Illness Makes Credit Sick: Can Health Insurance Rescue the Poor from Exploitative Credit

Basri Savitha, K. B. Kiran

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Health shocks cripple poor households through hardship financing and impoverishment. Borrowing from non-market sources is the most common strategy used by these households, which eventually pushes them into a debt trap. Micro health insurance (MHI) is expected to reduce the reliance on these sources of finance by ensuring financial protection. We use the data from a cross-sectional study undertaken in Karnataka to investigate any association between MHI and non-market credit during health shocks. The sample size was 1,146 consisting of 416 insured households and the remaining being uninsured. The analysis of the data shows inadequate risk protection provided by MHI giving rise to borrowing, sale of assets and liquidation of savings by insured individuals. Yet, they relied less on usurious credit compared with uninsured individuals. This finding not only substantiates the importance of MHI in health-care financing but also highlights the need for affordable and comprehensive financing mechanisms to replace non-market institutions with formal insurance.

Original languageEnglish
Pages (from-to)184-204
Number of pages21
JournalGeneva Papers on Risk and Insurance: Issues and Practice
Issue number2
Publication statusPublished - 01-04-2016

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance
  • Economics and Econometrics


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