Just as Mexico's microfinance lenders have carved out a lucrative niche making tiny loans to some of the country's smallest entrepreneurs, a handful of insurers are proving that it can be profitable to sell life insurance to the country's working poor and lower-middle class.

"The issue isn't that the population doesn't have the economic capacity, disposable income, or an insurance culture, rather we as insurance companies need to adapt to their means," said Alfredo Honsberg, chief executive of insurance company Seguros Azteca, in an interview.

There is a ready market for microfinance products in Mexico where the average monthly wage is about $500, and many people, especially the urban and rural poor, have little or no relationship with a financial institution. Mexico's biggest microfinance bank, Banco Compartamos, has over 573,000 clients, while retailer Grupo Elektra's bank Banco Azteca has made over 19.24 billion pesos ($1.8 billion) in loans to the low-income clients who frequent the group's stores.

Now investors like Elektra and Citigroup's local insurance unit Seguros Banamex have latched on to the idea of offering microinsurance, or very small policies, with microcredit.

Microfinance -- making tiny loans to poor people to fund business ventures -- was pioneered by Bangladeshi economist Muhammad Yunus through Grameen Bank. Earlier this month, Yunus was awarded the Nobel Peace Prize for his efforts to fight poverty.

In recent years, microfinance lenders have sprung up across Latin America, Asia and Africa to provide basic financial services to the working poor, a market virtually ignored by traditional banks.

Mexican insurers have traditionally sold policies to upper income consumers through agents, which isn't a cost effective distribution channel for microinsurance policies costing just a few dollars.

"To date we have found that credit is the most important vehicle (to sell microinsurance) because it is the principal need of the people in these segments," Seguros Banamex Commercial Director Hugo Aguilera said in an interview last month.

To make their policies as simple and inexpensive as possible, Seguros Banamex and Elektra's Seguros Azteca have done away with selective underwriting. In other words, potential clients don't have to provide information about their health, age, or medical history to be insured.

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