Microfinance institutions (MFIs) have been slow to offer micro-insurance to their customers for the following reasons:
Many microfinance organizations (MFI) do not recognize microinsurance as a component of microfinance. Private health organizations avoid providing services to rural populations, deeming them credit risks. High transaction costs are prohibitive. The dearth of reliable information on the risk patterns of the poor makes microinsurance appear unattractive. Inaccuracies in risk calculations could prove to be costly. The insurance industry itself is very immature in most developing economies.However, creative microinsurance programs have been emerging, as MFIs have been collaborating with private companies. For example, AIG, the largest insurance company in the world, is providing reinsurance services. Some microinsurance advocates believe that diversification of geographical risk is the motivating factor behind private insurance and reinsurance companies’ interest in the “micro” field.
Additional Resources.
1) “AIG Uganda: Good and Bad Practices in Microinsurance Case Study No. 9.”
2) Consultative Group to Assist the Poor (CGAP): “Microinsurance Service Providers.”
3) “Social Exclusion and Access to Health Care in Developing Countries.”
4) “Viewing Microinsurance as a Social Risk Management Instrument.”
5) “Understanding Demand for Microinsurance: A Crucial Step to Develop Market-led Products.”
6) “Report of the Workshop: HIV/AIDS and Microinsurance in the Microfinance Sector in Africa.”
