Manila, Philippines - The Asian Development Bank (ADB) has extended its technical assistance of $1-million for the further development of microinsurance in the Philippines.
The microinsurance project covered by the grant expires in September this year. It was first signed in September 2007.
Insurance Commission (IC) head Emmanuel L. Dooc said that the extension was granted in a meeting this week with representatives of the Japanese government and the ADB held in Baguio.
“The extension allows us to continue capacity building for the proper regulatory environment,” Dooc said, adding the extension will include coverage for natural catastrophes.”
A still undisclosed amount would be added to the original $1-million grant.
The executing agencies are the Department of Finance (DOF) and the National Credit Council (NCC).
The technical assistance falls under the Microfinance Development Program of the ADB, while the funding comes from the Japan Fund for Poverty Reduction of the Japanese national government.
The original technical assistance came in three components with the first component focused on improving regulatory framework with an allocation of roughly $688,137.
The second component was aimed at strengthening the capacity of government regulators and microinsurance providers, while the third and last component was aimed at promoting financial literary on microinsurance.
Spearheading this undertaking is the NCC and the IC, while the Cooperative Development Authority (CDA) and the National Anti-Poverty Commission (NAPC) would participate in the later stages.
The ADB explained that microfinance, including microsavings, microcredit, and microinsurance services, has expanded in the Philippines and reduced poverty in the past decade.
“Microinsurance is an emerging financial service for the poor, which has been recognized as a potent tool to minimize the financial risks to poor households, especially when premium payments are affordable,” it said.
Savings and credit are used to prepare for predictable life cycle events, but insurance could protect the poor from unpredictable shocks such as death, illness, injury, theft, and lately, the increasing number of natural disasters.
“Low-income households are most vulnerable to these risks. The costs of funerals, hospitalization, and lost or damaged property forces working capital to be directed toward non-productive ends, worsening poverty,” the Manila-based multilateral lending agency added.
With the help of the technical assistance and the German International Cooperation (GIZ), the government formulated last year the Microinsurance National Strategy and Regulatory Framework which would compliment the Microfinance Development Program (MDP).
According to the NCC, there were 3.5 million microinsurance policyholders in the country as of end December 2011.
Once the domain of the mutual benefit associations (MBAs) and non-government organizations (NGOs), it has not expanded to more microfinance institutions such as rural banks and cooperatives. All are now under the direct or indirect supervision of the IC.