MICROFINANCE PUBLICATION ROUND-UP: Role Reversal Revisited, Microinsurance Profitability Business Case, Trends in Cross-Border Funding

Role Reversal Revisited,” by Damian von Stauffenberg and Daniel Rozas, published by MicroRate, 2011, 22 pages, available at http://microrate.com/wp-content/uploads/2012/01/Role-Reversal-Revisited-…

This paper reviews the roles of development finance institutions (DFIs) and private lenders in funding microfinance institutions (MFIs). While DFIs are expected to pave the way for private funders to support MFIs as the industry matures, “Role Reversal,” a 2007 report published by MicroRate indicates that this is not the case. The 2007 paper observed that DFI lending was heavily concentrated towards the most creditworthy MFIs, leaving investment in smaller or riskier MFIs to private microfinance funds. This new report re-examines the situation and finds that MFIs with easy access to private funding still make up a significant portion of DFI lending.

A Business Case for Microinsurance: An Analysis of the Profitability Of Microinsurance for Five Insurance Companies,” Janice Angove and Nashelo Tande, published by the Microinsurance Innovation Facility, July 2011, 55 pages, available at http://www.ilo.org/public/english/employment/mifacility/download/mp11bus…

This paper analyses the profitability of microinsurance through case studies of five insurers that operate in low-income markets in Kenya, South Africa, India, Guatemala and the Philippines. The authors utilize a framework based on three main drivers of profitability: generating sufficient income by reaching scale, managing claims costs and managing acquisition and administration costs. The findings indicate that products with simple life benefits can be profitable. Working with partners can also be beneficial for insurers, both in managing distribution and administration costs as well as in providing customers value beyond the cover provided by the insurance policies.

Trends in Cross-Border Funding,” by Barbara Gähwiler and Alice Nègre, published by CGAP (Consultative Group to Assist the Poor), December 2011, 4 pages, available at http://www.cgap.org/gm/document-1.9.55998/Brief_Cross-BorderFunding.pdf

This paper describes global trends in microfinance funding between 2007 and 2010 based on data from the annual CGAP Funder Survey of cross-border funders. The findings show that the amount of new commitments increased from USD 2.9 billion in 2009 to USD 3.6 billion in 2010. The study also shows the increased use of microfinance investment vehicles (MIVs) and other intermediaries in channelling investments. While debt remains the primary instrument used by funders, equity investments have increased, with the share of equity funding in total commitments at 13 percent in 2010, up from 9 percent in 2008.

By Kristha Abores, Reseach Associate

Sources and Additional Resources:

[1] “Role Reversal Revisited,” http://microrate.com/wp-content/uploads/2012/01/Role-Reversal-Revisited-…

[2] “A Business Case For Microinsurance: An Analysis Of The Profitability Of Microinsurance For Five Insurance Companies,” http://www.ilo.org/public/english/employment/mifacility/download/mp11bus…

[3] “Trends in Cross-Border Funding,” http://www.cgap.org/gm/document-1.9.55998/Brief_Cross-BorderFunding.pdf

“Cross-border Funding (2011),” http://www.cgap.org/p/site/c/template.rc/1.11.45737/1.26.17576/

“CGAP Cross?border Funder Survey 2011,” http://www.cgap.org/gm/document-1.9.55343/Funder_Survey_2011_Results_Table_Rev.pdf

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