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The Rural Banking Industry Partnering to Expand Microinsurance

The RBAP’s research and training arm, the Rural Bankers Research and Development Foundation, Inc. (RBRDFI), will receive a US$ 100,000 grant from the International Labour Organization (ILO) under the Microinsurance Innovation Facility. This collaboration aims to support RBAP members in partnering with insurance companies to offer microinsurance.

Housed at the ILO’s Social Finance Programme, the Microinsurance Innovation Facility seeks to increase the availability of quality insurance for the developing world’s low-income families, helping them guard against risks and overcome poverty. The Facility was launched in 2008 with the support of a grant from the Bill & Melinda Gates Foundation.

This new partnership with the ILO will support training and technical assistance for rural banks to become licensed microinsurance agents. It will help provide microinsurance access to potentially millions of rural bank clients and their dependents. This initiative will also support RBRDFI in offering a turnkey approach to ensure rural banks’ cost-efficient compliance with licensing and capability-building requirements as institutional microinsurance agents. Rural banks will facilitate marketing, selling and servicing of microinsurance, with the commercial insurance companies issuing the policies.

The partnership with the ILO and the Gates Foundation will expand RBAP’s intiative to provide support to member rural banks and reinforces the unique position and important role that rural banks across the country have in providing social protection to the most vulnerable. Through micro-insurance, rural banks would be able to provide the assurance and  protection that in case of a peril or tragedy, the poor will not become poorer or those who have succeeded in improving their lives will not become impoverished once again.

With over 2,700 rural bank branches and other banking offices (OBOs) nationwide serving more than one million micro and low income borrowers, along with almost 6 million deposit account holders, rural banks (RBs) are best-positioned to facilitate access to formal microinsurance services in the countryside.

At the end of last year the Government of the Philippines launched the National Microisurance Framework. This important framework is a result of an ongoing collaboration among members of a Technical Working Group led by the Department of Finance with the support of the Asian Development Bank – Japan Fund for Poverty Reduction (ADB-JFPR) and the German Technical Cooperation (GTZ) through the Microinsurance Innovation Programme through Social Security (MIPSS). Following the framework, RBAP worked closely with the Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC) for the formulation of supportive policies and regulations for microinsurance using the partner-agent microinsurance model for RBs. These efforts resulted in the issuance of the BSP Circular 683 (Feb. 23, 2010), which allows RBs to partner with insurance companies in offering microinsurance.

To support this effort, RBAP, through its USAID-supported Microenterprise Access to Banking Services (MABS) Program, developed strategic alliances with 6 insurance companies and 3 specialized microinsurance brokers. These alliances are now being put in place to help rural banks forge partnerships to be able to offer microinsurance services to their microenterprise and low income client base.

Micro-insurance, as a risk mitigating tool allows rural banks to expand their operations in the countryside benefiting countless families without always having to worry that the funds they have lent out prudently to those belonging to the base of the economic pyramid might go unpaid in cases of sickness in the family or of natural calamities.

RBAP-MABS has already arranged seminars with all the interested insurance companies and has held workshops in July for member rural banks interested in initiating the licensing process to become microinsurance agents.

Over the next two years, RBAP expects that continued collaboration with the Insurance Commission, the Bangko Sentral ng Pilipinas, donor agencies, industry associations, and private insurance companies will result in a cost-efficient agent licensing and accreditation system for all interested and qualified member rural banks wishing to provide microinsurance access to over a million micro and low-income clients as well as other members of their households.

We envision that our ongoing partnership with USAID and our new partnership with the ILO and the Gates Foundation will ultimately improve the lives of countless  struggling filipino families in the largely neglected and impoverished Philippine countryside where  most rural banks are primary providers of financial services.

By Joseph Omar Andaya (Chairman, RBRDFI)

Published on the Manila Times,  20 August 2010