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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
Issue 5 / September - October 2004 |
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News | "Insuring" the Success of Poor and Low Income People The Way Forward at the CGAP Micoinsurane Working Group
By Perrine Puget, Student Ambassador for the Year of Microcredit 2005 In June 2004, Luxembourg's Ministry of Foreign Affairs and Appui au Développement Autonome (ADA) hosted the CGAP Working Group on Microinsurance. Microinsurance is a system under which people, businesses and other organizations make a payment to share risk. Through this system, low-income households can concentrate on developing their businesses while mitigating risks that affect property, health, death, or the ability to work. 25 people attended CGAP’s event, including representatives from SIDA, GTZ, the International Labour Organisation (ILO) and the CGAP secretariat. Mr Tapas Kumar Banerjee, a senior official from the Indian Regulatory and Development Authority, was the special guest. Representatives divided themselves into four groups, the Operations Group, the Regulation Group, the Demand Group and the Dissemination Group. The Operations Group discussed how to improve the features of the Donor Guidelines on supporting microinsurance. Their sessions addressed case studies aimed at establishing a microinsurance environment overview from the perspective of the microinsurance providers. Ten case studies have already been completed in various parts of the world including Peru, Philippines, Poland, and Vietnam that will be published later this year. Eight to twelve more case studies will take place over the next 12 months. Due to the dearth of information about regulation of microinsurance, the Regulation Group, led by GTZ, is planning to conduct three country case studies during 2005 on how the regulatory environment can inhibit or promote the availability of insurance to the poor. The research will explore how rules and regulations applicable to microinsurance affect the work of practitioners, regulators, governments, donors and clients. Thus, the Regulation Group will have the objective of building and disseminating a clear concept of how to regulate and supervise microinsurance. The Demand Group, coordinated by Microfinance Opportunities, presented its action plan for the upcoming year, focusing on the development of a consistent set of tools (data collection, processing and analysis) to assess poor people’s risk management options (formal, informal, self-insurance, State). Previous studies helped assess requirements of formal insurers to enter the market. This time, this subgroup’s key issues were the way to attract policyholders and retain them as microinsurance operators as well as developing tools for assessing risks. The Dissemination Group, led by ADA, has published three well-received issues of a MicroInsurance Newsletter and will, during the upcoming Year of Microcredit, enhance the current Microinsurance Focus website and database, as well as promote microinsurance and the Working Group. These two elements are the main sources of up-to-date information about microinsurance in close coordination with the Microinsurance Center Website. In order to better disseminate information, the ADA is making an effort to translate more microinsurance documents into French, Spanish and Arabic. ADA also plans to organize a technical workshop in the third quarter of 2005. For more details about the Working Group, or to receive the Newsletter, the regulation desk study or the Preliminary Donor Guidelines on Microinsurance, visit Microinsurance Focus. Interview with Axel De Ville,
chief executive of ADA: In fact, when one looks at the field level, one can see that credit. life insurance and health insurance are already empirically developed through some microfinance instutitutions and health insurance companies products. However such insurance products are usually not properly designed to meet the needs of the clients nor are they correctly implemented. This endangers both the institutional sustainability and the clients themselves. This entails a serious need for developing well-suited insurance products in order to better manage the risks and protect both institutions and clients…. Yes, and this is why microinsurance represents a new and interesting field of study within the microfinance industry! Microinsurance actually focuses on helping microentrepreneurs better manage their risks … while years ago the aim of developing microcredit was to offer financial resources to microentrepreneurs in order to improve their income. They may enjoy better living conditions by accessing a microloan and hence start their own activity; by being capable of saving which helps the microentrepreneur to be more flexible in its choices; or by benefiting from microinsurance products which are designed to better manage its risks. These three approaches are of course complementary and aimed at insuring microenterprises sustainability. In this growing sector what role in microfinance does the Working Group play since its creation in 2002 on an informal basis, without budget or concrete structure? The actions of the working
group itself have amazingly flourished and are mobilizing many different people
involved in this field, from different regions and with various profiles. Fifteen
15 case studies will be published soon, draft donor guidelines have been shared
with donor agencies, a study on microinsurance regulation has been performed
and a tool for clients demand analysis is under progress. Following the working
group meetings held during the last two years, the June meeting showed how much
things are moving in this field and that a lot still needs to be done in order
to make microinsurance play the role it might have as part a the poverty alleviation
strategy.
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