Defeating Global Poverty

In my recent trip to India (see other recent posts), we had the opportunity to visit a number of microcredit borrower group meetings. At Grameen Koota, a rural MFI partner of Unitus based in the outskirts of Bangalore, they meet weekly with the borrowers in what they call a "center meeting." Each center meeting consists of women borrowers from the same area (usually one village) who know each other and consists of 4-8 sub-groups of 5 women (so total of 20-40 women in a center.) There is one women elected the leader of each 5-person group and then one women is elected as the center leader by the entire group.

At each center meeting, the agenda is as follows and generally takes from 30-60 minutes:

• Speak pledges
• Take attendance (if more than 10% of center members are not present, then no loans can be disbursed that week)
• Borrowers make loan payments (principle and interest) which is recorded in their passbook. If anyone cannot make the meeting, they send along their payment with some who is attending. If someone cannot make their payment, the group must cover.
• New approved loans are disbursed.
  
• Loan officer requests any need for emergency loans and then disburses if approved by the group.
• New loan applications are collected for later review.
• General discussion on any issues/questions.
  
• Speak pledges again

I took some videos of our group of Americans visiting two center meetings. We had the opportunity to ask the women any questions we wanted through a translator and they were eager and excited to respond. We asked questions about their businesses, how they were using the profits, about their challenges and what other services they would be interested in.

Video: A center meeting in a rural, very poor village near Bangalore


Video: A center meeting in a small rural town near Bangalore

Labels: grameen koota, india, microfinance, poverty

Microinsurance is a relatively new financial service designed as affordable insurance for the poor ... typically in developing countries. In concept, the microinsurance products are similar to regular insurance products except they are typically providing benefits on a much smaller scale requiring a different approach in order to be feasable and sustainable. Microinsurance products can cover health, life, disability, crops/weather, housing, capital equipment and almost anything else which can be insured.

Increasingly, microfinance institutions (MFIs -- banks for the poor) are experimenting with new microinsurance both as a benefit to their clients as well as a method to reduce risk. One of the top reasons that microloans fall into arrears is due to health issues (including death) of the borrower or in their family. Many MFIs already have required life insurance built into their microloans so that if the borrower dies, the loan is automatically paid off and surplus can be used by the family to pay for funeral arrangements and give them some time to start earning again.

I just got back from participating in the Unitus Leadership Summit in Malaysia. I wanted to highlight examples of two innovative pilots of microinsurance which were discussed.

Grameen Koota, a MFI based in Bangalore, India has been piloting a health insurance program in 2 branches for the last year for their microloan clients. They have priced this program at about $3/person/year so a typical family of 5 can be insured for less than $1.50/month. For this fee, they are able to provide free outpatient services, free surgeries, significant discount on generic drugs and 3 hospital day stays per year. The clients are able to use convenient, designated local hospitals for health services. They are expecting that they will need to charge a small co-pay for outpatient services (less than $0.25) when they roll out the program more widely into other areas.

Jamii Bora Trust (JBT), a MFI based in Nairobi, Kenya is now serving more than 130,000 members with microloans and other financial and social services. When JBT experienced some microloan repayment issues in 2000, they researched and found that the #1 reason was health issues with a family member. In over 80% of the cases, borrowers were paying hospital bills first and therefore were not able to make loan repayments. JBT did research and found the cheapest commercial option they could provide to their members would cost $100/person/year which was way too expensive for their clients. They found a local Catholic hospital group which agreed to partner with them for a cost of $15/year to insure a borrower plus up to 4 children! Even at this amazing low cost, JBT has run this health insurance program at a surplus every year while providing good, basic healthcare services to their members.

These innovations are pioneering new models of affordable and sustainable healthcare solutions for the poorest of the poor. Credit is important in providing opportunity to generate new wealth. Insurance is a key tool in providing the important safety net from calamities/misfortune which otherwise might wipe out all assets (and earning potential) and place victims back into desperate poverty. Please post comments on other experiments and progress in microinsurance that you are aware of.

Other resources:

• Healthcare Insurance for the Extreme Poor
  
• Microsave's Microinsurance Center
• Microinsurance in microfinance institutions
  
• USAID's MicroLinks [some articles on micro-insurance if you search]
  
• International Discussion Forum on Micro-Insurance [somewhat outdated, but good definitions and an overview.
  

Labels: grameen koota, jamii bora, microinsurance, poverty