emerging trends in microinsurance: prospects and challenges

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Dr. Jaime Aristotle B. Alip Founder and Managing Director, CARD MRI January 29, 2009 Philippines-Australia Community Assistance Program

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Dr Alip, Founder and Managing Director of the Center for Agriculture and Rural Development Mutually Reinforcing Institutions (CARD MRI), presents the emerging trends in microinsurance and the challenges in the future (Jan 29, PACAP's Community Development Forum- Microfinacne amdist the Global FInancial Crisis.)

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Page 1: Emerging Trends in Microinsurance: Prospects and Challenges

Dr. Jaime Aristotle B. Alip

Founder and Managing Director, CARD MRI

January 29, 2009

Philippines-Australia Community Assistance Program

Page 2: Emerging Trends in Microinsurance: Prospects and Challenges

2007 2007

2006 2005

1999 1997

1986

CARD MUTUALLY REINFORCING INSTITUTIONS

Page 3: Emerging Trends in Microinsurance: Prospects and Challenges

Partnership Program in Hongkong since 2007

More than 681 Offices all over the Philippines since1986

Partnership Program in Indonesia since February 2008

First International NGO Office in Cambodia since 2006

Partnership Program with TYM in Vietnam since 2005

Geographical presence of CARD MRI

Establish-ment of an NGO office in Laos starting 2009

Page 4: Emerging Trends in Microinsurance: Prospects and Challenges

Microfinance Industry DataMicrofinance Industry Data

No. of Poor Household No. of Poor Household - 5M- 5MTotal Outreach Total Outreach - 2.7M- 2.7M-- NGOs (1.6M)NGOs (1.6M)-- RBs (0.8M)RBs (0.8M)-- Coops (0.3M)Coops (0.3M)20% Double Counting 20% Double Counting - 2.2M- 2.2MTotal Outstanding loans Total Outstanding loans - P16B- P16B-- NGOs (P6.5B)NGOs (P6.5B)-- RBs (P8B)RBs (P8B)-- Coops (P1.5B)Coops (P1.5B)

* out of P30B* out of P30B

MCPI, Dec 2008MCPI, Dec 2008

Page 5: Emerging Trends in Microinsurance: Prospects and Challenges

CARD MRI Performance as of December 2008 CARD MRI Performance as of December 2008 Operations UpdateOperations Update

Total No. of Clients Served for the Year Total No. of Clients Served for the Year 849,553 849,553 (31.46% ) (31.46% )No. of Active Members including Savers 706,890 (26.18%)No. of Active Members including Savers 706,890 (26.18%)No. of Active Clients with LoansNo. of Active Clients with Loans 684,756 684,756 (25.36%) (25.36%)No. of Insured PersonsNo. of Insured Persons 3,423,780 3,423,780Amount of Loans Disbursed Amount of Loans Disbursed P 8,773,800,924 P 8,773,800,924 Amount of Loans OutstandingAmount of Loans Outstanding P 2,804,993,921 (17.53% ) P 2,804,993,921 (17.53% ) Amount of SavingsAmount of Savings P 1,616,623,794 P 1,616,623,794Repayment RateRepayment Rate 99.49% 99.49%

No. of StaffNo. of Staff 4,102 4,102EmployeesEmployees 3,6593,659CoordinatorsCoordinators 443443

No. of OfficesNo. of Offices 681 681

BranchesBranches 430 430 Partners Partners 22Office Units Office Units 219 219 Provincial Offices 13Provincial Offices 13Head OfficesHead Offices 6 6 MRI Office MRI Office 11BDS OfficeBDS Office 1 1 Liaison Office (Cambodia) Liaison Office (Cambodia) 11BOAT Partners 5BOAT Partners 5 Partnership Office (Vietnam)Partnership Office (Vietnam) 1 1

PT TPR-CARD (Indonesia) PT TPR-CARD (Indonesia) 11XpressMoney-CARD (Hongkong)XpressMoney-CARD (Hongkong) 11

Page 6: Emerging Trends in Microinsurance: Prospects and Challenges

CARD MRI Performance as of December CARD MRI Performance as of December 20082008

Financial UpdateFinancial Update

Total AssetsTotal Assets P 4,907,625,973 P 4,907,625,973Total LiabilitiesTotal Liabilities P 3,899,029,597 P 3,899,029,597Total EquityTotal Equity P 1,008,596,376 P 1,008,596,376Operational Self-SufficiencyOperational Self-Sufficiency 116.14% 116.14%Financial Self-Sufficiency 105.00%Financial Self-Sufficiency 105.00%Return on AssetsReturn on Assets 4.34% 4.34%

Page 7: Emerging Trends in Microinsurance: Prospects and Challenges

3. Banks/FIs establishing Microfinance Units; and,

2. Banks/FIs establishing NGO/MFI;

1. NGO transforming into Banks/FIs;

Emerging Business Emerging Business ModelsModels

4. Mutually Reinforcing Institutions Approach (NGO, Bank, MBA, Training Institute).

Page 8: Emerging Trends in Microinsurance: Prospects and Challenges

* Slide from Mr. Jody dela Cruz

Page 9: Emerging Trends in Microinsurance: Prospects and Challenges

* Slide from Mr. Jody dela Cruz

Page 10: Emerging Trends in Microinsurance: Prospects and Challenges

a. Lack of Capital - From Non-profit to Profit Model

• Reasonable interest rates

• High dividends to investors (social and commercial investors)

• Financial Investment.. commercial loans, securitization, bonds

Overcoming 3 C’s of Overcoming 3 C’s of MicrofinanceMicrofinance

Ref: SKS Microfinance’s Vikram Akula interview, May 1, 2008 in India Knowledge@Wharton

Page 11: Emerging Trends in Microinsurance: Prospects and Challenges

b. Lack of Capacity - Use of best practices from the business world to scale-up

• manualization, simplification, standardization (from 1,000 clients to millions)

• McDonalds, Jollibee, Starbucks

Overcoming 3 C’s of Overcoming 3 C’s of MicrofinanceMicrofinance

Ref: SKS Microfinance’s Vikram Akula interview, May 1, 2008 in India Knowledge@Wharton

Page 12: Emerging Trends in Microinsurance: Prospects and Challenges

c. High cost of delivering microfinance - Use of Technology

• Computerization

• Mobile banking (internet, cellphones)

• ATMs

Overcoming 3 C’s of Overcoming 3 C’s of MicrofinanceMicrofinance

Ref: SKS Microfinance’s Vikram Akula interview, May 1, 2008 in India Knowledge@Wharton

Page 13: Emerging Trends in Microinsurance: Prospects and Challenges

• MFI’s market saturation in urban areas - nearing perfect market

Market BehaviorMarket Behavior

• Establishment of Credit Bureau

Page 14: Emerging Trends in Microinsurance: Prospects and Challenges

BEFORE

- Loans (productive, emergency)

- Savings / CBU (compulsory)

Products / Products / ServicesServices

NOW

- Loans (productive, emergency, housing, non-traditional energy)

- Savings / CBU (flexible), remittance

- Agri-microfinance

- Microinsurance (MBA / Agent Model)

- Credit with Education

Page 15: Emerging Trends in Microinsurance: Prospects and Challenges

Financial Institutions

- Shorter loans / tenors;

- Cutting back on commitments;

- Require guarantees / higher transaction cost; and,

- Require hard currency loans from international funders.

Global Financial CrisisGlobal Financial Crisis

Page 16: Emerging Trends in Microinsurance: Prospects and Challenges

Clients

- Lower loan needs

- Sluggish business activities

- Increasing number of potential clients (returning OFWs, displaced workers especially in the economic zones)

Global Financial CrisisGlobal Financial Crisis

Page 17: Emerging Trends in Microinsurance: Prospects and Challenges

MFIs

- Loanable funds from commercial and international funds are smaller

- Maintaining near perfect repayment rate of clients can be a challenge

- Profitability is now a challenge

Global Financial CrisisGlobal Financial Crisis

Page 18: Emerging Trends in Microinsurance: Prospects and Challenges