Microinsurance - the risks, perils and opportunities

01.03.2001
Donors and MFIs have recently begun experimenting with the development of insurance schemes to protect clients against the risks that can lead them further into poverty. This article attempts to inject a strong note of caution into the discussions surrounding these activities. It argues that vulnerability does not translate directly into 'demand' for microinsurance and, moreover, even where markets for microinsurance do exist, MFIs lack the skills and resources to develop or manage all but the most basic microinsurance products. As an alternative to microinsurance provided and managed directly by MFI, this article recommends that MFIs develop partnerships with established insurers in order to provide the benefits of insurance to their clients, without taking on the insurance risk. Recognizing that not all MFIs will accept these arguments, the final section of the article lays out a series of prerequisites, which MFIs that insist on developing their own insurance products ought to consider both to ensure they are providing good value to clients and to increase their prospects for financial sustainability.