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New round of dialogue on FRA’s proposal regarding mandatory insurance for microfinance clients against death risk and total disability


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• Dr. Omran: Insurance is mandatory on the lives of microfinance clients after presentation to FRA’s Board of Directors

Dr. Mohammed Omran – FRA’s Chairman held a meeting with representatives of NGOs and companies licensed to practice microfinance in the presence of the Chairperson of the Egyptian Microfinance Federation (EMF), to inform them of the mandatory insurance system proposed by FRA to provide insurance coverage to clients of microfinance institutions against the risk of death and total disability. This comes in the light of the increased number of microfinance beneficiaries that reach 2.7 million beneficiaries by the end of the third quarter of 2018 compared to 2.1 million beneficiaries for the same period of 2017. On the other hand, financing assets rose to about 10.6 billion pounds by the end of the third quarter of 2018, compared to financing balances of 6.1 billion EGP for the same quarter of 2017, representing a change of 73%.

FRA’s Chairman presented the results of the statistical study carried out by the Authority to show the amount of financing granted to microfinance clients in the eight largest microfinance donors in Egypt during the past four years. The study found out that nearly 6 billion pounds of financing funds were concentrated in 40% of financing clients of those entities which are the basis of the Authority’s study on the best principles and criteria for subscription and pricing for micro insurance policies.

Dr. Omran emphasized that the actuarial study prepared by the Authority to determine the value of insurance premium to provide insurance coverage against death and total permanent disability has ended to determine the monthly insurance premium for each insurance amount of one thousand pounds. He added that this will be discussed with life insurance companies at the meeting which will be held next week. On the other hand, Dr. Omran noted that this amount is the maximum pricing which opens the way for companies to compete in light of the cost of mortality and disability for the entities and companies and MFIs.

 FRA’s Chairman stressed that the premium’s maximum amount referred to will be reviewed annually based on an actuarial study prepared by FRA in this regard.

FRA’s Chairman revealed to the attendees that the Authority will amend Article (24) of its Board of Directors’ decision no. 31 of 2015 regarding the rules and standards for practicing microfinance activity by associations and NGOs, as well as decision no. 173 of 2014 concerning the rules and regulations set for companies practicing microfinance activity.  He added that the MFIs (Association / NGO / Company) are required to provide insurance coverage to clients against the risk of death and total permanent disability through a collective insurance agreement with an insurance company pointing out that  the amount of insurance shall be equal to  the financing  balance provided to the client.

Dr. Omran noted that the Authority will consider reducing development fees for micro-insurance activity, which contributes to reducing the cost for the target groups. The insurance policy is supposed to be collective, mandatory and standard in all its terms and conditions, characterized by the quick disbursement of compensation, simplicity of its procedures and its effectiveness and it should not contain any exceptions. He emphasized that the policy’s pricing is based on standardized technical principles used by insurance companies upon pricing such policies.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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