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> Posted by Jeremy Leach, Director and Head, Insurance, Bankable Frontier Associates
The global financial inclusion agenda continues to place insurance at the back of the queue when it comes to funding and broader financial inclusion strategies, despite the fact that the International Association of Insurance Supervisors (IAIS) has become the leading financial inclusion focused standard setting body with its own financial inclusion implementation arm, A2ii and the significant growth of microinsurance from a low base of 78 million people in 2007 to 500 million people in 2012.
My hypothesis is that this is because of a lack of understanding of the role of insurance in the value chain and the way that it can manage risk and provide benefits for the low-income markets, which includes:
- A misplaced view that insurance is the lowest priority in a hierarchy of consumer financial needs – thus less important than payments, savings, or credit.
- The desire to directly target the very bottom of the pyramid. Whilst there has been a global recognition that microcredit is aimed at the near-poor, not the absolute-poor, donors have typically focused at the very bottom of the pyramid, often in hard to reach areas sometimes called the “supra-market zone,” and yet expect market-based solutions to work. Whilst this may also have been exaggerated through an irrational optimism by some of the private actors, the impact has been somewhat predictable.
- The time it takes to create a viable and dedicated insurance business. As exemplified by the recent business case undertaken on specialist microinsurance intermediaries, there was an unrealistic view of how quickly and easily it would be to create a profitable microinsurance business. A founder of a multinational $1 billion insurer once said that it takes 10 years to create a viable and profitable insurance business in the traditional sector – and yet we have been trying to get there far sooner.
- The focus on driving retail-based insurance products, paid for by the consumer. The idealistic view is that through the poor paying the premium from their own pockets they will learn to trust insurance and therefore value it, which will create a market. However, the nature of insurance, with payments due now and returns in a possible future, makes it notoriously hard for a customer to test. This has led to discussions around the need to drive tangibility and in-life benefits in order to assist take-up. The focus could equally be revised to address the portfolio risks of the institutions that serve the low-income market.
Kim Wilson, of the Fletcher School of Law and Diplomacy, is a consummate educator who knows that drama leads to learning. That’s why she staged a competitive debate to kick off her Extreme Inclusion conference.
The Proposition: Financial inclusion means formal inclusion.
On the Pro side were myself and my esteemed colleagues Marguerite Robinson, emerita extraordinaire, Lauren Hendricks, of Care’s Access Africa conference, with coaching from Ahmed Dermish of Bankable Frontier Associates.
Taking the Con side were Ahmed’s colleague from BFA, Daryl Collins, together with Ignacio Mas, unaffiliated innovative thinker, and Jenny Aker of Fletcher, coached by Nick Sullivan, author of Money Real Quick: The Story of M-PESA.
Peter Walker of Tufts wielded the gavel with wit and a tiny hint of malice. He symbolized the Pro side with a green spike heeled shoe, and the Con side with a pink flip flop.
Unaccustomed as I am to public speaking, I took up the last position on the Pro side, with three minutes to make my points. Here’s what I said:
1. Development is about building societies that offer opportunity and connection to everyone. The important word is building. Let’s look where we are going. While many low income people today use and possibly even prefer informal financial services, one cannot consider this the path to the future. If we want to see the bottom 20 percent of the population become economically successful, there must be a path to success. We need only look to the accomplishments of microfinance in bringing microcredit to hundreds of millions in the past two decades to be confident about the prospects for major change in the future.
> Posted by Brigit Helms, Director, Support Program for Enterprise and Economic Development (SPEED)
It’s hard to imagine a more explosive, transformative, and empowering trend than the growth of the mobile phone sector in Africa. In 1998 there were fewer than 4 million phones on the continent; today there are around 800 million—a whopping 80 percent penetration. Compare this to the meager 24 percent of African adults with bank accounts. Experts expect there will be around 1.1 billion mobile phone subscribers by 2017.
Women likely will be at the forefront of this future growth in mobile access in Africa (and elsewhere), globally accounting for two-thirds of new subscribers. According to the Cherie Blair Foundation, the gender gap in Africa alone is a $2 billion business opportunity.
At the same time, the potential for mobile money is indeed dazzling. The Kenya example continues to dazzle us, with 21 million active users, more than 60,000 agents (many of whom are women), and mobile money deposits of KSh 226 billion, surpassing the deposit base of the country’s largest commercial bank, Kenya Commercial Bank.
With all this promise, the potential is unrealized outside of a few countries. Why? The answer is complex, but fundamentally it’s because mobile money operators systematically underinvest in two things: understanding the market and building the agent network.
As it turns out, both of these things are critical for connecting women with mobile financial services. Once we crack the problem of women’s access to financial services, their households and communities will follow shortly thereafter.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
The majority of individuals around the world without formal bank accounts are women. In the developing world, 63 percent of women lack accounts, versus 54 percent of men. Mobile financial services offer a path to inclusion given that 1.7 of the 2.5 billion unbanked own mobile phones. However, the path is longer for women, as the majority of mobile phone owners are men.
Visa, mWomen, and Bankable Frontier Associates are working together to bring mobile services to women. Today at the Mobile World Congress in Barcelona they’re releasing joint research that examines how to best design mobile financial services to reach women at the base of the pyramid (BoP), Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets.
You might remember our posting about mWomen research on mobile phone usage among BoP women earlier this year. The previous report, Striving and Surviving: Exploring the Lives of Women at the Base of the Pyramid, cast light on the opportunity for mobile money services to benefit BoP women. This potential was evidenced in the report’s findings that BoP women are largely responsible for managing their family’s finances, that they often go to unsafe, costly, and time-consuming lengths to do so, and that one of the biggest barriers preventing their use of formal financial services is a lack of nearby facilities.
Unlocking the Potential builds off Striving and Surviving to establish where the developing world is with mobile financial services among BoP women. Over the past few months the research team has worked with women in Indonesia, Kenya, Pakistan, Papua New Guinea, and Tanzania to better understand their relationship with mobile financial services, examining how they manage their money, what their needs are, and how mobile financial services can fit into their lives.