In "The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid," the authors analyzed several markets. However, only one market - financial services - was not estimated in terms of exact size and scope.

Financial services can be a fiendishly hard thing to measure, but is at the same time a crucial tool to develop markets for BoP customers. In fact, financial markets often help other BoP markets flourish. Data measuring access and efficiency in financial markets are notoriously hard to come across in emerging countries, because most of these markets lie under the cover of informal economies.

A new publication by the World Bank, Finance for All? Policies and Pitfalls in Expanding Access, tries to give an overview of the most recent advances and conclusions about the improvement of access to financial services for the poor. It is a superb report. Superb, but very hard to read. For those who want to avoid the econometrics and statistical analysis, I would suggest reading only the Overview.

The study analyzes how financial access provides opportunities for the poor and for small to medium sized enterprises (SMEs). Since a defining characteristic of BoP markets is their non-integration with global markets and their subjection to higher prices (monetary or not) for most of their goods, building inclusive financial systems means equalizing opportunities between BoP and non-BoP markets.

(This post continues past the break; click "Read More" to continue)

Cheikh Mbengue, an expert from Abt Associates on community-based health insurance (CBHI) schemes in Africa, said something that perked my ears last Wednesday at a USAID After Hours Seminar on microinsurance. He said that he thinks CBHIs can't function effectively without subsidies. No one has really talked about subsidies in the BOP space. The message is always, "get prices down low enough, quality up high enough, distribution wide enough, and you've got a market at the BOP."

In some instances, especially in fields with higher R&D, manufacturing, management, and labor costs like healthcare, extending the necessary suite of services to lower-income BOP may require government involvement, possibly with donor backing, in addition to entrepreneurialism, innovation, and investment.

Mbengue began the discussion by giving a brief history of CBHIs in Africa. In the 1990s, governments built up their health infrastructure, but facilities stood empty because people were too poor to pay for services. So individual communities resorted to creating their own insurance schemes, taking care of collection, management and disbursement on the community level. In 11 West and Central Africa countries, there were 76 schemes in 1999. By 2003, the total jumped to 366 schemes. Rwanda has been most successful in scaling insurance to the national level, and had 228 CHBIs by 2004 covering approximately 20% of the population.

Full story.

"Last year, global insurance giant American International Group Inc.opened a garage-size office in this dusty town of about 50,000. Coming up soon here: a policy that insures a cow for a $10 annual premium. "

This opening in WSJ article "Insurers Seek Growth in Developing Markets" captures best how the world is changing.

Microinsurance is a powerful instrument of change and has been discussed in this community before.

On March 16, The International Labour Organization announced the availability of a new book, Protecting the poor: A microinsurance compendium, published with Munich Re Foundation for the CGAP Working
Group on Microinsurance.

Based on in-depth analysis of 40 microinsurance schemes around the
world, this authoritative book brings together the latest thinking of leading academics, actuaries, and insurance and development professionals in the microinsurance field. The result is a practical, wide-ranging resource which provides the most thorough overview of the subject to date.

The book defines microinsurance as "the protection of low-income people against specific perils in exchange for regular premium paymentsproportionate to the likelihood and cost of the risk involved." This definition is essentially the same as one might use for regular insurance except for the clearly prescribed target market: low-income people. However, as demonstrated throughout the book, those three words make a big difference.

In many developing countries, where the vast majority of the population has limited income, some insurance companies, such as AIG and Allianz, are beginning to explore ways of reaching out to this market, perhaps because they are encouraged to do so by regulators (e.g. in India), or to fulfill social responsibility mandates, or because they see the huge volumes of low-income people as a viable market opportunity. At the same time, to reduce the vulnerability of the poor, many development organizations and policymakers are keen to understand the role that insurance can play.

Together these two perspectives--market-led microinsurance and microinsurance to extend social protection--are resulting in a proliferation of microinsurance experiences, some good, some bad. This book analyzes those experiences and provides clear recommendations to practitioners and policymakers that will enable better coverage to be made available to more low-income people.

Also worth reading are the case studies by the CGAP Working Group on Microinsurance on good and bad microinsurance practices.

"It's a moment to balance the global with the local." - Dr. Abhay Bang, director of SEARCH

NextBillion’s news section contains 4 new items, all of which pertain to “risk” in relation to the BOP community. But this risk I am referring to is two-fold. These news items address the wrongly perceived notion by commercial banks and insurance companies that the poor are 'high risk.' But the flip side, the newsworthy aspect, is that now these companies are seeing opportunity instead of risk. In fact, they are making it their job to reduce the risk to the poor using multiple approaches.

Click "Read More" to read about these approaches...