Will Insurance Prove More Valuable than Credit or Savings in Microfinance?

Microfinance in all its forms–credit, savings, insurance–has always been a story in part about technology. Without technological advances in information management, communication, and transportation, the delivery costs of all of these financial services would simply be too high to be sustainable. As such the spread of sustainable microfinance has followed a predictable pattern: coverage has spread from lower delivery cost areas to higher. From dense urban areas to rural. From higher income areas to lower. From less expensive services (credit) to more expensive (savings).

An example of this phenomenon is Tina Rosenberg’s post in the Opinionator blog about the advent of farmer’s insurance in Kenya.

“Weather insurance for small farmers has always faced numerous barriers.  But throughout east Africa today there are projects finding creative and innovative ways to overcome them.   One of them is a project in Kenya’s southwest that so far insures 22,000 farmers.  There are so few farmers with insurance in Africa that this project is the continent’s largest.  It is called Kilimo Salama, which means “safe farming” in Swahili.  What makes it work is technology.”

The full article is worth the read, and Rosenberg will be following up on Friday with a post about Oxfam America’s work in Ethiopia addressing a similar need.