Many microfinance institutions (MFIs) have recognised that the vulnerability of low-income households is not eliminated by access to microenterprise loans alone. Microentrepreneurs remain vulnerable to a host of perils that insurance may help low-income households to manage.

From the commercial perspective, insurance can improve loan portfolio quality since bad debts can often be attributed to the death or illness of a client or a client’s family member. Microfinance institutions are interested in developing new products like insurance to serve new markets, to enhance customer loyalty, and improve competitiveness. In addition, MFIs expect that the premiums or agent’s commissions from microinsurance could serve as a new source of capital or income.

Despite the persuasiveness of both the developmental and commercial arguments, critical questions remain unanswered: Do low-income people want insurance, and if so, what types of products are the most important to them? Is it appropriate to try and persuade insurance sceptics that premium payments are an appropriate use for their extremely finite resources? For which segments of the market might insurance be an effective means for managing risks, and for which risks?

To better answer these questions, the ILO is engaged in a variety of activities to understand the role of insurance for low-income households and to assist microfinance institutions to offer such services in a prudent and productive manner.

Publications:

Protecting the Poor - A microinsurance compendium
Edited by Craig Churchill
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Working papers
Informal microfinance schemes: The case of funeral insurance in South Africa , by J. Roth.

Microinsurance in Burkina Faso by M. Aliber and A. Ido.

A field study of microinsurance in the Philippines by E. Barbin, C. Lomboy and E. Soriano.

The demand of risk-managing financial services in low-income communities: Evidence from Zambia by L. Manje and C. Churchill.

South African microinsurance case study by M. Aliber.