Microfinance commercial viability improving

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Microfinance has not to date proved to be the most commercially viable area to expand into for many large insurers however that is changing and as regulation improves, technology is developed and the idea becomes more accepted it is beginning to be looked on as an area of potential growth and opportunity.

The latest edition of the Economist Intelligence Unit’s annual report on the microfinance business environment (available here) suggests that commercial opportunities are a reality in most areas of microfinance right now. The report looks at the 54 countries of the world and analyses their business environment and how conducive it is to microfinance schemes. To do this they look at three important factors; regulatory framework, institutional development and investment climate.

Top performing country with the best environment for microfinance is Peru for the second year running. Next come the Philippines, Bolivia, Ghana and Pakistan.

The report suggests that microfinance is rapidly moving away from being a niche product often associated with NGO’s and charities to become a globally recognised form of finance. Regular readers of Artemis will know that microinsurance is a growing market with a huge potential for revenue for re/insurers and benefits for the countries and local populations where schemes are launched. It is also perfectly aligned with modern risk transfer techniques and utilises many of the skillsets that global re/insurers have acquired in recent years.

You can download the full report from the Inter-American Development Bank website here.

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