While the real sector and governments (along with a
few micro economists) have long recognized the core
economic role that the insurance function plays, the
mainstream economics profession has largely treated
it as invisible background. This literature review of the
relevant research, most of which has been carried out in
the past few decades, demonstrates that the insurance
sector contributes at a basic level to inclusive economic
growth and the effectiveness of the credit function. It
also shows that the latter impact may be particularly
fundamental in assisting the poor to avoid poverty
traps and to progress economically. However, the
research and the theoretical models underpinning it also
highlight certain constraints to the efficient utilization
of the insurance function. The literature dealing with
innovations designed to overcome these constraints
is reviewed and successful initiatives and remaining
challenges are identified.
This paper is a product of the Non-Bank Financial Institutions Unit, Finance and Markets Global Practice. It is part of
a larger effort by the World Bank to provide open access to its research and make a contribution to development policy