Answer multiple choice questions:

Why informal insurance is imperfect?

a) can not tackle the risk in case of co-variate shocks

b) no premium collection

c) can not tackle risk in case of idiosyncratic shocks

d) builds on trust and respect

How micro businesses manage capital to start their businesses in developing countries?

a) corporate finance

b) no formal source of income

c) bank loan

d) equity based financing

Why is there a lack of insurance market in developing countries?

a) presence of informal insurance

b) information asymmetry

c) moral hazard

d) adverse selection

What are the two main critics of index-based rainfall insurance in developing countries? ( not multiple choice could be more than one answer)

-basis risk is not covered

-Auto claim generation

-no assessment by risk assessor

-based on historic rainfall variation

why micro-credit lending does not force asset purchase for income-generating activities?

a) peer monitoring will ensure this

b) unpopular by the borrowers

c) credit could be used for consumption smoothing

d) ensuring asset purchase will require additional administrative costs.

Why the borrowers of micro-credit group lending pay always on time?

a) none of the above

b) because of repayment flexibility

c) because of low interest rates

d) because of weekly repayment schedule, peer pressure and future borrowing possibilities.