MICRO INSURANCE THROUGH THE LENS OF “ARTHASHASTRA”

Abstract

Financial inclusion has emerged as a significant issue in development economics and public 
policy, especially in nations where substantial portions of the population function outside 
official financial systems. As a result, making it easier for people to use financial services has 
been widely touted as a strategy to get more people involved in the economy and reduce 
poverty. Many emerging economies have made a lot of progress in this area over the past 20 
years by putting regulations in place to make it easier for people to open savings accounts, get 
credit, and use digital payment systems. But just because low-income families have more 
access to financial services doesn't mean they will be more secure financially (World Bank, 
2014; Demirgüç-Kunt et al., 2018). In numerous situations, households that have obtained 
access to financial institutions continue to be significantly susceptible to income fluctuations, 
health crises, and disruptions in their means of life. 
This vulnerability underscores a significant constraint in the prevailing conceptualization of 
financial inclusion. Early policy efforts often focused on credit and banking access as the main 
ways to improve economic opportunity. However, researchers are starting to agree that families 
with variable earnings need more than just access to money; they also need ways to deal with 
risk. Even small economic shocks can have long-term effects on families that don't have 
protection against illness, crop failure, accidents, or other unforeseen catastrophes. Empirical 
research indicates that uninsured households often react to crises by liquidating productive 
assets, curtailing spending, withdrawing children from educational institutions, or resorting to 
expensive informal borrowing (Dercon et al., 2014; Morduch & Sharma, 2002). These kinds 
of coping mechanisms might help in the near term, but they often make people more vulnerable 
to economic problems over time. 

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