Consumer protection in microinsurance: challenges and good practices from the Philippines and Colombia
We explore challenges and good practices in consumer protection in microinsurance, defining ‘consumer protection’ as the effective use of microinsurance products by low-income consumers to protect themselves against risk. Consumer protection challenges fall into four main categories: 1) education and information; 2) product and process design; 3) regulation and financial soundness; and 4) capacities and responsibilities. We explore examples from the Philippines and Colombia, and find that consumer protection is best viewed as an outcome, a view requiring all stakeholders, including consumers, to play an active role. Interventions to improve consumer protection outcomes should be informed by market conditions and ongoing monitoring to understand the effectiveness of existing measures and raise red flags as new needs emerge. Consumer protection efforts can further support the value proposition among consumers and also for other stakeholders, as they increase trust and help to ensure that microinsurance is valuable, effective, and sustainable for all stakeholders.
Very small enterprises (VSEs) in Latin America and the Caribbean (LAC) represent a broad and heterogeneous segment, often underserved by formal financial institutions. To respond to this gap, many microfinance institutions (MFIs) are starting to move upmarket to serve small and medium enterprises, and in particular, VSEs. However, there has been little research or documentation of their experiences to date. This article presents the results of a recent study of the existing practices in Latin America of MFIs serving VSEs. The keys to entering the VSE market effectively, are that an MFI has appropriate infrastructure to expand upmarket and that it strikes an appropriate balance between risk management and an institution's commercial goals. This can be difficult, particularly if MFIs underestimate the need to adapt their commercial strategy, credit methodology, hiring and training practices, risk management, and financing strategies. Further, the interviewed institutions are recent entrants to the VSE space and the macroeconomic context in most of their countries has been favourable to microenterprise and VSE growth, which may buffer VSEs and the institutions that serve them. As such, their models have not really been fully tested and the lessons drawn from their experiences are evolving.