Enabling Micro Insurance Supervision in Ethiopia: Interview with Mr. Abate Mitiku, National Bank of Ethiopia
Through the Regulatory and Supervisory Framework for Microinsurance project, FIRST enabled the National Bank of Ethiopia (NBE) to develop a regulatory and supervisory framework for microinsurance. The technical assistance recommended adaptations to existing regulations, new/revised prudential standards, filing requirements, application forms and supervisory manuals.
The World Bank implemented the project, and regularly consulted stakeholders through workshops with regulators and practitioners to discuss the microinsurance market, and gain feedback on the draft microinsurance regulatory and supervisory framework. While NBE was the primary client for this project, a similar approach has shown that the benefits of providing opportunities for exchanges of views between regulators and industry's practitioners at early stages of the project's implementations outweigh the costs of adding additional steps to the implementation process.
Drafting a sustainable regulatory and supervisory framework implies a deep understanding of the local context and constraints, and a wise adaptation of best practices to that context. This required tailoring the regulatory framework to the needs of the client; and developing filing requirements, application forms, and supervisory manuals appropriate for the country’s growing micro insurance sector.
In this interview, Mr. Abate Mitiku, Advisor to Vice Governor (National Bank of Ethiopia) provides a brief overview of the background context leading to the project, and describes how the technical assistance has enabled Ethiopia to better regulate and supervise micro insurance firms. (Interview Date: June 10, 2015)
Q1: What challenges did Ethiopia face before the Microinsurance technical assistance project?
In Ethiopia, all the financial sectors are under the supervision of the National Bank of Ethiopia. The banks, insurance companies, and micro finance institutions are under the supervision of the National Bank of Ethiopia. There is a regulation for formal or regular insurance business; but we did not have regulatory framework for micro insurance.
So in order to get access to insurance services by low-income peoples, we have developed a micro insurance regulatory framework. For this, we needed support-- especially technical support-- for developing the framework. In this regard, FIRST initiative has supported us technically; and we have developed 4 directives for micro insurance.
We have now issued two directives-- licensing directive and supervision directive. Companies can now come to get license for micro insurance services.
Q2: What was your experience with FIRST?
FIRST has supported us really with the ‘know-how’. In our case, we have recruited the consultants by getting international bid. Once we had selected the consultants, FIRST supported all the expenses. We have made different workshops while we were developing the framework, and all the expenses have been covered by FIRST.
Q3: How does Microinsurance fit into Ethiopia’s larger financial inclusion agenda?
One of the services or products for financial sector is insurance. Most of the people [in Ethiopia] do not use insurance services because of lack of access and lack of knowledge. Now we are promoting insurance services-- especially micro insurance service. We have now developed the framework, and created the legal basis so that any company, even the regular insurance provider companies, can engage in micro insurance services. The micro finance institutions also run micro insurance services; and SACCOS, the savings and credit co-operatives, can also provide micro insurance services. Any company who needs to get license for micro insurance can have a micro insurance license from the National Bank. So, we can easily [provide] access to those people who have no access to micro insurance services.
Q4: How can FIRST continue to support Ethiopia’s Financial Inclusion agenda?
Our country has already engaged in developing the Financial Inclusion framework. We need most to develop another framework for weather index insurance. This weather index insurance is for farmers who protect their grains from disasters- from weather disasters. I think this issue is a little bit complicated, so we need technical assistance, especially on weather index insurance; by recruiting similarly like developing the micro insurance framework. We need also assistance on developing weather index insurance policy.