“It struck me that all this great work going on in development was fantastic, but if we couldn’t put a safety net under people that stops them from falling back when inevitably bad things happen, then we’re all wasting our time.”
Richard Leftley
How can our poverty eradication efforts through credit facilities like microfinance, the Anchor Borrowers Programme, Trader Moni, Market Moni and the likes eradicate poverty and expedite our drive to sustainable economic development if there is no net to defend, indemnify and put low income earners and under-served small business owners back on their feet in the event that an unfortunate happenstance affects their businesses? For like they say,“life happens” and risk is a constant in business and in life. There are a million and one Nigerians who have fallen into extreme poverty as a result of job loss, business failure, natural disasters and the death of breadwinners.
Micro-insurance can be the panacea. Yes, micro-insurance holds the potential to lift Nigeria out of the throes of devastating extreme poverty. Micro-insurance, defined by Wikipedia as “the protection of low-income people (those living on between approximately $1 and $4 per day) against specific perils …” can make vulnerable people resilient and protect them from risks that can destroy their lives.
For developing countries like Nigeria that have very weak social security systems; where workers in informal sectors (and even some informal sectors) have no access to employer provided insurance; where security is volatile and risk of natural disaster has increased (thanks to climate change) and where 6 people fall into extreme poverty every six minute, micro-insurance should therefore be exploited as an effective tool of economic empowerment and development.Microfinance can cushion the effects of a job loss, palliate the cost of quality health, keep families running if the bread winner dies, put small business owners back on their feet in the event that their business experiences hard times, and generally increase the risk-bearing appetite of low-income earners without the fear of falling back into poverty in the event of unexpected loss because like mainstream insurance, micro-insurance caters to a wide variety of risks; life, property, health, disability, natural disaster,cattle and livestock, etc. the major difference between the two being that while regular insurance caters to businesses and middle-income earners, the dynamics of micro-insurance is structured in such a way that it is very affordable and can reach people and places that mainstream insurance cannot reach.
Micro-insurance has gained considerable traction in other developing countries like India, Bangladesh, Philippines and Brazil and low-income earners in those countries are already reaping the benefits it confers. For instance, when Typhoon Haiyan hit the Philippines in 2013, it took only about a month for local farmers and fishermen covered under micro-insurance schemes to receive claims totaling more than $2 million.
Moreover, the story of George Kamau Githome is a clear and typical example of how micro-insurance can help curb the rising scourge of poverty in Nigeria. George is a movie and hardware vendor in Nairobi, Kenya. He is blessed with two wives and ten children and they all rely on George’s business for sustenance. One day however, tragedy struck where it pinches most;George’s shop caught fire and burst in flames. The fire was so severe that nothing could be salvaged. George cried like a baby as he lost his only source of income. But being that George was covered under a micro-insurance scheme which was bundled into a micro-finance program that he secured a loan from, he was able to start his business afresh and continue growing because the micro-insurance scheme paid off his loan and gave him some seed fund.
Poverty eradication and alleviation is not rocket science, it only takes some strategic thinking, formulation of strong policies coupled with adequate planning. Nevertheless, to formulate fine plans is not enough. Concerned stakeholders must exercise the will and temerity to ensure that programs and policies are well implemented.
Going forward, concerned stakeholders –government, Nigerian Insurance Commission (NAICOM), Insurance firms – should form strategic alliances to increase awareness and chart best ways to improve the effectiveness and penetration of micro-insurance in a bid to accelerate the drive towards fostering sustainable socioeconomic development.