Monday, February 24, 2014

Re: [MFP] Introducing Case Briefs: Highlighting successful innovation

 

Dear Colleagues

A quick read of the Fonkoze Case Study suggests that there are a whole set of issues that are misunderstood about the purpose and practice of microcredit and microinsurance ... and the role of conventional 'for-profit' financial organizations being engaged with the social microfinance sector. 

Certainly there is no reason for capital markets to be excluded from support for the microfinance sector, but the reason the capital markets are supporting this sector should be that they see the value of 'creating good' rather than merely making goods that someone with money can buy and produce a profit! 

People who are typically the clients of a microcredit institution like Fonkoze are going to need help from time to time because of natural disaster. The big question is who should 'fund' the recovery that these people need. 

And then there is a second question. How should the high cost of administration in an emergency recovery situation be funded? 

In this case study, it seems that the big entities in the financial ecosystem backed out as soon as the need for their help was real and substantial. It seems to me that a rather modest hit to the profits of these institutions took precedence over what Fonkoze and its clients really needed. 

Remember these names ... big Swiss Re and MiCRO (MIcroinsurance Catastrophe Risk Organization) limited their exposure essentially leaving Fonkoze and its clients stuck with the disaster. This is essentially what the financial sector does all the time, and it is high time they get called on their practices. 

A long time ago I was the 'risk' manager and CFO of an international company operating in 26 different jurisdictions ... we managed our risk and self insured for most of the hazards that were likely to come up most of the time. However we did carry 're-insurance' for the very big event that we hoped would never happen. This was a win win for my company and for the insurance industry. 

You cannot use quite the same model with very poor communities that are the typical clients of the social microfinance institutions. Big finance organizations that have a for-profit business model cannot deliver in the poor community world and at the bottom of the pyramid. Extracting profit from the BoP is almost always going to be at an unacceptable cost to the community ... yet these communities need investment in order to progress. Muhammad Yunus is on the right track with the idea of Social Business just as he was with social microcredit. 

Peter Burgess 


____________
Peter Burgess
TrueValueMetrics ... Meaningful Metrics for a Smart Society
Multi Dimension Impact Accounting
twitter: @truevaluemetric @peterbnyc 
mobile: 212 744 6469 landline 570 431 4385
email: peterbnyc@gmail.com
skype: peterburgessnyc


On Mon, Feb 24, 2014 at 11:47 AM, <mifacility@yahoo.com> wrote:
 

The ILO's Microinsurance Innovation Facility has launched a new series.

The Case Brief series highlights successful innovation stories from the Facility's grantees. Each brief describes a grantee's experience and lessons learned. The latest case brief features the experience of Fonkoze.

Increasingly insurance is being seen as a way to protect low-income people against the worst effects of catastrophes, such as the storms, floods and earthquakes which are regular and devastating for poor Haitians. Yet a chasm exists between the world of multinational reinsurers and the daily life of Haiti's most vulnerable. Find out how Haiti's largest microfinance institution was able to bridge this gap in the Case Brief: Fonkoze.



Please feel free to share the case briefs with others.

Best regards,
ILO's Microinsurance Innovation Facility


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