So far, it is the rural banking sector that has taken the formal cudgels in taking the risk of financing what was erroneously called the "unbankable" poor. And so far, rural banks can attest that it is indeed a misconception.
With micro-insurance, the rural banking sector can remain bold in lending to the microentrepreneur without risk of increasing its non-performing loans (NPLs). It also protects the micro borrower from misfortunes and loan defaults.
Taking the lead is the Malayan Insurance Co. Inc. by launching Todo Asenso, the first micro-insurance product geared towards the growing microfinance sector.
Efren G. Manuel, Malayan Insurance vice president said that they recognize the importance of microfinance in poverty alleviation and economic growth. But they also recognize the risks faced by the rural banks and the limited resources of the microentrepreneur.
"Microfinance helps the poor move out of poverty through credit, micro-insurance can help people protect the gains they have made, and the protect the lender as well," Manuel added.
It is the first of its kind in the country, and Malayan Insurance had even applied with the Intellectual Property Office for the necessary accreditation and protection.
Since microlending does not entail a huge amount per loan, Malayan Insurance believes it can meet any claims from any of the hundreds of rural banks all over the country. After all, not all rural banks are practicing microfinance and those that do still limit their exposure to between 15 to 20 percent of their total loan portfolio.
Malayan Insurance has been the country’s leader in the non-life insurance sector for decades.
It reported over P9 billion in assets and a net income of over P370 million last year.
Manuel revealed that a test pilot project with the Rural Bank of Pagbilao and the Rural Bank of Sto. Tomas. From there, Malayan Insurance could develop other products for the microfinance sector.
Todo Asenso protects the rural banks through a loan redemption accident insurance and loan repayment assistance. It likewise protects the micro-borrower through the borrower’s family assist and the medical expense assistance.
For every one thousand pesos microloan, a mere P0.65 will be deducted as insurance premium. The rural banks also deduct a certain amount for savings of the microborrower to encourage long-term savings consciousness.
The Malayan vice president said that they are also exploring the possibility of extending the same type of microloan to cooperatives and non-government organizations (NGOs) involved in microlending.
Malayan Insurance has 34 branches and services offices nationwide, and Kalibo, Aklan and Bacoor, Cavite may see its offices mushrooming within the year.