M-RCBG Associate Working Paper No. 173

Advancing Financial Inclusion: Assessing opportunities and challenges in implementing a digitally enabled microinsurance service in Myanmar

Nakul Nagaraj


Executive Summary

Even though access to financial services in Myanmar has grown, a large proportion of families remain narrowly served, or financially excluded altogether. Financial exclusion impedes economic development and keeps households in poverty. This report assesses the feasibility of digitally enabled microinsurance services as a means to accelerate financial inclusion and access in Myanmar.

The power of financial technology innovations in advancing financial inclusion is well known. Numerous innovations have taken advantage of the fact that mobile phone usage is nearly ubiquitous and that internet facilities are now more accessible than ever. This allows firms to provide financial services cheaply and at scale. At the same time, these innovations are a boon for users too. It helps them reduce transaction costs and allows greater access to financial services. This effect can be especially profound in Myanmar where there are nearly 68 million phone connections, over 80% of which have at least a 3G internet connection.

Microinsurance works well when the market is underpenetrated and Myanmar is just that. While there is little doubt that insurance is an important service for poor households, Almond Finance will find that this market is large, likely making a venture in the microinsurance sector financially sustainable. The report finds that only 6% of the country is formally insured meaning that over 30 million adults have no formal insurance coverage. This is a sizable, untapped market that is estimated to be $1.3 to 2.7 billion per year.

When looking at what insurance product to offer, the report determines that it is best to start with life insurance. While it is relatively easy to explain to people who have never been insured, the service is also important from Almond Finance's point of view, chances of fraud are low, and mortality rates are decreasing. In addition, to encourage long-term use, some strategies suggested include piling the service on to other services Almond Finance is planning to offer, using a freemium model, automatically enrolling customers, and incorporating a financial literacy program.

At the same time, the report also finds some important challenges and barriers to overcome in Myanmar. First, the regulations in the country do not appear to be friendly to newcomers, especially foreign entities. Further, a lack of clarity in the roles of responsibilities of different players means that Almond Finance might face scrutiny in the future. Second, the country faces an uncertain future with the current military coup. The internet is unstable, many individuals and firms are engaged in regular protests, and foreign governments are asking entities to not work with the junta. These challenges means that Almond Finance will have to hold back until the political situation is back to normal and the regulations in the sector are addressed.

While the challenges seem too big to surmount, these are short-term. Over the medium to longer term, Almond Finance will find the market for microinsurance services in Myanmar large and untapped. This gives them a real opportunity to better the lives of millions of citizens by providing these risk-mitigating services in an economically sustainable way.

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