MANILA, PHILIPPINES - A $2 million grant approved by the Asian Development Bank (ADB) Board of Directors will aid the development of the micro insurance sector in Bangladesh and help to reduce the vulnerability of the poor from sudden losses of income.
Around 20,000 people in Bangladesh are expected to directly benefit from the grant, which is provided by ADB's Japan Fund for Poverty Reduction (JFPR), funded by the Government of Japan.
The money will finance the development of low-cost insurance services to protect the livelihoods of poor households, especially women, from risks such as accidents, illness, theft, and natural disasters.
The grant will also fund an insurance awareness campaign and training to at least 50,000 rural poor households.
"Those risks that would mildly affect middle class households are a significant setback for the poor and often push them deeper into poverty," says Mayumi Ozaki, finance specialist for rural and microfinance of the South Asia Department. "Problems like illness, fire, or theft can severely set back efforts to ease poverty. Without insurance, the poor resort to borrowing from informal sources, withdrawing from their savings, or selling assets to cope with these shocks."
Although micro credit is well-established in Bangladesh, micro insurance, while gaining in popularity, is still a relatively new concept. It is estimated that 93% of the country's total population have no access to insurance services.
The project will promote micro insurance through non-governmental organizations with a long-established presence among poor communities, high accountability and sustainability, and the presence of a regulatory body.
At least 20 microfinance institutions will undertake capacity training on micro insurance operations to develop expertise in insurance underwriting, screening, financial management, product development, and marketing.
The Japan Fund for Poverty Reduction is an untied grant facility established by the Japanese Government and ADB in May 2000. From an initial contribution of $90 million, the Fund now stands at well over $360 million, of which $224 million has been committed. JFPR assists ADB clients to provide direct relief to the poorest and most vulnerable segments of society while building up their capacities for self-help and income generation.