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. See IFC's Insurance Strategy in Action.
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)
An innovative program managed by IFC, and jointly implemented with the World Bank
Insurance is important for development because uninsured losses lock vulnerable populations in vicious cycles of destitution. With the adverse impact of climate change and rising food security concerns, index-based insurance offers low income people – particularly the world’s smallholder farmers – an affordable means of protecting their assets and livelihoods.
The Global Index Insurance Facility (GIIF) is a multi-donor trust fund supporting the development and growth of local markets for weather and catastrophic index-based insurance in developing countries, primarily Sub-Saharan Africa, Latin America and the Caribbean and South Asia. GIIF’s implementing partners have insured more than 228,000 farmers, pastoralists and micro-entrepreneurs and reached nearly one million with information and access to index insurance. Learn more about the innovative IFC-led program here.
GIIF is funded by the European Union, Japan and the Netherlands.