In an article on the website of MicroEnsure, a subsidiary of US-based microfinance network Opportunity International, Kate Waiganjo, MicroEnsure’s Country Manager in Kenya, discusses the issue of mandatory loan insurance. She argues that while some critics believe that mandatory loan insurance only benefits financial institutions rather than the person paying the premium, a well-priced mandatory insurance product that takes into consideration all types of risk can be beneficial to the borrower.
The author uses anecdotes from MicroEnsure’s experience in Kenya to illustrate that mandatory loan insurance can offer vital support in situations in which clients do not fully appreciate a risk or would not otherwise have taken measures against it, such as the case of a tailor who realized the importance of insurance only after a fire destroyed his workshop and his insurance covered loan repayment plus an additional cash benefit. Mandatory coverage can also allow insurance to be offered at a lower price because greater scale can help reduce costs. Ms. Waiganjo sums up the challenge for insurance companies as needing to ensure that products cover a realistic range of risks, offer genuine value to clients and are sustainable for the company.
By Kristha Abores, Research Associate
About MicroEnsure:
MicroEnsure was founded in 2005 in the UK as a wholly-owned subsidiary of Opportunity International, a global nonprofit microfinance network created in 1974. It was known as the Micro Insurance Agency until 2008. As an insurance intermediary, it provides a range of products including health, life, property and weather index-based insurance to approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.
Sources and Additional Resources:
[1] MicroEnsure newsletter, http://www.microensure.com/resources-blog.asp?id=150&utm_medium=email&utm_campaign=Newsletter+-+Issue+12&utm_content=Newsletter+-+Issue+12+CID_dbcbdca5e7f2a5cccfda25652520ba95&utm_source=Email+marketing+software
“Fire At Sido Market”, http://www.microensure.com/news.asp?id=149&start=0
MicroCapital.org article, November 9, 2011, “MICROCAPITAL BRIEF: MicroEnsure, Tigo, Milvik, Golden Crescent to Deliver Tigo Bima Microinsurance Product in Tanzania”, https://www.microcapital.org/microcapital-brief-microensure-tigo-milvik-golden-crescent-to-deliver-tigo-bima-microinsurance-product-in-tanzania/
MicroCapital.org article, September 27, 2011, “MICROCAPITAL BRIEF: MicroEnsure to Offer Microinsurance in Kenya Using M-Pesa, FrontlineSMS:Credit Technology”, https://www.microcapital.org/microcapital-brief-microensure-to-offer-micr…
MicroCapital.org article, May 19, 2011, “MICROCAPITAL BRIEF: World Vision Tanzania, MicroEnsure Partner to Launch Agricultural Microfinance Loans Bundled with Weather Index Insurance”, https://www.microcapital.org/microcapital-brief-world-vision-tanzania-mic…
MicroCapital.org article, May 17, 2011, “MICROCAPITAL BRIEF: MicroEnsure, PharmAccess Foundation Launch Health Microinsurance for Coffee Growers in Kilimanjaro, Tanzania”, https://www.microcapital.org/microcapital-brief-microensure-pharmaccess-f…
MicroCapital Universe Profile: MicroEnsure, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroEnsure
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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