Financial Markets

Climbing out of poverty and starting a business are hard enough as it is. But in emerging markets, the breadwinner's death can mean financial devastation for a family, which is plunged back into poverty.

Things change when poor people have insurance. Products such as micro-insurance, agricultural insurance and index-based weather insurance are increasingly necessary as instruments for safeguarding against specific risks.

With insurance, not only can the family be protected against sudden deaths, people are also more likely to invest in expanding their farms, establishing new businesses, or sending their children to school.

A well functioning insurance market provides tools to offset risks, to protect investment and assets, provide peace-of-mind safety and, through its accumulation of capitals nature, can significantly stimulate financial markets in the country. Thus, the insurance sector can fulfill an important role in economic development, especially of emerging markets, by providing risk management services to both individuals and businesses.

However, a recent study by Swiss Re found that the 1.5 billion–person market is only 5 percent penetrated at present.

Microinsurance—the provision of affordable insurance to the poor—is now one of the world’s most demanded financial services and one that they are willing to pay for if it is accessible. This is where IFC has a critical role.

By promoting private sector investment and improved corporate government standards, IFC’s involvement through Advisory Services and Investments facilitates access to finance, supports the build-up of technical skills and encourages greater competition and innovation sustainable commercial success in emerging economies.

Global Index Insurance Facility (GIIF)

Insurance providers in Africa and other developing regions rarely offer the hazard insurance familiar to industrialized countries. Earthquake, flood, and hurricane victims often lose their homes in an instant, recovering none of their assets or investment unless they are fortunate enough to be part of a donor-funded disaster relief program. Likewise, droughts can wipe out the crops or livestock that farmers rely on for income.

IFC, together with the International Bank for Reconstruction and Development (IBRD), also a member of the World Bank Group, has established the Global Index Insurance Facility (GIIF) to address this problem. GIIF takes an innovative index-based approach to insurance that aims to expand access to insurance products in developing countries, and particularly to farmers and people in agrarian communities. Learn more about the innovative IFC-led program here.