Manila, Feb 22, 2006 AEST (ABN Newswire) - Asian Development Bank (ASX: ATB) will help to provide insurance products to poorer households in Sri Lanka through a US$600,000 technical assistance (TA) grant from its Poverty Reduction Cooperation Fund, financed by the Government of the United Kingdom.
Almost no formal insurance service is currently available for poor households, and to cushion the effects of shocks such as illness, fire or theft, they often resort to borrowing from informal sources, withdrawing their savings, or selling their assets.
"Even shocks that would only mildly affect upper- and middle-income households can dramatically reduce the assets of the poor, eliminate their income sources, reduce consumption, and thus adversely affect their ability to improve their welfare," says Mayumi Ozaki, an ADB Rural Finance/Microfinance Specialist.
The Government's insurance schemes for the poor are not based on actuarial principles and are deemed unsustainable without government refinancing, while private insurance companies cater mainly to the corporate sector and the urban middle- or upper-income groups.
A few microfinance nongovernment organizations provide insurance services to their members, but they are also largely informal and are often subsidized by donor funds. With no means to regulate informal schemes such as these, there is growing concern about the protection of policy holders and the viability of the providers.
The TA will help the Government to develop the microinsurance sector in Sri Lanka by reviewing the existing insurance policies in the country and recommending improvements based on successful microinsurance schemes in other countries. The TA will also assess the capacity of the Insurance Board of Sri Lanka and provide capacity building support if necessary.
A comprehensive market assessment will be conducted to provide government agencies, insurance companies, and microfinance institutions with a thorough inventory of existing and potential clients. In selected conflict- and tsunami-affected areas, where there is a greater sense of vulnerability among households, an insurance awareness campaign will be carried out.
A pilot microinsurance scheme will also be tested to identify cost-effective means of providing insurance services especially to households in selected conflict- and tsunami-affected areas.
The Government will contribute $155,000 toward the TA's total estimated cost of $755,000. The Ministry of Finance and Planning is the executing agency for the TA, which will be carried out over eight months to September 2006.
Contact
Omana Nair
Email: onair@adb.org
Tel:+632 632 5178; +63 917 855 2085
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253; +632 898 3413
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