Mindanao business leaders mull microinsurance for small entrepreneurs

BusinessWorld

Economy

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Posted on December 13, 2012 10:46:04 PM

ZAMBOANGA CITY -- Business leaders in Mindanao are working on a scheme that will provide cover for investments of small and medium entrepreneurs when natural calamity strikes.

  Ricardo C. Juliano, Philippine Chamber of Commerce and Industry vice-president for Mindanao, told BusinessWorld that members of his group and representatives from a German aid institution are working on mechanisms that will allow small businesses to recoup their losses in times on natural disasters.

Business leaders in Mindanao, he said, met last Monday in Cagayan de Oro City to see how they can help small businesses regain profitability amid the destruction wreaked by typhoons and other natural calamities through a microinsurance system.

Microinsurance refers to low-premium insurance policies. They are usually targeted at the poor, who are hit hardest by natural and man-made calamities.

Microinsurance premiums must not exceed 5% of the current daily minimum wage of non-agricultural workers in Metro Manila, while benefits must not be higher than 500 times the daily minimum wage for non-agricultural workers in Metro Manila.

Typhoon Pablo, whose impact on small businesses was discussed at the Cagayan de Oro meeting, hit the eastern part of the island, destroying banana plantations and coconut farms and affecting thousands of small investors.

"The situation is so bad that until now, we cannot properly communicate with our local chamber presidents in those areas," Mr. Juliano said in reference to specific municipalities in Davao Oriental and Compostela Valley where communication systems have been disrupted days after Pablo struck. The situation was compounded further by lack of supply of electricity in those areas.

Last year, tropical storm Sendong left more than a thousand people dead in Northern Mindanao. Mr. Juliano said the increasing frequency of typhoons passing through Mindanao is now a major problem for businesses operating on the island. Local business chambers, he said, are collaborating with the Insurance Commission to look at the viability of microinsurance.

Currently, most insurance companies do not cover flood damage, Mr. Juliano said. "What we want to focus on here is the situation of small entrepreneurs because they don’t have the resources to recover quickly compared with large corporations," he said. Mindanao’s business leaders will again meet within the month to complete the details of the proposed microinsurance scheme for small entrepreneurs. -- Darwin T. Wee

Why do many go to pawnshops more than banks?

The Philippine Daily Inquirer
Business
By Michelle V. Remo

6:52 pm | Saturday, December 1st, 2012

CEBUANA Lhuillier has a branch on Chino Roces Avenue. PHOTO BY EDWIN BELLOSILLO

For many Filipinos, pawning jewelry at a neighborhood pawnshop has been the most common and quickest way to address an urgent need for relatively small amounts of cash.

Compared with banks, pawnshops do not impose as many documentary requirements before releasing cash to customers. Moreover, the latter are more accessible, as they may be found even in remote areas where banks do not operate.

But despite the essential role these financial-service providers play, pawnshops still suffer from a bad reputation of preying on middle- and low-income Filipinos. The perception remains that pawnshops have a tendency to take advantage of people in need of cash through profiteering, and that many of them are fly-by-night operators that steal pawned jewelry.

The Bangko Sentral ng Pilipinas, which has a division dedicated to regulating pawnshops, agrees that the pawnshop industry continues to suffer a stigma. It admits that it receives complaints involving pawnshops from time to time, usually in terms of operators that suddenly disappear without notifying customers about how they could get their pawned assets back.

The BSP, however, says the proportion of erring pawnshops to the total number of industry players is miniscule. Ma. Belinda Caraan, officer-in-charge of the central bank’s integrated supervision department, says the number of pawnshop branches that have been the subject of complaints is equivalent to less than 5 percent of the industry’s network.

The pawnshop industry has a network of nearly 17,000, which include head offices and branches. Of the number, about 10,000 are engaged solely in the pawning business. The rest also operate auxiliary businesses, such as money changing, remittance facilitation, and bills payment facilitation.

MOA with LGUs

“Until now, there is still the negative view that pawnshops prey on consumers. We want to help the industry change its image,” Caraan tells SundayBiz.

To do the task, Caraan says, the BSP is intensifying its coordination with local government units (LGUs) as far as monitoring pawnshops is concerned.

She says that under a recently updated memorandum of agreement (MOA) between the central bank and the Department of the Interior on Local Government (DILG), the two government institutions shall engage in information sharing for the purpose of better regulation of pawnshops.

Caraan says constant enhancement of regulation, with the aim of bringing down the number of erring or fraudulent pawnshops to almost zero, will help improve the public image of the pawnshop industry.

In one of the central bank’s latest initiatives, its representatives, with assistance from LGUs, conducts random visits of pawnshops all over the country. The BSP targets to cover 500 pawnshops until 2015, and an even larger number in the succeeding years.

In the spot visits, Caraan says, BSP representatives check if a pawnshop is duly registered and if it complies with various regulations.

Caraan says most of the pawnshops that have been the subject of complaints are not registered businesses. She advises people planning to pawn a property to first check the website of the BSP to see if the pawnshop to be visited is registered.

Training

The BSP likewise holds training seminars for pawnshop operators and their staff. She says such training is conducted at least once a month by BSP personnel all over the country. The training covers a wide range of topics, including ethical business behaviors, valuation of assets, and detection of money-laundering activities, among others.

Training helps improve the manner of service delivery by pawnshops, Caraan says.

“We like people to develop a positive view of pawnshops. We want the public to perceive pawnshops not only as accessible, but as reliable and trustworthy providers of financial services,” Caraan says.

Service providers

Minda (not her real name), an employee at Palawan Pawnshop in Mandaluyong City, says in a random interview with SundayBiz that pawnshops must be perceived positively given the vital role they play in meeting short-term financial needs of many Filipinos.

“For many Filipinos who are short of cash, pawning is the easiest way to solve their problem. It is much easier to raise money through pawning than securing a bank loan,” she says in Filipino.

She says the pawnshop she works for receives between one and six customers, mostly from the neighborhood, pawning jewelry in a day.

Janet, a mother in her 50s and who has been a pawnshop customer, says pawning has been a reliable means to meet her immediate need for cash.

“For instance, if there is an urgent requirement for house repair and I fall short of cash, all I have to do is visit the nearest pawnshop,” Janet says. “It is not advisable to go to a bank and try meeting all its requirements if what you need is just a small amount of money,” she adds.

Expanded role

Because of their wide reach, pawnshops are identified by the BSP as entities for “financial inclusion.” The term refers to the act of making various financial services (such as payment facilitation, remittance facilitation, money changing, micro loans, and micro insurance) accessible even to people in far-flung areas.

A study by the BSP released earlier this year said only two out of 10 Filipinos have bank accounts. The BSP said the information is an indication that banking services are still mostly concentrated in urban areas and are not reaching most Filipinos in rural communities.

Caraan says, however, that pawnshops are capable of filling the gap.

Unlike a bank, a pawnshop is much easier to put up. This is the reason they are much bigger in number compared with banks. While there are nearly 17,000 pawnshop head offices and branches in the country, there are only about 9,000 bank head offices and branches.

The wider reach of pawnshops is largely credited to the ease in putting them up. Compared with a bank, a pawnshop requires less space, less staff, and needs much less capital (each pawnshop branch is required by the BSP to have a capitalization of just P100,000), according to Caraan.

“There is a push for financial inclusion, and pawnshops are seen to help achieve the goal of having more Filipinos access financial services,” Caraan says.

Some of the auxiliary services that many pawnshops now offer include remittances facilitation, money changing, and bills payment facilitation. Moreover, a few also now serve as “cash in-cash out centers” and offer mobile banking services.

Under the mobile banking concept, an individual may open an electronic account with a “cash in-cash out center” (which may be a pawnshop) for a measly amount, usually P100. To open an account, the individual fills out a form with the cash in-cash out center and registers his cellular phone number.

Once an account has been opened, the individual may place a deposit by buying a “mobile phone load” from the cash in-cash out center. He will then encode details of the “load” to his electronic account using his cellular phone.

Moreover, an individual with a mobile banking account may also receive money. If someone (who must also have a mobile banking account) sends money to the recipient’s account, the latter shall be notified through text. The recipient may then go to a cash in-cash out center to get his cash.

The BSP said that as the practice of mobile banking further develops, the number of Filipinos that do not access financial services and that do not have bank accounts is expected to

Ma. Belinda Caraan

diminish over the next few years.

Besides providing mobile banking services for low-income Filipinos, Caraan says, pawnshops in the future may also provide other financial services. With proper regulatory framework, the BSP believes there is scope for pawnshops to also sell micro insurance and provide micro credit, she says.

“They serve the important role of making financial services—and even more kinds of such services in the future—reach the poor and those who reside in remote areas. Indeed, pawnshops are important to the economy,” Caraan says.

Inclusive growth? Jollibee cites 'chickenjoy' supply chain

Inclusive growth? Jollibee cites 'chickenjoy' supply chain

BY AYA LOWE
POSTED ON 11/26/2012 1:17 PM  | UPDATED 11/26/2012 2:26 PM

Rappler.com

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FOOD GIANT. Jollibee is the biggest buyer of chicken in the Philippines. Photo by AFP

MANILA, Philippines – Homegrown food giant Jollibee Foods Corp. is doing its part in addressing poverty in the Philippines through its massive supply chain program, a top official of the company said.

Jollibee chief finance officer Ysmael Baysa highlighted at an Asian Development Bank forum on Monday, November 26, that the food service company's P6 billion annual purchase of chicken from farmers in various parts of the country creates sources of income.

"Our contract [growing program] helps the poultry industry and helps to build livelihood in the area often where the most impoverished sectors in the country are,” Baysa said.

"We make poultry farmers grow chicken for the company. They also dress and cut the chicken for us which increases the value of their corporation," he added.

“We provide them with a sure demand of their produce, access to financing, access to management training. Some have been able to pay off their debts, send their children to college and buy farming equipment," Baysa said.

Under its own "Inclusive Business Program," the country's biggest buyer of chicken deals and buys 80% of chicken supplies directly from local poultry farmers. It is only during the Christmas that Jollibee imports from the US.

This business strategy involves 250 local poultry farms and around 2000 farmers located throughout the country.

Jollibee's "chickenjoy" products are among the food retailer's bestsellers. Chicken accounts for the largest portion of its raw material supplies.

Entrepreneurship program

Jollibee also has a Farmer Entrepreneurship Program for raw materials other than chicken.

"Practically all of our raw materials, outside of packaging materials, are agricultural base," Baysa said. Majority of Jollibee's agricultural needs for its burgers, soup, french fries, and other food offerings are now bought from rural producers.

Since 2005, farmer cooperatives have been supplying Jollibee with green and red bell pepper, lettuce, tomato and potato.

For enterprise training and organizational needs of farmers, the company works with US relief services. To develop financing for famers through a network of micro financing institutions, Jollibee works with state-owned National Livelihood Development Corp.

"We’re also convincing other corporations to buy from our farms. We persist in organizing the farmers and helping them in agro enterprise training to help improve their livelihood and help in our own way the development of agriculture in our country,” the executive shared. .

This year, the entrepreneurship program involved 400 farmers in 13 communities some in central Luzon, central provinces and Mindanao.

P39-worth lunch

Bulk of Jollibee’s consumers are middle class, poor and very poor, he added. "That’s the center gravity of our business. They spend on average P39 on lunch."

The company recently posted a 9-month net earning of P2.47 billion up 20.4% from the same period in 2011. According to Baysa, their sales grew at 30% with a return on equity consistently hovering around 17.5% to 18% year-on-year.

“We serve the poor and make money. So it is possible,” said Baysa.

Every year, the group opens at least 100 retaurants in the Philippines. By working with local suppliers and relying on volume for their profits, the business has maintained a strong year-on-year growth.

Jollibee, the Philippine’s largest food service company, operates the largest food service network in the Philippines. As of September 30, 2012, it was operating a total of 2,040 stores in the Philippines: Jollibee 765, Chowking 383, Greenwich 201, Red Ribbon 209, Mang Inasal 457 and Burger King 25.

In foreign operations, the group had 541 stores: In China, Yonghe King 288, Hong Zhuang Yuan 52, San Pin Wang 39; in the US, Jollibee 27, Red Ribbon 32, Chowking 18, Chow Fun 3; in Southeast Asia and the Middle East, Jollibee 60 and Chowking 22 for a total of 2,581 stores worldwide.

Crop insurance

Baysa said furthering their corporate inclusive business program will need another support leg: crop insurance.

“What kind of incentive would we have on our wish list from the government? Two words; crop insurance."

"The crop insurance in the Philippines is very inhibitive and expensive. It’s a function of the low uptake in the Philippines. We have been trying very hard to insure our farmers against crop failures and have been working already with the largest insurance not just in the Philippines but in the world. It is very tough so we have not solved this problem. Our farmers have told us that if they can get a proper crop insurance they can invest more,” said Baysa.

Jollibee was recently mentioned at the ASEAN Business Awards on November 18 as an ‘outstanding Philippines company’ that has contributed to regional economic growth. At the ceremony held in Phnom Penh, the company said sales growth was broad-based and volume driven resulting from better-value-for-money recognition by consumers on its products and services. – Rappler.com

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Philippines: Multisectoral agency to draft country's first EQ insurance pool

Source: eDaily | 26 Oct 2012
The private insurance industry, government and multilateral lending agencies are teaming up to create the country's first-ever earthquake insurance pool due to the frequency of Nat CATs wreaking havoc in the country, reported the Philippine Star. The pool will cover the middle class residential and medium-sized enterprise property owners. 

The initial draft of the insurance pool is expected this December, the first structured draft by the first half of 2013. The actual implementation of the Public Private Earthquake Insurance Pool of the Philippines is expected in late 2014 or early 2015.

The project is part of the bigger integrated disaster risk management that would result in innovative risk management tools in dealing with the increasing number, intensity and frequency of natural catastrophes, such as earthquakes, tsunami, tropical cyclones, floods and droughts, in Philippines. The initiative received a boost following a US$225 million technical assistance special fund from the Asian Development Bank (ADB) in August.

Ms Madeleine Varkay, Principal Development Specialist for ADB Southeast Asia, said the increasing number of disasters called for an earlier implementation of the insurance pool. The pool will also strengthen the ability of private insurance to underwrite new policies on CAT risk and enhance their capacity to proactively manage and transfer risk to international reinsurers. It is expected to offer options for insurers to expand available scope to cover private earthquake risk.

A property valuation survey is being conducted currently, which includes model assets at risk, estimations of the scope of the market and related insurance and re-insurance premiums. Following these stages, the technical working group composed of the private and public sector representatives, will formulate the structure of the earthquake insurance pool.

Philippines improves ranking in global microfinance survey

Business World

Finance

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Posted on October 26, 2012 09:21:37 PM

By Diane Claire J. Jiao, Senior Reporter

THE PHILIPPINES maintained its leadership in microfinance as most countries ran into problems with the rapid expansion of the industry, the Economist Intelligence Unit (EIU) said.

The Philippines placed fourth out of 55 countries polled by the EIU’s “Global Microscope on the Microfinance Business Environment 2012 ” -- a jump of two spots from its sixth-place finish last year.

The country also improved its score of 64.4 out of an index of 100, up 4.8 points.

Peru topped the EIU rankings for the fifth straight year, followed by Bolivia and Pakistan.

Kenya, El Salvador and Colombia -- other mainstays in the top 10 like the Philippines -- ranked fifth, sixth and seventh, respectively.

Cambodia, meanwhile, was the only newcomer in the top 10, rising five places to eighth from 13th. Mexico and Panama tied at ninth.

At the other end of the EIU rankings, Vietnam remained at the bottom rung because of the government's monopoly of microfinance.

"The last few years have presented a series of challenges and learning opportunities for the microfinance sector. During the last few decades the microfinance industry experienced substantial growth, but eventually this resulted in market saturation, a rise of non-performing loans and multiple lending across a few key markets," the EIU said in its report.

The global financial crisis also highlighted the need for risk management, corporate governance and regulatory capacity, it explained.

The EIU rankings were created in 2007 as microfinance began to emerge as one of the key strategies for growth in developing countries.

It surveys governments, industry associations and international organizations on three areas: regulatory framework, institutional framework and stability.

The Philippines -- along with Peru -- kept its hold on the top spot in terms of regulatory framework, which assesses the legal recognition of microfinance institutions, national regulatory and supervisory capacity and policies towards deposits and market distortions. It was the fourth time the country led the regulatory rankings.

It also placed 15th in terms of institutional framework, which covers financial reporting standards and transparency, credit bureaus, pricing, dispute resolution and policies for offering microfinance through new agents and channels. It was an improvement of two slots from last year's 17th place.

The sub-category of stability, a new addition to the survey, put the Philippines at 22nd place. It analyzes to what extent political shocks have affected the microfinance sector and general country conditions.

Overall, the EIU cited the country for its business environment.

The Bangko Sentral ng Pilipinas doesn't just regulate but promotes and enables microfinance, it noted.

Government financial institutions like People's Credit and Finance Corp., Small Business Corp., Land Bank of the Philippines and Development Bank of the Philippines also provide wholesale funds for retail lenders. The private sector, for its part, is diverse, with "no one dominant institutional type."

The EIU is the business information arm of The Economist Group, publisher of The Economist magazine. The "Global Microscope on the Microfinance Business Environment 2012" is its fourth annual analysis of the microfinance business in 55 countries.

Govt has plan in place for microinsurance claims

Business Mirror

Published on Sunday, 21 October 2012 18:36

Written by Jun Vallecera / Reporter

THE government has a draft framework for resolving disputed microinsurance claims whose incidence does not as yet threaten the popularity of an P8-billion industry catering to the insuring requirements of some seven million policyholders.

The draft was presented on Friday at a consultation workshop held by proponents at the Hyatt Hotel as an initial step towards full accreditation and adoption by the Insurance Commission (IC).

Disputes between policyholders and microinsurance providers are still rare but the government, said Joselito “Itoy” Almario, director at the Department of Finance, is making sure the framework addresses the absence of dispute resolution bodies for insurance claims involving no more than P200,000.

Right now, such bodies can be found only in the cities of Cebu in the Visayas, Davao in Mindanao and in Manila, the nation’s capital.

Requiring microinsurance policyholders to elevate their claims to the regional offices of the Insurance Commission was clearly impractical and thus the need to adopt an accredited alternative dispute resolution mechanism right where the conflict arises.

The framework seeks to respond to the physical and administrative challenges to the resolution of microinsurance-related conflicts at the local levels.

Establishing ADR mechanisms for microinsurance foresees the decentralization of dispute resolution capacities by deputizing fair and capable third party mediators outside of the three regional offices of the Insurance Commission.

Thus far, the government said, five microinsurance claims have been disputed since the IC issued the mandate for the creation of the ADR in 2010.

The ADR aims to eliminate the likelihood for the conflict to reach the level of the judicial courts which entail costs on both the policyholder and the microinsurance provider.

The long and tedious legal process, plus the lack of readily accessible resolution bodies other than those found in three regional centers, may discourage microinsurance clients to pursue disputed claims with legitimate microinsurance providers.

Microinsurance policies typically cover risk claims of up to P200,000 and require premium payments of between P1 to P20 a day.

Delivery channels for now include community-based organizations, rural banks, cooperatives and non-government organizations.

Microinsurance ADR Consultations-Cebu City Oct 2, 2012

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Micro insurance can peak at P20B

Business Mirror

TUESDAY, 09 NOVEMBER 2010 21:13 JUN VALLECERA / REPORTER

THE domestic micro-insurance sector at this time is only about a P200-million area in risk coverage, but the group of insurers and reinsurers sees a huge potential, estimating that premium payments of P20 billion a year is a reasonable expectation within a few years.

Philippine Insurers and Reinsurers Association (Pira) chairman Mitch F. Rellosa made the projection at the opening on Tuesday of the three-day 6th International Micro Insurance Conference summit aimed at identifying industry challenges and offering possible solutions.

Key figures in micro insurance at the global level acknowledged the topnotch performance of the Philippines in this area, but local industry leaders acknowledged that the country’s insurance-penetration rate at less than 14 percent of the population is one of the lowest in the region.

Nevertheless, Rellosa argued that while some 40 million of the estimated 92 million Filipinos can hardly afford to pay the price of a risk cover, the market for micro insurance “is without doubt very promising. . . .There is even an estimate that the micro-insurance market for the Philippines alone is worth at least P20 billion a year. That’s a huge market if you ask me.”

Joselito S. Almario, deputy executive director of the National Credit Council and Finance department assistant secretary, pointed out there already are more or less 7 million Filipino micro-insurance clients, each with a potential to recruit five more.

At the press meeting, Almario said the largest domestic challenges are overcoming the insurance “literacy black hole”
that holds back the advance of microrisk coverage, the relative incapacity of quite a number of Filipinos to pay the cost of a risk cover, and the attitude that such cover is a nonessential and that they would rather get a mobile phone and other gadgets.  

On this issue, Craig Churchill of the International Labor Office said one also has to consider the demand side of the equation and tailor-fit a micro-insurance product that perfectly matches the requirements of poor people not just in the Philippines but everywhere else.

Antonio Malagardis, program director of the micro-insurance project in the Philippines under the auspices of Germany’s Gesellschaft fur Technische Zusammenarbeit, or GTZ, looks forward to seeing the country excel in its pursuit of a micro-insurance program and become its premier example.

He said the Philippines is considered the third most active and successful disciple of micro insurance, no matter that it still has a long way to go to really get the sector moving at its potential stride.  

Thomas Losterm, chairman of the Munich Re Foundation, which helps underwrite government’s micro-insurance programs, noted that the Philippines has an “almost perfect environment for the development of micro insurance.”

Gov’t not keen on insurance subsidy

Philippine Daily Inquirer

2:01 am | Monday, September 17th, 2012

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The government is not keen on subsidizing insurance premiums for low-income Filipinos or giving perks to insurers even with a still much-needed push for an emerging micro-insurance market.

Finance Undersecretary Gil S. Beltran said in an interview that the government’s thrust was to encourage greater participation from commercial insurance sellers, mutual benefit associations and other private-sector entities.

“Right now we are not looking at tax breaks for insurers and we want to limit subsidies to the conditional cash transfer program,” Beltran said.

He said that while micro-insurance was expected to help the Philippines meet its millennium development goals, particularly in reducing the number of Filipinos living below the poverty line, the best way to improve access to this service was through a greater role for the private sector.

“We want this to be market-driven, with the private sector providing the supply based on demand,” Beltran said.

According to Reynaldo Vergara, chief of the Insurance Commission’s actuarial division, there were now some 7.8 million Filipinos covered by micro-insurance. He clarified that the number included the policyholder’s dependents.

This was more than double the 3.1 million individuals covered before a multisectoral drive to promote micro-insurance made headway in 2008.

“Micro-insurance growth is forthcoming as insurers become more familiar with the low-income market, and the market becomes more comfortable with them,” Vergara said.—Ronnel W. Domingo

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Held at Hotel Sofitel, 12 September 2012, with the theme "Insuring the Future, Empowering the People".
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Microinsurance clients surge

BusinessWorld

Finance

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Posted on September 12, 2012 09:50:11 PM

BY DIANE CLAIRE J. JIAO, Senior Reporter

AN ESTIMATED 7.8 million Filipinos are now covered by microinsurance, more than double the number five years ago, the Insurance Commission (IC) yesterday said.

The IC bared a list of industry milestones as it concluded yesterday the Developing Microinsurance Project, a technical assistance program of the Asian Development Bank (ADB)-Japan Fund for Poverty Reduction that ran from 2008 to 2012.

Only 3.1 million Filipinos were protected by microinsurance before 2008, IC Chief Insurance Specialist Reynaldo M. Vergara said during the National Conference on Microinsurance yesterday.

The number has grown sharply to 7.8 million this year, he said, due to the concerted effort of the government, development partners and the private sector to develop microinsurance, low-premium insurance targeted at low-income individuals.

Moreover, prior to 2008, microinsurance products were only offered as an optional benefit for the credit and savings programs of microfinance institutions, he noted.

Now, there are 80 microinsurance products approved by the IC -- 54 life and 26 non-life.

The uptake of the private sector has also been immediate, he said. There are now 17 mutual benefit associations and 28 insurance companies -- 16 life and 12 non-life -- licensed to offer microinsurance products from the “very few” seen before.

There are also 116 licensed microinsurance agents to date, 26 of which are rural banks and 90 are individuals.

Since 2008, with the help of technical assistance from the ADB, Japan and the German Agency for International Cooperation (GIZ), the government has been able to draft a national microinsurance strategy, a comprehensive regulatory framework and a roadmap to financial literacy.

“As a result, the Philippines is now the pioneer and the source of concrete best practices in the world when it comes to microinsurance,” Mr. Vergara said.

“Many countries have microinsurance products and providers but no foundation, which makes it difficult to develop the industry,” he explained.

Despite these early gains, stakeholders pointed out in the conference that there are 23 million Filipinos below the poverty line, and they need to be targeted for microinsurance.

“They remain susceptible to unpredictable incidents such as unemployment, accidents, illnesses and natural disasters. This is where microinsurance could enter as aid in ensuring that inclusive growth penetrates even the bottom layer of the society,” Takahiro Etchu, financial attache of the embassy of Japan, said.

Inclusive growth is growth that reaches the poorest sectors of society.

Kunio Senga, director-general of the ADB Southeast Asia department, added: “Under uncertainty of another global crisis, financial inclusion will enable even poor people to access a wide range of financial services, including credit, savings, insurance... integral to sustain and realize inclusive growth.”

In order to expand microinsurance coverage, GIZ program manager Antonis Malagardis called for the improvement of distribution channels so more people can be reached at less cost.

“Well-developed distribution channels are crucial in bringing microinsurance... to the doorsteps of the low-income people. It will not only make enrollment more efficient for insurance providers but more importantly, it makes the servicing of claims faster,” Mr. Malagardis said.

Some of the conduits that have been eyed are schools, pharmacies and utilities, he explained. Relationships with local communities must also be strengthened so they can be convinced to participate in microinsurance.

Finance Undersecretary Gil S. Beltran also revealed the government is considering imposing a mandatory allocation for microinsurance for insurance companies, similar to the case of India where 10% of premiums must be from microinsurance policies.

This will be similar to the Agri-Agra Reform Credit Act of 2009 which requires banks to set aside at least 25% of their total credit resources for lending to the agriculture and agrarian reform sectors.

Other than this possible quota, the government is not keen to offer subsidies or tax incentives to encourage microinsurance providers, Mr. Beltran said.

“These perks are not efficient. Microinsurance must be mainly private sector-led,” he said.

Microinsurance coverage surges 95% year-on-year

By: Likha Cuevas-Miel, InterAksyon.com

September 13, 2012 8:38 AM

 

 

MANILA - About 7.8 million Filipinos, including dependents, are now covered by microinsurance, the government announced on Thursday.InterAksyon.com
The online news portal of TV5

During a national conference, Reynaldo Vergara, actuarial division chief at the Insurance Commission, said this level of coverage has expended from 4 million last year due to increased awareness and interest.

Before 2008, microinsurance products sold in the market were mostly credit life, except for those sold by mutual benefit associations. Only six licensed microisurance MBAs and "very few" commercial insurance companies were offering these kinds of products back then.

But now, the industry offers 80 microinsurance products, including 54 life and 26 non-life. Seventeen licensed microinsurance MBAs and 28 insurance firms (16 life and 12 non-life) are selling these insurance products.

Vergara, however, said the industry must aim for coverage of 23 million Filipinos who are living below the Asian poverty line. 

The low-income households can now have easier access to these financial products since the cost of selling and paying for microinsurance - where policy holders pay small premiums in many transactions - can be reduced by using mobile banking, e-payment or paperless policies.

Vergara said the Philippines is pushing for more private sector participation and the government's role would be on establishing the enabling policy and regulatory environment. 

Antonis Malagardis, GIZ Microinsurance innovation program manager, said the Philippines has one of the most advanced regulatory frameworks in the world. 

The German development organization has been working with the Philippine government towards the development of the microinsurance industry since 2007. GIZ has helped design microinsurance products that are affordable, simple  and accessible to low-income households.

Malagardis said the Philippine government must now revise and draft new regulations in agroinsurance, which has been stagnating under the current Philippine Crop Insurance Corp. set-up.

For the farms, the ideal would be an area-based yield insurance that would base its actuarial computation on data gathered in the last 5 years. The coverage would be P10,000 per hectare and the premium would only be at 4 percent. 

The government and the private sector are in discussions on which of them would take care of marketing the product.

Industry sources said there are also proposals to overhaul PCIC and just make it a regulatory entity so that private sectors can come in and offer products that are responsive to the needs of farmers. 

Another option is to make the PCIC a national reinsurance body for agro-microinsurance.