Hi Daniel
While i agree that loan linked insurance is more mfi risk mitigation practice than client centric. Its utility cannot be undermined. As
1.None of the formal institutions writeoff loans in case of death of a client. So mfis cannot be expected.to do so
2. One of the major cause of intergenerational poverty is debts left unpaid by head of household.
3. Death of client places undue pressure on other group members eapecially in very early stages of loan.
So now with loan insurance covering both loan client and spouse it works well for clients and group members. Yes some mfis like Equitas have gone a step further and set up policies for loan writeoff in cases of defaults due to circumstances. These policies are very difficult to implement in field as there is huge possibility of moral hazard.
To rest my case loan insurance may not be a bad idea afterall.
Regards
Ragini
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-------- Original message --------
From: "danrozas@yahoo.com [MicrofinancePractice]"
Date:18/06/2015 9:47 PM (GMT+05:30)
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] Re: The microfinance delusion: who really wins?
Derek -- these are interesting observations for sure. But on the one point of loan cover insurance, I'm having a hard time seeing this as a client-oriented product. I get that clients are concerned about loans in the event they die or become incapacitated, but is that a reflection of client need or the result of MFI practices? Let me propose a simple concept -- in the event a client dies or becomes incapacitated, the loan should die too. After all, the loan is a contract between the MFI and the client, not her family. Likewise, a group might be expected to vouch for clients' credit-worthiness, but should they be expected to vouch for clients' longevity as well?
For MFIs that have trouble managing this risk, why can't they buy a group life cover for the loan pool? This should be much more cost effective than doing the same on a per-client basis.
Loan-life insurance is one of the core microinsurance products out there, but honestly, I have trouble seeing it as a client-centric product.
Daniel
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Posted by: raginichaudhary <raginichaudhary@gmail.com>
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