The Impact of Microinsurance on Household Asset Accumulation in Ghana: An Asset Index Approach

This paper examines the link between microinsurance services and households’ asset accumulation in Ghana. Using FINSCOPE data from the nation-wide household surveys conducted by FinMark Trust, we created a household asset index using the multiple correspondence analysis approach. We employed three methods: Heckman sample selection, instrumental variable and treatment effects models to estimate the impact of microinsurance on household asset accumulation. These models control for the problem of endogeneity treatment effects and self-selection bias associated with the usage of microinsurance services. The findings show that microinsurance has a positive welfare impact in terms of household asset accumulation. This suggests that microinsurance prevents asset pawning and liquidation of essential household assets at “give away” prices. By absorbing the risk of low-income households, insurance equips them to cope effectively with risk, empowers them to escape poverty and sustains the welfare gains achieved.