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Yale University

Publication Date

Fall 12-1-2014

Program Name

Mongolia: Geopolitics and the Environment

Abstract

Mongolian herders must contend with the risk of dzuds, harsh winters that can kill large numbers of livestock. To do so, they use a mixture of formal financial tools and traditional risk mitigation techniques. This paper is a study of the interaction between the Mongolian Index-based Livestock Insurance Program and traditional informal risk mitigation techniques. The researcher interviews herders in Bulgan soum, Arhangai aimag and Galuut soum, Bayanhongor aimag to compare the IBLI program’s impact in a community that has had IBLI since 2006 and one that only received IBLI in 2012. This study finds that insurance purchase is positively correlated with stronger social networks. It also finds that lower income herders are less likely to purchase insurance. However, herders trust social networks to support them in dzud years more than they trust formal financial institutions. Herders also face substantial basis risk beyond the risks covered by IBLI. While the IBLI program is growing in popularity and some herders find it a source of greater financial security, this study concludes that more work is needed to enhance other risk mitigation tools and to support IBLI uptake among poor herders to effectively mitigate the risk of dzud.

Disciplines

Agricultural Economics | Agriculture | Asian Studies | Finance and Financial Management | Insurance | Nature and Society Relations | Other Animal Sciences | Physical and Environmental Geography

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