MICROFINANCE PUBLICATION ROUND-UP: Financing Africa, Social Performance Indicators for Microinsurance, Segmentation of Agricultural Households

“Financing Africa Through the Crisis and Beyond;” by Thorsten Beck, Samuel Munzele Maimbo, Issa Faye and Thouraya Triki; published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), World Bank Group, African Development Bank; 2013; 322 pages; available at: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Financing%20Africa%20Through%20the%20Crisis%20and%20Beyond.pdf

This book presents a review of trends in Africa’s financial sector in the context of Africa’s past economic development trends and broader historical background. It draws attention to the opportunities and challenges facing the financial sector in Africa, focusing on recommendations for promoting enhanced economic growth. The authors note that although Africa’s financial systems have progressed markedly over the past 20 years, there remains a great deal of progress to be made before these systems are fully developed. According to the authors, “finance in Africa still faces problems of scale and volatility,” which may be addressed through technological advancements and increased integration both regionally and globally.

The authors arrive at the following three conclusions: (1) “competition is the most important driver of financial innovation;” (2) there is a need for increased attention to the consumers of financial services; and (3) there should be an increased focus on developing and promoting specific, effective financial services targeted towards specific groups or locations, such as agricultural loans, rather than focusing on developing new types of financial institutions. Based on these conclusions, the authors suggest creating policies that: (1) focus on strengthening government institutions to create a stable foundation for policy measures; (2) replicate existing successful policy initiatives; and (3) are implemented incrementally and feasibly given “political economy realities.”

“Handbook on Social Performance Indicators for Microinsurance;” by Thérèse Sandmark; published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Microinsurance Network, Appui au Développement Autonome, Belgian Raiffeisen Foundation, Grameen Crédit Agricole Microfinance Foundation; 2013; 54 pages; available at: http://www.microinsurancenetwork.org/publication/fichier/Social_performance_indicators_for_microinsurance_workshop_report.pdf

This handbook presents a set of principles, guidelines and social performance indicators intended to assist microinsurance providers in monitoring and improving their social performance. Four principles of social performance are highlighted, and a set of guidelines is offered for ensuring that they are upheld by microinsurance companies.

The first of these principles stipulates that the product should provide the client with appropriate and effective mechanisms for managing and minimizing risks. According to the authors, this should be done through assessing client needs during the product development stage, gathering client feedback and implementing product improvements over time to increase client value. As indicators of product value, the authors identify the ratio of incurred claims, the renewal ratio and promptness of claims.

The second principle suggests that insured clients should be treated fairly and with respect. According to the authors, this may be accomplished through ensuring information transparency, “excellent” customer service and treatment, maintaining the privacy of client data and maintaining effective mechanisms for resolving complaints. Indicators of client protection include the claim rejection ratio and complaints ratio.

The third principle proposes that microinsurance products should be aimed at those who historically have lacked access to financial services. According to the authors, this may be accomplished by reducing physical, financial and educational barriers to obtaining microinsurance products and services. Inclusion indicators include the percentage of the population that is covered by microinsurance, the percentage of clients below the poverty line, the percentage of the insured who are female and the percentage who are above the retirement age.

The final principle is that the microinsurer’s systems should promote high levels of social performance. The authors suggest that this may be accomplished through clearly defined social mission objectives, commitment to these objectives, external and internal audits, and the responsible and ethical treatment of employees.

“Segmentation of Smallholder Households: Meeting the Range of Financial Needs in Agricultural Families;” by Robert Christen and Jamie Anderson; published by Consultative Group to Assist the Poor (CGAP); 2013; 32 pages; available at: http://www.cgap.org/sites/default/files/Focus-Note-Segmentation-of-Smallholder-Households-April-2013.pdf

This paper examines “the challenge of providing financial services that support the multiple goals of rural households, including those related to their more universal, general household needs and those linked to their agricultural activities.” Beginning with an overview of the political and business cases for serving the financial needs of small-scale landholders and their agricultural activities, the paper presents a “segmentation framework” for the estimated 500 million “smallholders” in low- and middle-income countries. The authors conclude that “different kinds of households have different kinds of financial needs”, and that “this variety in demand cannot be met by the same suite of financial products, terms of service, or even formal financial service providers.” The proposed framework consists of three segments: (1) noncommercial smallholders; (2) “commercial smallholders in loose value chains”; and (3) “commercial smallholders in tight value chains”. The segments are “differentiated by what they grow, how they engage with markets as buyers and/or sellers, and how those markets are organized.”

By Makai McClintock, Research Associate

Sources and Additional Resources

“Financing Africa through the Crisis and Beyond,” http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Financing%20Africa%20Through%20the%20Crisis%20and%20Beyond.pdf

“Social Performance Indicators for Microinsurance,” http://files.microfact.webnode.com/200000751-ad4a4af3da/Handbook%20Social%20Performance%20Indicators%20for%20Microinsurance.pdf

“Segmentation of Smaller Households: Meeting the Range of Financial Needs in Agricultural Families,” http://www.cgap.org/sites/default/files/Focus-Note-Segmentation-of-Smallholder-Households-April-2013.pdf

MicroCapital: March 12, 2013, “MICROCAPITAL BRIEF: Uganda’s Insurance Regulator, Making Finance Work for Africa (MFW4A), Access to Insurance Initiative (A2ii) Seek to Expand Access to Microinsurance, Perhaps Mobile Money,” https://www.microcapital.org/microcapital-brief-ugandas-insurance-regulator-making-finance-work-for-africa-mfw4a-access-to-insurance-initiative-a2ii-seek-to-expand-access-to-microinsurance-perhaps-mobile-money/

MicroCapital: November 26, 2012, “MICROCAPITAL BRIEF: African Development Bank (AfDB) Microfinance Capacity Building Fund (MCBF) Offering up to $500k per Institution,” https://www.microcapital.org/microcapital-brief-african-development-bank-afdb-microfinance-capacity-building-fund-mcbf-offering-up-to-500k-per-institution/

MicroCapital: March 19, 2012, “MICROCAPITAL BRIEF: Nigeria Chapter of Economic Community of West African States (ECOWAS) Federation of Business Women Entrepreneurs (FEBWE) Launched to Boost Cross-Border Entrepreneurship,” https://www.microcapital.org/microcapital-brief-nigeria-chapter-of-economic-community-of-west-african-states-ecowas-federation-of-business-women-entrepreneurs-febwe-launched-to-boost-cross-border-entrepreneurship

MicroCapital: July 21, 2011, “MICROCAPITAL BRIEF: African Development Bank (AfDB), Spain Launch Microfinance Capacity Building Fund for Africa, Offering Funding Through Request for Proposals,” https://www.microcapital.org/microcapital-brief-african-development-bank-afdb-spain-launch-microfinance-capacity-building-fund-for-africa-offering-funding-through-request-for-proposals/

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