We know that the path out of poverty is rarely a smooth one. The poor are buffeted by a wide range of shocks, pushing them backwards along the way. Exploring the world of risk in the Kenya Financial Diaries, we learned that for many of the poor, navigating a world of risk is actually not only about how you manage your money. It’s also about how you manage relationships with friends and family who can come to your aid when things go wrong. Consider Greta’s story: . . .
Greta and her husband had saved money for a caesarian section she would need to deliver her baby. But public health facility workers went on strike just she was due, and the cost of care at a private facility was five times higher, much more than Greta could finance without hard and dangerous sacrifices. Through friends and family Greta was able to raise roughly 75% of the additional funds needed. . . .
For low-income Kenyans, social network financing of risk is incredibly powerful . . . . . .
Read MoreThis is a guest post from Aparna Dalal, independent consultant and former FAI Director of Special Projects. . . .
A new briefing note by the Microinsurance Network’s Insurance Education Working Group (of which FAI is a member) outlines emerging practices in risk management and insurance education. The note, targeted at practitioners, outlines basic principles that practitioners should incorporate into their education programs such as:
1. focusing on risk management and insurance content;
2. relating education to people’s risk exposure;
3. using a mix of channels and tools;
4. delivering ongoing education as opposed to one-time programs;
5. linking education with products;
6. leveraging existing institutions and pool resources; and
7. incorporating monitoring and evaluation activities from the start. . . .
Read MoreThis is a guest post from Aparna Dalal, independent consultant and former FAI Director of Special Projects. . . .
If you are studying or working in the field of microinsurance, the annual International Microinsurance Conference, jointly hosted by the Munich Re Foundation and theMicroinsurance Network, is the place to be. The 6th installment of the conference was held in Manila last week. This was the third conference I’ve attended, and in many ways, the most interesting one. While challenges remain, various organizations are successfully implementing innovative products and processes. Below are four areas of development that I found particularly interesting . . . . . . .
Read MoreIn this excellent post, Kate McKee highlights the intensive financial life of Hiram, a smart Kenyan entrepreneur with a thriving car rental business. Because one single institution cannot meet all his financial needs, Hiram has to patch together services from five different institutions. . . .
He has five financial accounts, each for a specific purpose –
1. Loan from an MFI
2. Loan from another MFI
3. Business account at a large international bank only to cash checks
4. Savings account at another bank to deposit cash
5. Mobile account (M-PESA) to allow him to receive electronic payments and reduce the amount of cash he needs to carry around. . . .
The evidence is mounting that poor households rely upon an array of surprisingly complex financial tools, and lead active financial lives because they are poor, not in spite of it. They create “portfolios” that leverage both informal networks and formal institutions to address their immediate and long-term needs . . . . . .
Read MoreHave the lessons from the financial crisis been fully absorbed by the microfinance sector? . . .
IFMR Capital recently announced its first multi-originator securitization, the first such securitization in microfinance (that I know of). As compared to previous securitization transactions, which involved loans from only one microfinance institution, this transaction combined 42,000 loans from four microfinance institutions. This securitization was highly rated by Crisil, one of India's leading ratings firms for microfinance... . . .
Read MoreIn his useful assessment of microinsurance schemes, Paul Mosley proposes the idea of “quasi-insurance” – the provision of risk-protection through non-insurance routes such as loans and savings in markets where microinsurance is lacking or insufficient. Mosley purports that “in every case where a choice has to be made concerning choice of risk management strategies it is desirable to assess whether such non-insurance options may offer a lower-cost or more effective method of protective the poor than microinsurance.” . . .
Read MoreWhat do we do now that two impact studies from the Philippines and India say that microfinance isn’t such a big deal after all? The Microfinance Working Group at Columbia took on this question in a panel on “Taking stock of microfinance: Does it really help the poor.” An ambitious topic to cover in one hour, but the panelists did a commendable job... . . .
Read MoreThe organizers of this year’s 5th International Microinsurance Conference, held last week in Dakar, wisely included “Providing health insurance to the poor” as one of the main themes. Health events - whether they are unanticipated emergencies, or even foreseeable events like giving birth - are among the main financing challenges for poor households. When you’re living on $1 or $2 a day, better health financing mechanisms have the potential to make a huge difference. Too often, they’re literally life and death issues. . . .
Read MoreLast year's financial crisis caused many people to lose their already tenuous faith in financial institutions and the role they play in supporting the various functions of an economy. . . .
This view of finance in the life of an economy is paradoxical to the one we hold about finance in the lives of low income households. The microfinance industry, and our work here at FAI, rests on the belief that access to well-designed financial services is critical for the economic and social development of poor families... . . .
Read MoreFAI Director Sendhil Mullainathan appeared as a witness in the recent U.S. Senate Banking Committee meeting “Creating a Consumer Financial Protection Agency: A Cornerstone of America’s New Economic Foundation.” You can watch the hearing here... . . .
Read MoreIn early June, I joined several hundred researchers at the First European Research Conference on Microfinance hosted by CERMi. The three-day conference included presentations on a wide array of subjects including social responsibility, institutional governance and performance, and rural and informal microfinance. . . .
One striking aspect of the conference was the prolific use of data from the Mix Market. The Mix Market database contains data on financial performance and outreach indicators for over 1,400 institutions... . . .
Read MoreIt’s time again for the Financial Times Sustainable Banking Awards. The awards recognize financial institutions that show leadership and innovation in incorporating environmental and social sustainability objectives in their operations. . . .
The organizers included a new category this year - Achievement in Basic Needs Financing. The category highlights institutions with solutions to address basic needs such as energy, food and water... . . .
Read MoreThe Microinsurance Network and ILO's Microinsurance Innovation Facility and STEPprogramme are conducting a survey on Third-Party Payment Mechanisms in Health Microinsurance in Developing Countries. . . .
Payment mechanisms form an integral component of insurance schemes because they not only affect the financial flexibility available to customers, but also afect the quality of care delivered by the health provider... . . .
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