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Microinsurance Reaches 3m in the Philippines, More Expansion Predicted in Microcredit as Commercial Banks Enter Microfinance

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Wednesday, April 4, 2012

MICROCAPITAL BRIEF

» Posted by  in Category: Asia,Microinsurance at 11:12 am

According to a report attributed to the Insurance Commission of the Philippines, a government body regulating the country’s insurance industry, the microinsurance program launched in 2010 has contributed to 3.1 million Filipinos having acquired insurance coverage. The basic unified microinsurance product for health, accident, house and livelihood doesn’t charge more than 5 percent of an individual’s earnings and can provide coverage between PHP 10,000 (USD 233) and PHP 200,000 (USD 4,460). The Asian Development Bank has provided USD 1 million in funding for the microinsurance program.

The Chairman of the Insurance Commission, Emmanual F Dooc, reportedly said the goal was to cover all households below the poverty level, which includes 27 percent of the population [1]. A recent addition to the program is the new product of property and livelihood coverage in case of disaster, a service that the government will be promoting through road shows within the country.

In a recent article in Positive, an online platform for investing in microfinance and small enterprises, several factors were cited as contributing to growth potential for the microfinance market in the Philippines. These include a strong regulatory framework and commercial establishments partaking in the microfinance arena, as opposed to only cooperatives and rural banks.

The Philippines was ranked as the second best market for microfinance business environment in a recent study based on 2010 data was conducted by the Economist Intelligence Unit of London that compared 55 countries. The Filipino National Credit Council Director, Joselito Almario, reportedly argued that the Philippines would have ranked first had it not been for a low ranking in the “investment climate” category.

By Amira Berrada, Research Associate

About the Insurance Commission of the Philippines: The Insurance Commission (IC) of the Philippines was created in 1949 and is mandated by law to regulate and supervise the country’s insurance industry. Its mission is to “protect the interest and welfare of the insuring public and to develop and strengthen the insurance industry.” Specifically, its objectives are to promote the growth and financial stability of insurance companies; to maintain a minimum standard of performance for insurance companies; to educate the public about insurance; to establish a sound insurance market; and to safeguard the rights and interests of the insured. IC’s vision is that by 2020, every Filipino will have the opportunity to be covered by insurance.

About the Asian Development Bank (ADB): Established in 1966 and headquartered in Manila, the Philippines, the Asian Development Bank (ADB) is a development finance institution that consists of sixty-seven members, of which forty-eight are located in the region. ADB has three strategic priorities: to foster inclusive growth, to facilitate regional integration and to ensure environmentally sustainable growth. To accomplish these objectives, ADB uses loans, technical assistance programs, grants, equity investments and guarantees to private companies in member countries. ADB reported a total capitalization of USD 64 billion as of December 31, 2010.

To Catch A Dollar: A Sundance Movie Review

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Michelle Malsbury, BSBM, MM
April 01, 2011
Last evening I had the privilege of seeing this wonderful movie about Grameen Bank and Mohammed Yunus. It was called “To Catch A Dollar”. In 2008 Mohammed Yunus won the Nobel Peace Prize for microfinance. His groundbreaking work with Grameen Bank sets him apart from most financiers. However, he still adheres to the adage that it “takes money to make money”, just on a slightly less grand scale. Hence, the dollar theme.

The story revolves around the Nobel Laureate, Mohammed Yunus from Bangledash, India. He has travelled all over the world, but began his plan for change in his home, India. India has a large population and much of that population is quite impoverished. The people there suffer from an array of maladies some of which could be solved if they had some money and hope. Mr. Yunus wanted to change the dynamics of his society for the betterment of ALL her citizenry. His plan was simple and genius! He created what is known as microfinance.

Mr. Yunus saw a need to loan money to women who were under the poverty level in his country because they had no credit, no credit scores, no collateral, and no way for any bank to serve them. He set out to loan between $500 and $3,000 to each one. He did not collateralize these loans, but did make some requirements that would help these lucky ladies to become self-sustaining, productive, members of their society. Here´s how the plan works.

The money was conditionally lent out to groups of five women. All women had to be under the level considered impoverished and could not be on any other state assistance plan. Businesses ranged from hair salons to nail salons and from chicken hatchers or goat herders to shoe sales or catering businesses and more. Each woman served as support for her team and met each week for one hour to see how these new business ladies were progressing. They discussed an array of business topics pertinent to their new positions. One member from the Grameen Bank was also present to check in with these ladies and to collect the funds for repayment of the loans. There were also some other interesting twists to what had to be done by these ladies who were lent funds. Each step was thoughtfully intended to help them get out of poverty and make something of their lives.

Contingencies to money being lent also expressly designed a plan where each lady had to sock away a whopping two dollars each week into savings accounts and make weekly, affordable payments to Grameen for these loans. Larger loans, than the $3,000 max individual loan, could be taken out if all members of the group could concur and continue in the practices that had been outlined for them by their loan officer at Grameen. Over a period of time these loans had a 99% plus payback ratio and have helped many many deserving women in India to achieve their dreams.

This microfinance plan was so successful that it was implemented in Ghana: New York City: Omaha, Nebraska: San Francisco, California. Target women for this microfinance program have typically been new immigrants to the USA because they are so motivated toward making a place for themselves and working hard to achieve that end. Can this type of financing translate into other segments of our society and perhaps be the cure for what ails our banking and investment system? I say I believe so.

To date more than 5,000 loans have been made by Grameen to women of various backgrounds and over $15 million dollars have been invested in this program. For more information about this special man, Mohammed Yunus, or Grameen Bank please preview some of his news video´s on YouTube.