The role of group-based contracts for risk-sharing; what are the opportunities to cover catastrophic risk?

Abstract

Group-based contracts are stimulated by food and agricultural development programs as powerful tools for risk-sharing. In successful groups social capital serves as a catalyst for risk prevention and knowledge sharing. It is however difficult to deal with catastrophic risk. In this paper we ask whether and how group-based contracts have been innovated to include catastrophic risk? The review shows that, albeit at early stage, innovations emerge from linking up to formal finance markets, negotiating better risk-sharing deals with upstream and downstream value chain actors, and upscaling of public-private improvement projects to joint calamity funds. These changes to group-based contracts are expected to enhance inclusion. We also identify a research agenda for risk-sharing via groups.