August 2nd, 2010

2010 Year-to-date Review of Microfinance, Microinsurance

Posted at 1:00 AM ET

Here we bring together all of the stories that appeared on GCCapitalIdeas covering Microfinance/Micro Risk/Micro Insurance in 2010. The series has presented the background and genesis of the product area and Guy Carpenter’s commitment to advance it.

Guy Carpenter Sponsors New MicroRisk Publication:   Microfinance focuses on the execution of small, basic transactions in markets that do not have direct access to traditional financial services. While major institutions prefer to work with large amounts of capital, microfinanciers have moved in the other direction, making loans, issuing insurance polices, and facilitating currency transfers in parts of the world where individual transactions are not measured in billions or even millions of dollars, but in hundreds or single-digit multiples of ten.

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Sources of Micro Risk:   Microfinance focuses on the execution of small, basic transactions in markets that do not have direct access to traditional financial services. While major institutions prefer to work with large amounts of capital, microfinanciers have moved in the other direction, making loans, issuing insurance polices, and facilitating currency transfers in parts of the world where individual transactions are not measured in billions or even millions of dollars, but in hundreds or single-digit multiples of ten.

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Micro Risk Management:  Risk, if left unmanaged by people with low incomes, may render their attempts to exit poverty more difficult. It may also increase the likelihood of a return or new entrance to poverty for those who hover just above the poverty line, and may increase the chances of personal loan default for the minority of low-income individuals with current access to microcredit (small value loans usually provided to help the entrepreneurial poor to develop microenterprises).

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Guy Carpenter & Company a Media Partner at Microinsurance Summit 2010, Miami: Microinsurance, an emerging category of microfinance, works in a manner similar to traditional commercial insurance - except products are designed for and distributed to low-income populations, predominantly in emerging economies that have had historically low insurance penetration. Because this corner of the market is relatively new, many insurers find it difficult to write “micro” policies with little access to loss history, exposure data, and other essential underwriting information. Without access to reinsurance, the situation becomes even more challenging.

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Click here to read prior-2010 GCCapital Ideas stories on Microfinance and Microinsurance >>

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