- Dr. Omran: Exempting collective life insurance policy for micro-finance clients from paying the fees set for reviewing and approving new insurance policies and forms
- Dr. Omran: Mandatory life insurance policies for microfinance clients with a premium of 30 piasters per month per one thousand pounds of the insured amount.
- Dr. Omran: Microfinance institutions (MFIs) are prohibited from receiving any commissions or introducing fees for offering mandatory insurance coverage other than insurance premiums
Dr. Mohammed Omran – FRA’s Chairman announced that FRA’s initiative to extend the social safety net to microfinance clients came into force after FRA’s BOD has approved some amendments in its sessions held last week. This includes an amendment to the provisions of article no.(24) of FRA’s BOD decision no.31 of 2015 regarding the rules and regulations set for practicing microfinance activity. In addition to other amendment to FRA’s BOD decision no. 173 of 2014 regarding the rules set for microfinance companies. These amendments stipulate that the MFIs, whether a company, a civil institution or a NGO of categories (a) and (b) are obliged to provide an insurance coverage for clients obtaining microfinancing against the risk of death and total disability through collective insurance policies with an insurance company. The new amendments state that the insurance amount shall be equal to the balance of the outstanding loan obtained by the client.
FRA’s Chairman added that based on the actuarial study prepared by the Authority to estimate the maximum rate of premium based on client’s data received from MFIs, the maximum insurance premium was estimated at 30 piasters per month per one thousand pounds from the insurance amount. He noted that this amount shall be amended each year through an actuarial study and by a decision of FRA’s Chairman.
Also, Dr. Omran noted that FRA promotes this kind of mandatory life insurance for beneficiaries from microfinance loans. In this respect, FRA’s BOD issued decision no. (17) of 2019 on approving the exemption of collective life insurance policy for micro-finance clients from the fees set for reviewing and approving new insurance policies and forms.
FRA’s Chairman said that Board’s decision no. (15) of 2019 regarding the issuance of collective insurance policies for micro-finance clients has allowed microfinance entities (company, institution, NGOs) to require insurance coverage on the project or the asset. In addition, it stipulates that microfinance entities shall not receive any commissions or introduce fees under any name or in any other way for mandatory insurance coverage other than insurance premiums.
Dr. Omran also noted that FRA promotes this kind of mandatory life insurance for beneficiaries of microfinance loans. FRA’s BOD decision no. (17) of 2019 approved exempting collective life insurance policy from paying the fees set for reviewing and approving new insurance policies and forms.
FRA’s Chairman stated that FRA’s BOD decision no. (15) of 2019 on the issuance of collective insurance contract form to cover micro-finance clients, has allowed microfinance sector (companies, institutions, NGOs) to require insurance coverage on the project or the asset. He added that microfinance institutions (MFIs) are prohibited from receiving any commissions or introducing fees under any name or in any other way for the mandatory insurance coverage other than insurance premiums.
Dr. Omran also emphasized that the Authority’s initiative, which was announced in June last year, aimed at expanding the umbrella of micro-insurance to micro-finance clients in a collective manner to achieve higher efficiency of financing rates and increase the ability of financial institutions to recycle financial portfolios. Besides, FRA’s initiative aimed at resolving the absence of cadres and the lack of insurance experience in microfinance institutions which lead to resorting to self-insurance or directing clients to inappropriate insurance products. Consequently, this requires obliging MFIs to provide insurance coverage for each client by contracting with an insurance company according to the collective insurance form – which clauses were suggested by the Authority to cover death and cases of permanent total disability. He added that the amount of insurance is to be equal to the balance of the micro loan owed by the client.
The terms of the contract include the insurance company’s acceptance to grant coverage without medical examination, and obligating the microfinance institution to include all those receiving financing without exception in the monthly list sent to the insurance company.
It is worth mentioning that by the end of 2018, performance indicators for microfinance institutions shows that the number of beneficiaries reached 2.8 million through 1849 financing branches in most of countries and cities of the Republic with a growth rate of 22% over the previous year. Moreover, financing balances reached 11.5 billion EGP with a growth rate of 62% last year, noting that the rate of women benefited from financing is 68.8% of the total number of beneficiaries.