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MICROE NSUR E

Africaâ€™s fastest growing insurance organisation www.microensure.com

ame M I C R O E N S U R E

Unprecedented

Insurance

MicroEnsure has proved over the past 13 years that it is possible to insure the low-income market and has subsequently thrived off the back of its unique and innovative service provision Writer: Matthew Staff â€˘ Project Manager: Callum Philp

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icroEnsure has enjoyed an unprecedented rise in registered customers over the past 12 months as a result of its innovative product and distribution approaches, and is already setting its stall for the next 12 months in the low-income insurance bracket across the continent. The increase to seven million customers served in Africa, from the one million accounted for at the beginning of 2014, provides the answer to a question the Company asked itself prior to inception in 2002: “Is it possible to insure the low-income mass market?” A resounding “yes” has been the response from Ghana and Kenya initially, and now from a further eight markets across Africa, through its partner Group model comprising telecoms, banks and other aggregators. With a global headquarters in the UK, MicroEnsure provides a turnkey solution portfolio from its regional headquarters in Nairobi - in partnership with its distributors - for brands looking to use insurance to drive their business: its offering including innovative product design; customised, customerfacing mobile technology; back-office operations; risk management; policy and claims administration; customer engagement; and ongoing product performance management. Marketing Director, Peter Gross adds: “Low-income customers can’t afford to pay the same premium as typical insurance customers, and yet they face greater risk. We found that we could serve this market sustainably by lowering administrative costs, reaching scale quickly, building great products, and preserving trust through fast claims payment. “In the process we uncovered dozens of new ways to provide insurance and we’ve become the fastest-growing provider in Africa by outreach.”

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FINCA: The Leading Pan-African Microfinance Network Over the past 20 years, FINCA has worked its way to the top in providing financial services for low-income individuals across Africa. Regional Director, Mike Gama-Lobo explains the strategies and decisions behind this evolution and the Company’s commitment to continue meeting customer demand in the future.

Mike Gama-Lobo,

Vice President and Regional Director - Africa

www.FINCA.org Office: +256-414-340-838

Africa Outlook (AfO): Can you firstly introduce FINCA, providing a history of the Company and its evolution over the years? Mike Gama-Lobo (M G-L): FINCA is the leading pan-African microfinance network with a vision to be the number one financial services provider for low-income individuals in Africa. FINCA has more than 20 years of experience in Africa, with operations in the DRC, Uganda, Tanzania, Nigeria, Malawi, and Zambia and, over the past six years, has seen a major shift in its business model, which has historically been focused on group credit operations serving group lending customers, only at the very bottom of the pyramid. Today, all six operations have microfinance banking licenses, and in many countries, we have been the first to transform into a regulated financial institution, Malawi being the latest example of our leadership in the region. We currently serve more than 700,000 customers in Africa, more than 360,000 of them borrowers with an average loan size of $650, staying true to our mission to alleviate poverty through lasting solutions that help people build assets, create jobs and raise their standard of living.

‘FINCA is investing in its future now, so as to be the clear choice if you want a warm, responsible and trusted financial partner’ AfO: What is the range of products and services within the FINCA portfolio which the Company has become renowned for within the market? M G-L FINCA’s focus is on finding appropriate solutions for low income individuals and businesses, but we offer products to a broader range of the market. The majority of our portfolio, and what we are known for, is Village Banking; a group lending and savings product appropriate for serving peri-urban and rural communities in Africa. In Tanzania for example we have modified our Village Banking product to allow for smallholder farmers to invest in farming activities giving them repayment options to meet their needs. More than 50 percent of our

Plot 11,Portal Avenue,Adam House, Block B P.O.Box 24450,Kampala,Uganda

Building Tomorrow Together portfolio, however, is in small business loans that range from $1,000 to $100,000. Beyond Loans and Savings, we also offer microinsurance products and payment services in many of our subsidiaries. AfO: What is FINCA’s main customer demographic and current geographic footprint? M G-L: FINCA, though mostly known as a financial services provider for women and low income borrowers, offers savings products, loan products, and payments solutions for the larger low to mid-income segments of the market. We mobilise deposits from entrepreneurs, salaried workers and corporations. Our loan products focus on small entrepreneurs with debt needs from $300 to $20,000, but will go as high as $100,000 in the SME space. FINCA works in six countries and has a branch network of 93 full service branches. We offer an innovative agency banking solution in DRC, Tanzania, and Zambia. In Tanzania, and soon in Uganda, we offer full interoperability between your bank account and e-wallet provider (Vodacom, Airtel, Tigo, etc). AfO: What have been the main continuous improvement strategies and philosophies to have driven FINCA’s growth? M G-L: It has been a case of organic growth and FINCA will now focus on having maximum impact in the countries it operates in before further expansion. In November, 2014 FINCA opened a microfinance bank in Nigeria given the size and need of the market there. There is lots to do in each of our six countries! All FINCA Subsidiaries in Africa are owned by a holding company which has a global presence in 23 countries and includes investors such as IFC, KFW, Triodos, ResponsAbility, FMO, and FINCA International. AFO: What have been the key features of your relationship with MicroEnsure, including the kinds of services offered specifically within this partnership? M G-L: MicroEnsure and FINCA have a longstanding relationship and we work with them to provide micro-insurance products for our borrowers.

The major causes of poor loan repayment among our clients are unforeseen events and emergencies; for example illness or death in the family, or the destruction of the business due to fire or flooding. Micro-insurance creates a great buffer in times of such a shock to the client; including repayment of the loan in case of death of the borrower, covering funeral costs in case of loss of a family member and payment of health bills. AfO: Going back to FINCA specifically, what expansions/ diversifications/ investments/launches have been seen in 2015 to ensure you are progressing and staying ahead of the industry curve? Nigeria M G-L Throughout the region we are investing heavily in new technology to bring down the Zambia cost of delivery and Malawi to ensure improved service to the customer. We will soon automate all our loan and savings applications through tablets; we are expanding agency banking solutions in all countries which allow for cheaper and more convenient transactions for the customers; and we are partnering with various mobile network operators in the region to innovate on payment services and new products we can launch together. AfO: What is FINCA’s approach to the hiring, training and retention of key skills as part of its overall employment strategy? M G-L: We take great pride in the training and development programmes in place at FINCA. We mostly hire new graduates and do not rely on other banks to “make” our people. The FINCA Development Academy has been put in place to develop training programmes appropriate and specific to the challenges of serving our target market.

AfO: What would you say defines FINCA, and sets it apart from market competitors? M G-L: With more than 20 years of experience in Africa, FINCA has proven its ability to provide appropriate financial services to low income individuals and at the same time evolve and expand its services to other segments. Across our subsidiaries, FINCA is recognised for responsible financing and being a trusted financial partner in the growth of our clients’ businesses and improvement in their livelihoods. This is anchored in our Democratic mission and brand Republic promise. That’s what of Congo defines and sets us apart. AfO: Looking forward, what Uganda short or mediumterm goals are in place for FINCA’s future growth and how do you expect to get from Tanzania where you are now to that point? M G-L: Our short term focus is to work on our operational efficiency, invest in technology, and introduce credit scoring and other new loan underwriting techniques to serve our customers faster. We aim to be viewed in the market as an institution that offers a great customer experience through products and services that respond to customer needs, that are easy to understand and access, and that are delivered in an enjoyable manner. Afo: Finally, is there anything you feel I have failed to mention within these questions that you think would be important to mention in the final editorial? M G-L: The financial sector in Africa is evolving rapidly and the needs of the population are changing. With more than 20 years of experience in Africa and a proven ability to change, FINCA is investing in its future now, so as to be the clear choice if you want a warm, responsible and trusted financial partner.

M I C R O E N S U R E

An additional four million customers around the world in 2015 alone epitomises the freshness and uniqueness of the offering to this segment of the market; something which Gross attributes largely to the high levels of innovation found within the Company. “We’re very much market innovators, in as much as we don’t design products and services in a boardroom,” Gross continues. “We go out to slums, villages and towns to talk to the individuals there to find out what they really need from an insurance product and design it around them. “We also look to provide value to our partners. How can we help their retention levels by developing solutions that their customers really want? What this has done has really put us at the forefront of our market and we’re really proud that we’re being recognised for our efforts.” Managers always try to talk to their clients in person

Unprecedented insurance products

Peter Gross presents a cheque in person to a client, one of many satisfied MicroEnsure customers

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While the aforementioned segment of customers is one that large, turnkey insurance specialists have traditionally bypassed, it certainly isn’t a small segment, with MicroEnsure accessible to the middle 70 percent of consumers outside of the top and bottom rungs. Subsequently, the Company has managed to not only change the dynamic, but has done so in an extremely lucrative domain following a strong a positive response from the majority of prospective customers existing under this umbrella. Once again though, simply entering the market was never going to work without bringing something equally dynamic, different and ultimately tailored along with it. “Over the years, we’ve created a number of unprecedented insurance products to meet the needs of the mass market,” Gross says. “What we

Plot 11,Portal Avenue,Adam House, Block B P.O.Box 24450,Kampala,Uganda

www.FINCA.org Office: +256-414-340-838

M I C R O E N S U R E

found was that the mass market is very well-educated about the risks they face, and they have many ways of coping with those risks. As a result, our best product ideas have always come from our customers. “Today we offer a range of products that are easy to use, from hospital cash products that provide cover at any hospital for any medical reason, property insurance products that protect against any natural or manmade disaster, to life insurance that covers any one at any age, without all the terms and conditions and restrictions that typically lead people to mistrust insurance companies. “We can provide these useful benefits because of the massive scale we reach. We find that scale requires simplicity, but also that scale justifies simplicity as well.” MicroEnsure compounds this collaborative influence via a product design approach which actually encourages change among its customers’ behaviours for its partners also. Gross explains: “For example, Barclays Africa uses our products in four African markets to increase salary accounts. Airtel Africa uses our products in eight African markets to drive customer loyalty and spend, as well as direct revenue. “What we’ve found is that, due to the low penetration of traditional insurance but the high demand for valuable protection from risk, massmarket consumers will reward a brand that protects them in the course of their normal customer relationship. We have shown that insurance does not have to be a “grudge purchase” as is commonly assumed. “The result is a win-win for the brand and the customer. The brand receives increased patronage and the customer receives access to valuable insurance, often for the first time.”

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Value proposition

...Barclays Africa uses our products in four African markets to increase salary accounts. Airtel Africa uses our products in eight African markets to drive customer loyalty and spend, as well as direct revenue Establishing partnerships has expanded MicroEnsure’s customer base faster than others in Africa

Barclays is just one of the numerous globally-renowned brands who have partnered with MicroEnsure in recent years, epitomising the rapid growth experienced by the Company over a relatively short period of time. As a for-profit social enterprise, a shareholding structure comprising the likes of AXA, Omidyar Network, International Finance Corporation and Sanlam has set the tone for a partner portfolio which features Airtel, FINCA, Advans and Opportunity International among its network. “By establishing large partnerships with Airtel and others, and then delivering on those partnerships with fast implementation, we’ve seen our customer base expand faster than any other insurance organisation in Africa,” Gross emphasises. “We were only able to establish those partnerships because we provide unique products supported by the best service in the market, whereas many of our competitors see insurance as a commodity business and compete primarily on price. “We’ve found that the biggest consumer brands on the continent aren’t interested in a commodity offering, insurance or otherwise. They want something new that addresses their customers specifically, and they want to see an insurance provider deliver a service that is helpful and easy to use, and that is key to our value proposition.” Ultimately, MicroEnsure’s positive reputation has derived from a ‘golden rule’; to serve customers in the way that you would want to be served, on a local level in each country of operation. This has been rewarded as such, and becomes a pivotal aspect of the Company’s continuous improvement strategy which requires the business to keep expanding and diversifying in the same way it expects its partners to do. From a capital expenditure perspective, “we have invested

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M I C R O E N S U R E

heavily in the past several years in our back-office technology, to ensure that our quality, speed-to-market, and customer learning engines are up to standard as compared to other mobile VAS (value-added-service) providers”, Gross notes. “We don’t spend money on flashy offices; we’d rather spend money to improve our service offering. “As a result, we were able to launch last year in Zambia with only ten weeks from the first meeting to the launch of the product, and we covered more than two million people overnight. Mobile operators expect that kind of speed when bringing a product to market, in contrast to most insurance offerings which often take months or years to see the light of day.”

Once we learned that wider and deeper forms of coverage were in demand and made business sense, we started to expand our offerings, and we aren’t finished yet. We’re committed to ongoing innovation from year to year

Ongoing innovation

As well as the Company’s presence in Ghana, Kenya and Zambia, MicroEnsure has also penetrated into Burkina Faso, Niger, Madagascar, Nigeria, Tanzania, Uganda and Malawi over the past 13 years; ensuring strong local support in each case as a key facet of its commitment to sustainability.

People and skills development and corporate social responsibility efforts further enforce this dedication to long-term enrichment both inside and outside of its core industry operations; laying the perfect foundations for the next stage of MicroEnsure’s rapid rise to prominence.

Five billion Although the industry serves 500 million people today, there are another 5.5 billion to reach CEO, Richard Leftley at Financial Times IFC forum

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Assessing the Company’s evolution thus far, the Marketing Director says: “When we started, we weren’t sure what would be possible from a product perspective, so we started small with credit life insurance. “Once we learned that wider and deeper forms of coverage were in demand and made business sense, we started to expand our offerings, and we aren’t finished yet. We’re committed to ongoing innovation from year to year.” In terms of services, the Company has expanded into becoming fully mobile in recent times, addressing the latest trends and the realisation that mobile is the future of financial services. “We feel we are on the leading edge of where the industry is headed,” Gross continues. “Looking forward, we already have 10 products to roll out in our telecom markets and over the next three-to-five years I would expect this number to be increasing year on year. “We are constantly innovating and looking at how we can do things better and maybe in a different way to how they are done now, so it’s a very exciting time.”

The health domain will form a particularly concerted focus for MicroEnsure in the coming years, while the Company is also looking to capitalise on smartphone penetration and an enhancement of its technological processes. All of this will help to not only build upon the market significance already enjoyed by MicroEnsure, but will set the business up for a drive into the vast potential that still lies untouched around the world. Gross concludes: “Although the industry serves 500 million people today, there are another 5.5 billion to reach, so much work remains to be done, and our approach will continue to focus on ongoing enhancements to product and service offerings, and new areas of innovation in distribution.

In 2015, MicroEnsure won the Financial Times IFC Transformational Excellence Award

Peter Gross, Marketing Director

“We were selected [by the FT/ IFC to receive their special 10-year anniversary award for excellence in transformational business] as being the best of the best from the past decade: the Company that stands head and shoulders above all the other winners of the awards; a list that includes most of the world’s largest banks and leaders in inclusive finance. “This is as a result of the monumental effort put in by the MicroEnsure team across the globe and the award really does go to show that we are making a real difference to the people we serve, and is testimony to the phenomenal effort and hard work that everyone has put in over the past 10 years.”

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Kenya Office Studio House, 4th Floor Argwings Kodhek Road Nairobi Kenya T: +254 20 222 10 74/5 E: kenya@microensure.com