The National Bank of Ethiopia (NBE), the country's central bank is drawing up a policy framework and drafting a directive which will regulate micro insurance business in Ethiopia. Micro-insurance targets low income people  without access to the mainstream insurance services – is still at its earliest stage in Ethiopia.

Insurance companies have been giving micro insurance services as early as 2011 through international financing from organizations like International Labor Organization (ILO) and Milliman Consulting targeting crop, livestock and life insurance services.

“There is a high level of risk involved in micro-insurance and it requires some external funding, or at least a re-insurer,” said Tesfaye Desta, manager of Oromia Insurance, which provides micro-insurance to around 3,000 rural residents in Ethiopia.

Because of lack of policy or framework that regulate the sub-sector,the few insurance companies providing micro insurance services, like Oromia Insurance Company, provide provide the service as part of their general or life insurance, not as a separate scheme.

However, a few weeks ago, the National Bank of Ethiopia and the World Bank organized a workshop to discuss the contents the draft micro insurance directive should incorporate. The World Bank provides technical assistance and financing through the Financial IRST (FIRST) Initiative Trust Fund,  a multi-donor initiative managed by the World Bank, to assist low and middle income countries in strengthening their financial sector.

Ethiopia’s insurance market premiums, for life and general insurance, contributed 0.2pc to the gross domestic product (GDP) in the 2010/11 fiscal year, with 105 million dollars, according to the NBE’s annual report.

Source: Fortune