If you're interested in microfinance, but don't necessarily want to learn about graphs, econometric equations and statistical techniques then you have come to the right place.Kiva and FAI are partnering to bring you "101" blog posts that explain the core principles of microfinance. . . .
This week's blog is a basic introduction to the subject of microinsurance. Check out our past 101 blogs on microfinance, microcredit, and microsavings. . . .
Microinsurance is a financial tool that helps low-income households mitigate risk and plan for the future. It enables them to cope with unpredictable and irregular incomes, while also preparing them for financial emergencies that threaten their livelihood. One of the major problems faced by many households is that due to low and unpredictable incomes, they lack a financial cushion. Living so close to the margin means that it doesn’t take much to push a family into destitution. For many people an unexpected trip to the doctor or a bad harvest can quickly become a catastrophe. Microinsurance offers a way for households tomanage risk and deal with the ups and downs of life . . . . . .
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 MoreThis is the third post in our Microfinance 101 blog series. The purpose of the series is to help non-practitioners and people in general who are interested in microfinance to understand various aspects of the field. This blog deals with microinsurance. . . .
Microinsurance is a financial tool that helps poor households mitigate risk and plan for the future. It enables them to cope with unpredictable and irregular incomes, while also preparing them for financial emergencies that threaten their livelihood. One of the major problems faced by poor households is that due to low and unpredictable incomes, they lack a financial cushion. Living so close to the margin means that it doesn’t take much to push them over the line from poverty to destitution. When you live on less than $1 or $2 a day, an unexpected trip to the doctor or a bad harvest can quickly become a catastrophe. Microinsurance offers a way for poor households to manage risk and deal with the ups and downs of life. . . .
So why doesn’t everyone use microinsurance? . . .
Read MoreHighlights of the first day according to the leaders of the sponsors of the conference: . . .
Dean Karlan, Innovations for Poverty Action: . . .
1) The results presented from the ultra-poor programs of SKS and BRAC were very exciting. They show that you can have an impact on the poorest of the poor. . . .
2) The results of the studies on savings and insurance were also very encouraging. These programs continue to show that they can have measurable positive impact in a very short time frame. . . .
3) The studies of the impact of credit continue to show that there are benefits but they are harder to find and weaker. . . .
Read MoreThe vast majority of microfinance programs -- particularly group lending efforts -- explicitly target women. This focus grew in part out of the belief, supported by some research, that women are more likely to invest in the household as a whole, particularly in the children. Given that, what can we do to improve women’s financial self-sufficiency, either through employment, entrepreneurial success or thoughtful risk management tools? . . .
Barbara Magnoni, President of EA Consultants, a development consultancy that advises on microfinance product design, thinks we could start by taking a more differentiated view of men and women as microfinance customers . . . . . .
Read MoreProviding insurance to protect the world’s most vulnerable people seems like a no-brainer, but putting microinsurance into practice is easier said than done. A recent event co-hosted by FAI and Allianz SE – a leading global financial services provider – shared new and practical insights from the insurer’s perspective about the challenge of desigining effective insurance products for the poor. . . .
Held at the Allianz Global Investor headquarters in New York City on September 22, the discussion was moderated by Robert Schiff and Tony Goland from McKinsey’s Social Sector Practice. Heinz Dollberg and Michael Anthony of Allianz discussed the barriers and opportunities for larger players in the microinsurance market and about Allianz’s experience following Cyclone Nisha in 2008. . . .
The session began with an assessment of potential markets for the Allianz group. Michael Anthony stressed that emerging markets, especially India and Indonesia, but also including Egypt, Senegal and the Ivory Coast in Africa, and Brazil and Colombia in Latin America, were particularly attractive because of growing populations and an awareness and demand for insurance products. . . .
Three types of products are typically offered in each of these countries – simple credit life insurance; accident / life insurance products which are linked to savings; and new products that address the specific needs of people in developing countries . . . . . .
Read MoreWhen CARE India field officers delivered emergency relief services to the coastal regions ravaged by the 2004 tsunami, they were struck by the communities’ vulnerability to shocks and lack of access to appropriate risk protection tools, and assessed that microinsurance could be an effective product for these communities. Out of this determination, the CARE Insure Lives and Livelihoods (ILAL) microinsurance program was born. In introducing this new program, CARE set out to improve communities’ risk management capacities by improving their understanding of insurance. . . .
A new case study from FAI takes an in-depth look at the key challenges—such as sustainability and performance measurement of the education programme—and how CARE tried to overcome them . . . . . .
Read MoreMost players in the microinsurance sector would agree that to increase the outreach of microinsurance products, more education is needed. But, this is where the agreement ends. Discussions around content, delivery, funding and measurement of insurance education raise more questions than answers. What is insurance education, and how should we define it? How is it different from product marketing? What are the most effective delivery channels? Who should pay for education? How do we measure its impact? . . .
Read MoreA recent Newsweek article praises the role of microcredit in disaster recovery. The piece singles out Fonkoze, the leading microfinance institution in Haiti, for their ability to get cash to its clients while bigger banks remained paralyzed. The article suggests that a new role for microfinance is to help economies respond to shattering tragedies like the Haitian earthquake. . . .
The sentiment points to a larger insight: Microfinance can do more to help families respond to emergencies in general. Sometimes those emergencies arrive as a national crisis that affects hundreds of thousands of people. But more often, they are local. Sometimes the emergency is felt just by a single family in a community. It could be an illness that keeps a husband from working and putting food on the table because he can’t pay for medical treatment. Or it could be a bad harvest that means there’s no money to pay for children’s school fees. Research from financial diaries in India and Bangladesh shows that nearly half of the families surveyed reported a serious injury or illness in the past year. And in South Africa over 80% of families reported needing to pay for a funeral in the past year. . . .
While the narrative of microfinance as small business finance still has currency, that’s too narrow a vision. We blogged recently about how Fonkoze recapitalized nearly 14,000 loans in the wake of the 2008 hurricane. It’s exactly this kind of flexibility that poor households need when faced with emergencies. Grameen Bank has built more flexibility into its notoriously standardized products. But why aren’t more institutions designing products flexible enough to work better with poor households’ uneven cash flows? . . .
Read MoreThe recent tragedy in Haiti serves as a stark reminder of just how vulnerable the poor are in the face of emergencies. When crises hit, households often turn to family and friends for help, and the news stories from Haiti are full of inspiring stories of charity. But the news reports also bring home the fact that in large-scale disasters, like the earthquake in Haiti, it’s hard to rely on acquaintances, neighbors, friends, and family members. No one has much to spare. . . .
There’s hope that microfinance institutions can help provide a path towards recovery and reconstruction, despite the devastation. . . .
Fonkoze is the largest microfinance institution in Haiti and one of the most admired in the hemisphere. Following the earthquake, the organization’s response was immediate. Within a matter of days, all 41 of its branches in Haiti were operational, providing the opportunity for customers to make withdrawals and receive transfers from friends and family members abroad. Fonkoze also developed a Relief and Rehabilitation Fund, which will be used for a range of purposes including: “providing relief to staff members, opening an emergency operations center, delivering remittances, acquiring equipment and facilities, and assisting clients who have lost their business and homes.” . . .
This is not the first time that Fonkoze has faced disaster . . . . . .
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 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 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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