MICROFINANCE PUBLICATION ROUND-UP: Microfinance Information Exchange Diamond Rating System; Savings-Linked Microinsurance in India; Banking Correspondents in Brazil

“Diamonds No Longer Forever;” by Scott Gaul; published by Microfinance Information Exchange (MIX); April 2012; available at: http://www.themix.org/publications/microbanking-bulletin/2012/04/diamonds-no-longer-forever

This publication announces a change in the “diamonds” system used by the US-based nonprofit Microfinance Information Exchange (MIX) to score the amount of data and third-party documentation available for each microfinance institution (MFI) listed in its MIX Market database. MFIs can receive between one and five diamonds, with a higher number of diamonds indicating a higher transparency level. Up until now, diamonds were given on all data ever provided. However, MIX will now be using annual diamonds, which will reflect only data reported for a partifular financial year. The webpage will display the number of diamonds for each year that the MFI has reported data.

“Savings in Microinsurance: Lessons From India;” by Rob Rusconi; published by Microinsurance Innovation Facility; January 2012; 4 pages; available at: http://www.ilo.org/public/english/employment/mifacility/download/brnote12_en.pdf

This document considers the design of four different savings-linked insurance products that cover health risks and accumulate cash value over time. Mr Rusconi finds that one of the main challenges of these insurance products is for the insurer to accumulate enough funds to cover benefits in the event of death or if the policy reaches maturity. The author expresses the opinion that each insurer must address this issue according to customer needs. The document also reviews the surrender terms that apply when a customer withdraws savings from the policy. The author says that flexible surrender terms can increase the probability of financial losses but can provide a competitive advantage to insurers, facilitate sales and build loyalty. The author concludes that insurers need to find a balance between simplicity of products, which allows for less customer choice, and flexibility, which allows for more.

“Eliminating Entry Barriers for the Provision of Banking Services: Evidence From ‘Banking Correspondents’ in Brazil;” by Juliano Assuncao; Unpublished working draft; January 2012; 18 pages; available at: http://www.cfsp.org/publications/working-paper/eliminating-entry-barriers-provision-banking-services-banking-corresponde

This paper examines an arrangement for the distribution of banking services in Brazil whereby banks form agreements with non-banking firms to provide financial services. These firms thus become “banking correspondents” and have a function similar to a bank branch, with some restrictions. The document finds that the number of banking correspondents in the country increased rapidly between 2000 and 2007, with approximately four times more banking correspondents than actual bank branches in 2007. The author then examines the extent to which these correspondents improved access to financial services in the country. The author concludes that banks can serve most Brazilian municipalities without needing to open traditional bank branches.

By Charlotte Newman, Research Associate

About Microfinance Information Exchange
The Microfinance Information Exchange (MIX) is a US-based nonprofit provider of performance data and analysis on microfinance institutions (MFIs), funders, networks and service providers dedicated to serving the financial needs of low-income clients. The mission of MIX is to strengthen the microfinance sector and financial inclusion in general by promoting transparency. The organization’s MIX Market website offers access to financial and social performance information covering approximately 2,000 MFIs. MIX publications include the MicroBanking Bulletin and MIX Microfinance World, which feature periodic research and data analysis. Incorporated in 2002, MIX is headquartered in Washington, DC, with regional offices in Azerbaijan, India, Morocco and Peru. Its supporters include the Bill & Melinda Gates Foundation, CGAP (Consultative Group to Assist the Poor), Omidyar Network, The MasterCard Foundation, the UN’s International Fund for Agricultural Development, the Michael & Susan Dell Foundation, Citi Foundation, Ford Foundation and Deutsche Bank.

About Microinsurance Innovation Facility
Launched in 2008 with a USD 34 million grant from the US-based Bill & Melinda Gates Foundation, the Microinsurance Innovation Facility (MIF) is housed at the International Labour Organization’s (ILO’s) Social Finance Programme. MIF’s goal is to increase the availability of insurance for low-income families in developing countries to help them overcome poverty. MIF provides grants to help organizations develop innovative microinsurance products, with an emphasis on agriculture, health, life and property insurance. MIF also provides technical assistance and advice. ILO is an agency of the United Nations and is located in Geneva, Switzerland.

Sources and Additional Resources:

“Diamonds No Longer Forever,” http://www.themix.org/publications/microbanking-bulletin/2012/04/diamonds-no-longer-forever

“Savings in Microinsurance: Lessons From India,” http://www.ilo.org/public/english/employment/mifacility/download/brnote12_en.pdf

“Eliminating Entry Barriers for the Provision of Banking Services: Evidence From ‘Banking Correspondents’ in Brazil,” http://www.cfsp.org/publications/working-paper/eliminating-entry-barriers-provision-banking-services-banking-corresponde

MicroCapital Universe Profile: Microfinance Information Exchange
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Information+Exchange+%28MIX%29

MicroCapital Universe Profile: Microinsurance Innovation Facility
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microinsurance+Innovation+Facility+%28MIF%29

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