MICROFINANCE PUBLICATION ROUND-UP: Microcredit Interest Rate Determinants; Mobile Phones and Microinsurance; Health Financing Through Gifts and Remittances in Kenya

“Microcredit Interest Rates and Their Determinants 2004-2011;” by Richard Rosenberg, Scott Gaul, William Ford and Olga Tomilova; published by CGAP (Consultative Group to Assist the Poor); June 2013; 32 pages; available at http://www.cgap.org/sites/default/files/Forum-Microcredit-Interest-Rates-and-Their-Determinants-June-2013_1.pdf

This study explores the factors affecting the determination of interest rates that microfinance institutions (MFIs) charge their customers by analyzing financial data reported from 2004 to 2011 by MFIs to the Microfinance Information Exchange (MIX), a US-based nonprofit data provider. The authors isolate the determinants of interest rates by deconstructing the components of interest rates into four factors: operating expenses, cost of funds, rate of loan losses and target profit margins. After comparing the levels and trends in each factor to the levels and trends in reported interest rates, the authors conclude that the operating costs borne by MFIs are the largest determinants of the level of interest rates MFIs charge their customers. The authors also report certain trends in the microfinance sector from this time period, including a general rise in funding costs for MFIs, falling average returns on equity and a rise in profitability for those MFIs targeting lower-end, poorer clients.

“Mobile Phones and Microsinsurance;” by Pranav Prashad, David Saunders and Aparna Dalal; published by International Labour Organization (ILO); November 2013; 41 pages, available at http://www.microinsurancefacility.org/sites/default/files/MP26.pdf

This discussion paper offers a literature review of the current trends, challenges and best practices in mobile microinsurance, as well as an analysis of the effectiveness of 13 vendors’ insurance schemes that use mobile phones as a delivery channel. The theme of the study is how microinsurance providers can partner with mobile network operators (MNOs) and regulatory agencies to harness mobile technology in scaling up insurance services; increasing process efficiencies across the microinsurance value chain; and reducing expenses related to microinsurance product development, marketing and delivery. The authors offer examples of how these partnerships have been successful at making enrollment and claims processing more efficient, creating more value-added and customized products, enhancing customer service, and expanding communication channels within the value chain. The authors conclude that the key to a successful implementation of mobile microinsurance depends not only on effective partnerships between insurers and MNOs, but also on a regulatory environment that promotes innovation and expansion, while ensuring that consumers understand the products, have proper access to them and have adequate privacy protection.

“Remittances and gifts: how friends and family affect health financing from outside of the province in Kenya,” published by Microinsurance Centre; January 2014; 3 pages; available at http://www.microinsurancecentre.org/resources/documents/doc_details/1076-milk-brief-29-remittances-and-gifts-how-friends-and-family-affect-health-financing-from-outside-of-the-province-in-kenya.html

This study is intended to increase the understanding of the role of remittance and gift financing in helping Kenyan households cope with economic shocks caused by high-cost medical needs. Specifically, the authors seek to understand whether remittances, defined as income received from sources outside of the patients’ local community, and gifts, defined as income received from members of the patients’ local community, are complementary or offset each other. The study examines interview-based data reported in July 2013 by 144 former patients in various medical facilities in Kenya’s Central Province. The results of the analysis indicate that those individuals who regularly receive remittances are more likely to receive remittances during a medical emergency and that receiving remittance financing did not have a negative effect on patients’ ability to raise funds locally from friends and family in the form of gifts. The authors conclude that, in isolation, remittances and traditional forms of insurance are not adequate to fully cover expenses resulting from health-related shocks, leaving room for informal income sources such as gift financing.

By A’kos Szebeni, Research Associate

Sources and Additional Resources

CGAP, “Microcredit Interest Rates and Their Determinants 2004-2011,” http://www.cgap.org/sites/default/files/Forum-Microcredit-Interest-Rates-and-Their-Determinants-June-2013_1.pdf

International Labour Organization (ILO), “Mobile Phones and Microsinsurance,” http://www.microinsurancefacility.org/sites/default/files/MP26.pdf

Microinsurance Centre, “Remittances and gifts: how friends and family affect health financing from outside of the province in Kenya,” http://www.microinsurancecentre.org/resources/documents/doc_details/1076-milk-brief-29-remittances-and-gifts-how-friends-and-family-affect-health-financing-from-outside-of-the-province-in-kenya.html

MicroCapital, January 15, 2014, “African Centre for Catastrophe Risks Hosts “International Congress on Insurance and Reinsurance of Agricultural Risks”, January 29 – 31, 2014, Marrakech, Morocco,” https://www.microcapital.org/microfinance-event-african-centre-for-catastrophe-risks-hosts-international-congress-on-insurance-and-reinsurance-of-agricultural-risks-january-29-31-2014-marrakech-mo/

MicroCapital, January 12, 2014, “Accion Venture Lab Invests in Kenyan Mobile Money System Kopo Kopo, MeraDoctor of India,” https://www.microcapital.org/microcapital-brief-accion-venture-lab-invests-in-kenyan-mobile-money-system-kopo-kopo-meradoctor-of-india/

MicroCapital, October 29, 2013, “Lessons Learned from Morocco’s Microcredit Crisis; Using Microinsurance to Promote Universal Coverage; Remittances and Post-Conflict Economic Growth,” https://www.microcapital.org/microfinance-publication-round-up-lessons-learned-from-moroccos-microcredit-crisis-using-microinsurance-to-promote-universal-coverage-remittances-and-post-conflict-economic-growth/

MicroCapital, October 22, 2013, “Airtel, Tanzania Postal Bank (TPB) Partner to Offer Mobile Banking Services,” https://www.microcapital.org/microcapital-brief-airtel-tanzania-postal-bank-tpb-partner-to-offer-mobile-banking-services/

MicroCapital, September 29, 2013, “Microfinance Companies in Ghana Allegedly “Reaping Heavily” from Small Businesses via High Interest Rates,” https://www.microcapital.org/microcapital-brief-microfinance-companies-in-ghana-allegedly-reaping-heavily-from-small-businesses-via-high-interest-rates/

MicroCapital Universe Profile: CGAP (Consultative Group to Assist the Poor), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

MicroCapital Universe Profile: International Labour Organization (ILO), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Labour+Organization+%28ILO%29

MicroCapital Universe Profile: Microinsurance Centre, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+Microinsurance+Centre

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/.


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