Gender and rural microfinance: Reaching and empowering ... - IFAD

Several recent innovations in savings
products can make a significant contribution
to women’s empowerment (box 6). Pensions
– which are essentially a long-term savings
product – have received far less attention than
other instruments such as insurance. However,
pensions are potentially a key component of
empowerment, because they offer women
security for their old age and have many other
implications (for example, reducing women’s
vulnerability in the household or influencing
family-size decisions). Some pension products
for women exist in India, but pensions are an
area in which much more needs to be done.
In Bangladesh, the Income Generation for
Vulnerable Groups Development Programme
(Bangladesh Rural Advancement Committee
[BRAC]) and the Tangail Infrastructure
Development Project (German Agency for
Technical Cooperation [GTZ]) are examples
of how grant-based or employment-based
approaches and financial services can
be complementary.
Insurance
Although savings-and-loan products from
financial service providers can reduce
vulnerability to crises and shocks, they
generally do not enable people to accumulate
sufficient funds to cope with major crises.
Over the last decade, an increasing number of
MFIs have developed microinsurance
products to address various sources of
vulnerability. These products include
compulsory insurance against loan defaults,
and health, life, livestock, property and indexbased
weather insurance. Microinsurance is
one of the most rapidly moving areas of
innovation. A full technical discussion of
different types of insurance provision is
outside the scope of this paper. Important
advances have been made in agricultural and
health financing, as well, particularly in some
membership-based financial organizations.
This is particularly the case with the
‘agent/partner’ model that combines the
strengths of a private insurer, in terms of scale
and financial expertise, and of an MFI, in
terms of poverty depth of outreach and
experience with its clientele. 25
Despite the clear need for insurance
products and their great potential to
contribute to the development of the rural
sector, the viability and desirability of
specialized microinsurance institutions for
poor people have been questioned. Most
people engage in various forms of ‘selfinsurance’,
such as diversifying their
livelihood strategies, savings of different types,
building of assets, and investing in social
capital that can be called on in times of
hardship. Some communities have collective
forms of informal insurance such as burial
societies. As with savings, it is crucial that
microinsurance products from financial
institutions complement rather than
undermine such systems.
Much concern has been expressed over
badly designed microinsurance products that
are being foisted on vulnerable people,
particularly as a condition of loans in order to
reduce risk for the institution. In some cases,
microinsurance providers have collapsed,
taking all the premiums with them. Several
private insurers, particularly in parts of Africa,
have become profitable by selling a
substantial volume of policies to poor
households. In many cases, the new
policyholders did not understand what they
were purchasing or how to make a claim, and
they did not benefit (Brown 2001). Wider
questions emerge over whether poor people
can or should be expected to spend scarce
resources insuring themselves against all the
risks of poverty caused by bad governance,
poor state health systems, and environmental
disasters arising from climate change and
global warming. There is an inevitable
mismatch between the range of hazards
against which poor people need insurance
and the level of premiums they are able to
pay, which undermines the potential of
insurance provision (Brown 2001).
25 For the most recent information, see the MicroFinance
Gateway (www.microfinancegateway.org) and the
International Labour Organization (www.ilo.org). For a
compendium of case studies, see Churchill (2006).
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