MICROCAPITAL STORY: The Gates Foundation Makes USD 34 Million Grant to the International Labour Organization to Set Up Microinsurance Initiative

The Bill and Melinda Gates Foundation has given USD 34 million to the International Labour Organization (ILO), the specialized United Nations (UN) agency that deals with labour issues, to establish a microinsurance support initiative. Known as the ‘Microinsurance Innovation Facility’, it will be a one-off, five year project that provides grants and technical assistance to organizations working in microinsurance in developing countries.

The Facility will promote market education to help low-income consumers appreciate the utility of insurance, as well as providing grants and technical assistance to institutions. In addition, it will provide funding to pilot new insurance schemes, use technology to create new products, train technical specialists to help replicate successful models and conduct research to quantify the impact of the expanded availability and use, in order to guide future investments in the microinsurance industry.

The grant comes out of the Gates Foundation’s Financial Services for the Poor initiative in which it aims to develop new and improved financial services for the poor; develop business models that dramatically accelerate growth; provide more predictable capital flow and improve information for policy-making. Previous grants have included the USD 2.2 million given to Opportunity International to test new technologies that can help expand microfinance outreach into rural areas of East Africa, as reported by MicroCapital.

The Facility will be run by the Social Finance Programme, the ILO’s microfinance focal point, which aims to analyse, evaluate and disseminate how financial sector issues effect employment, with the aim of reducing vulnerability, creating jobs through enterprise development and making financial policies more employment-sensitive.

Microinsurance is defined as the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. Often workers and their families in developing countries live and work in risky environments, vulnerable to numerous perils, including illness, accidental death and disability, loss of property due to theft or fire, agricultural losses and natural disasters. However, according to the MicroInsurance Centre, a US-based consulting firm, only 78 million lives were insured in the 100 poorest countries in 2006.

Amy Rennison, MicroCapital writer

Additional Sources:

Microfinance Gateway:
http://www.microfinancegateway.org/content/article/detail/45656

ILO Press Release:
http://www.ilo.org/global/About_the_ILO/Media_and_public_information/Press_releases/lang–en/WCMS_088398/index.htm

Media Center, Gates Foundation:
http://www.gatesfoundation.org/MediaCenter/

Protecting the Poor – A microinsurance compendium, ILO
http://www.ilo.org/public/english/employment/finance/