30925 - MicroEnsure

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Summary of Investment Information

Project Number

30925

Company Name

MICROENSURE HOLDINGS LIMITED

Date SPI Disclosed

Oct 15, 2012

Country

World Region

Region

Global

Projected Board Date

Nov 15, 2012

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Jun 3, 2021

Department

NonBanking & Alternative Finance

Industry

Financial Markets

Previous Events

Approved : Dec 13, 2012
Signed : Jan 10, 2013
Invested : Jan 14, 2013

Sector

Composite Insurance (Life and Non-life)

Project Description

FC proposes to make an equity and subordinated debt investment package of up to USD 2.1 million in MicroEnsure (ME), a leading micro-insurance facilitator with operations in Africa and emerging Asia. ME is highly innovative in the provision of micro-insurance through mass distribution channels such as MFIs and telecom companies (telecoms).

The project supports ME transformation process from a donor-funded NGO business model to a for-profit company focusing on reaching financial sustainability. IFC’s investment would be part of a USD 7 million investment package, which aims to make the company commercially sustainable by: (i) expanding ME’s client base through a partnership with a leading telecom and innovator in mobile financial services, which would initially focus on 4 Asian markets, (ii) strengthening the Company’s equity base, and (iii) expanding the Company’s shareholder base to incorporate more commercially minded investors.

IFC’s initial disbursement of the investment would be for approximately USD 1.7 million for approximately 17.6% stake in ME. And a second tranche disbursement is planned for approximately USD 0.4 million one year after the first disbursement, for a cumulative total of 19% equity share in ME.

MicroEnsure is a leading micro-insurance facilitator that offers a range of affordable insurance solutions to the low income market. ME currently operates in five countries and currently offers insurance products to 4 million people. ME is a three-time winner of the Financial Times/IFC Sustainability Award. ME provides a range of services along the insurance value chain, including: product design, intermediation, administration, claims management services and third party administration (“TPA”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	0.86
Equity	1.31

Development Impact

Essential Protection of the Less-privileged: Unpredictable events, such as illness, loss of assets, death or accidental disability of breadwinner, bring devastating consequences to the poor, particularly in developing countries. Natural disasters such as windstorm/cyclones, floods and earthquakes constantly represent a threat to poor households and small enterprises. It is currently estimated that the current penetration of microinsurance is close to 2% of the potential market worldwide and that up to 4 billion people at the ''bottom of the pyramid'' could potentially benefit from microinsurance to mitigate their vulnerabilty against risks and disasters. Insurance can prevent people from lossing the achievements of their whole life and from falling back into abhorent poverty.

The Project is expected to increase the availability of micro-insurance products to low-income people in Sub Saharan Africa and Emerging Asia, markets that have very low insurance penetration rates. Based on conservative projections, MicroEnsure (ME) expects an increase of more than 7 million low-income people accessing micro-insurance in the next 5 years, however there is a potential for this outreach to be much higher.

ME is actively engaged in the provision and development of weather index insurance, a new and innovative product, currently in several countries and reaching tens of thousands of low-income farmers. As ME continues to develop the technology and management of this product, it has the potential to be rolled out on a mass scale.

IFC expects the project to have a strong demonstration effect in the micro-insurance space by establishing the viability and profitability of a micro-insurance platform that can successfully deliver tailored products and utilize innovative distribution channels to reach the low income segment.

In addition to IFC''s financial support in the form of equity, IFC brings broad experience in and knowledge of the insurance sector, unique experience in the relatively underdeveloped micro-insurance sub sector and a vast network of risk carriers, MFIs, telecommunications companies, and other potential partners for ME. IFC''s involvement will provide a "stamp of approval", but also credibility to a concerted push into the microinsurance space. IFC''s best practises in corporate governance, E&S, AML/CFT and responsible finance are seen a tools to mitigate the risks inherent in a fledgling market such as micro-insurance.

Specifically, IFC''s additionality in supporting ME operations is given by (i) strengthening ME''s capital base, allowing ME to expand its operations, and therefore the offering of micro-insurance products, (ii) facilitating ME''s entrance into new markets through IFC''s client network and relationships, and (iii) advising ME on the implementation of corporate governance best practices.

E&S Category Rationale / Risks and Mitigation

This project has been classified as Category FI-3 according to IFC’s Environmental and Social Review Procedure. IFC is planning an equity investment in MicroEnsure LLC (ME) a micro-insurance company operating primarily in Ghana, Kenya, India, Tanzania and the Philippines. The company provides affordable insurance to low-income individuals, including low-income farmers. The E&S risk is limited to a potential for providing by ME insurance to farmers (e.g. weather index insurance) involved in activities on IFC''s exclusion list. Therefore, ME will be required to establish a simple ESMS allowing on screening its clients'' business activities through the IFC Microfinance Exclusion List. The company will also work with its partners/contractors (insurance distributors) on building their capacity to ensure a proper pre-selection process of individuals/farmers to be insured. Annually the company will provide to IFC a simple report on implementation of those requirements. ME''s policies on labor and working conditions are aligned with requirements of the Performance Standard 2.

Contacts

For Inquiries About the Project, Contact

Norbert Schneider - mailto:NSchneider@ifc.org - +51 1 611 2527
Carlos Numen Ferro – mailto:cferro@ifc.org - +1 202 531 3991

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