Micro-insurance and human development
In the past poverty has been measured solely by per capita income, however, it is now widely recognised that poverty also includes deprivation from health, education, food, liberty and opportunity. The Human Development Index (HDI) measures welfare of people using three factors, income (GDP per capita), educational attainment and life expectancy at birth (UNDP 2000). Micro-insurance programs can increase HDI by providing creditors with greater security and incentive to lend to micro-enterprises (World Bank 2000). For the individual, reducing risk through insurance enables credit and savings to be used more productively on income-generating opportunities (Devaux 2000, Matin et al 1999). With greater resources and a safety net the borrower can take on greater risk to achieve higher income and stimulate outside investment. They can also market their products outside of the local market achieving a better price for goods and for raw materials (Ford Foundation 2000). Insurance enables the policyholder to save a portion of his income, without the need to use it on medication, fire, theft and death, it can instead be invested in a child’s education. The requirement for less income also enables parents to send their children to school instead of working in the fields, better education leads to better health and better income earning potential as well as population control (World Bank 2000). Health insurance enables access to better medical services and a better quality and longer life. Access to adequate insurance protection can assist the poor to achieve sustainable growth and provide them with the capability to attain a better standard of living. It can mitigate the impact of personal and national calamities on the build up of assets, providing escape from the viscous circle of poverty that engulfs each new generation. Insurance can also protect those that have risen above the poverty level against unforeseen events that may cause them to fall into poverty again. Insurance provides security where none is available from the state, it facilitates self-sufficiency and empowers people to build for their own future.
Whilst the benefits of insurance for the poor are clear there are still very few micro-insurance schemes which have proved their viability and sustainability. The next chapter will look at why it has been so difficult to provide the same insurance products to the poor which are so widely available in developed countries.
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