MICROFINANCE PUBLICATION ROUND-UP: Microinsurance Distribution Channels, Friendship Bridge, MicroVest Impact Reports

“Microinsurance Distribution Channels: Insights for Insurers;” by Alice Merry, Pranav Prashad and Tobias Hoffarth; published by the Microinsurance Innovation Facility of the International Labour Organization as Paper Number 33; June 2014; 25 pages; available at http://www.microinsurancefacility.org/sites/default/files/MP33.pdf

The Microinsurance Innovation Facility of the International Labour Organization (ILO), an agency of the United Nations that addresses labour standards and related issues, recently analyzed the distribution channels available to microinsurance providers based on the experiences of 60 of its partner institutions.

The authors aim to assist insurance providers in finding “low-cost channels that can reach clients in large numbers”[1]. They analyze six channels, including “financial institutions,” “community-based organizations,” “retail chains,” “mobile network operators,” “employers” and “direct sales”[1] by exploring the following three questions: (1) “What can the distribution channel do for me?”; (2) “What can I do for the distribution channel?”; and (3) “Is the channel right for my target market?”[1]. In order to answer the first question, the authors discuss advantages and disadvantages of each of the listed distribution channels and recommend insurers distribute their products using “incentive mechanisms”[1] that reward individual sales agents such as for policy renewals and achieving revenue targets. To answer the second question, the authors recommend that insurers go beyond offering traditional sales commissions to incentivize their distribution partners to build “long-term partnerships”[1] with distributors and clients. In answer to the third question, the authors recommend that insurers chose distribution channels that are suitable to the “maturity of their target market,”[1] by sequencing “mandatory, group and individual products.” They advise insurers to consider using intermediaries and offering free products in certain cases. The authors conclude by emphasizing that “successful [microinsurance] distribution strategies”[1] need to offer value to the insurer, the distribution channel and to the clients.

“Making a Difference, 2013 Impact Report;” published by Friendship Bridge; 2014, 15 pages; available at http://www.friendshipbridge.org/wp-content/uploads/2013/03/fb-impact-report-2013-final.pdf

Friendship Bridge, a US-based nonprofit that provides microcredit services and education to women in rural Guatemala, recently published a report on the impact of the services it provided during 2013. The report, which is based on client surveys, commences with a statistical overview and indicates that Friendship Bridge served approximately 27,000 clients during 2013. The average “small business loan”[2] the organization disbursed to a new client amounted to USD 250 with a loan cycle of 4 to 12 months. For its program entitled “Microcredit Plus,” Friendship Bridge uses a “group lending model”[2] whereby groups of 7 to 30 women guarantee loans taken by one another. In 2013, the organization’s loan portfolio had a repayment rate of 98.7 percent, and its portfolio at risk for 30 days (PAR30) ratio was 0.4 percent. The report describes the organization’s segmentation strategy, which is based on the following categories: (1) “dreamer,” (2) “entrepreneur,” and (3) “leader”[2]. As part of its “Strategic Objective for 2011-2013,”[2] the organization began developing tailored products for the three different client segments based on their respective requirements. In summary, the report concludes that the organization’s clients evaluated its impact positively, with achievements including unspecified levels of income stabilization, poverty reduction and social empowerment.

“Social Impact Report FY 2014;” published by MicroVest Capital Management, 2014, 4 pages, available at http://www.microvestfund.com/docs/2014-07-17-43.pdf

MicroVest Capital Management (MicroVest), a family of funds that invests in microfinance institutions (MFIs) in emerging markets, recently published its annual social impact report. In it, Mr Gil Crawford, MicroVest’s Chief Executive Officer, states that “social impact is a leading indicator of long-term sustainability and outperformance”[3]. He also explains that MicroVest only invests in a partner organization following an assessment of its “Social Impact Score”[3], which includes an analysis of the organization’s “social mission, governance, staff social commitment, client protection policies and procedures, and outreach practices”[3]. In 2013, the Social Impact Score of MicroVest’s investments ranged from 2.4 to 4.7 on a scale on which the lowest grade is 1 and the highest is 5.

As of December 2013, MicroVest’s portfolio companies funded 6.7 million customers. The percentage of female borrowers grew from 40 percent to 60 percent from 2011 to 2013, and the proportion of loans provided for “productive purposes”[3] was 80 percent in the last three years. In total, as of 2013 MicroVest’s portfolio consisted of 71 organizations including MFIs, SMEs and community banks located in 58 countries. This included 56 MFIs with approximately 193,000 active borrowers, 58 percent of whom were women. The portfolio also contained financiers of small and medium-sized enterprises serving approximately 186,000 borrowers, 12 percent of whom were women.

By Alíz Crowley, Research Associate

[1] Microinsurance Innovation Facility, International Labour Organization, Paper No. 33, Microinsurance Distribution Channels: Insights for Insurers

[2] Friendship Bridge, Making a Difference, 2013 Impact Report

[3] MicroVest Capital Management, Social Impact Report FY 2014

MicroCapital, March 12, 2014, “Using Subsidies for Inclusive Insurance: Lessons from Agriculture and Health;” by Ruth Vargas Hill, Gissele Gajate-Garrido, Caroline Phily, and Aparna Dalal; Published by International Labour Organization

MicroCapital, January 26, 2014, MicroVest to Manage Calvert Foundation’s $50m Microfinance Investment Portfolio

MicroCapital, January 13, 2013, Global Partnerships Agrees to Loan Up to $500k to Friendship Bridge for Microcredit for Rural Guatemalan Women

MicroCapital Universe Profile: Friendship Bridge

MicroCapital Universe Profile: MicroVest Capital Management

MicroCapital Universe Profile: International Labour Organization

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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