Megan Peterson

Latin America and The Caribbean

Nicaragua

Challenges and Crises

Enabling Environment

Financial Health

Inclusive insurance

Insurance

Resilience

Savings

Agricultural and Rural Finance

Credit

Digital Payments

Microfinance

Mobile Banking

MSME/SME Finance

Article

FAMA

Everyone needs access to high-quality financial tools. They give entrepreneurs the keys to start businesses, let parents send their kids to school, help families finance the significant moments in their lives — from marriages to children to retirement. These tools are helpful for building better lives, but they are also necessary to help people stay resilient through life’s worst moments.
With the earthquakes, hurricanes, floods, and wildfires of 2017, it’s becoming increasingly clear that those with the least money often pay the highest price during natural disasters. Many of the world’s poorest people live in communities that lack resilient infrastructure and financial tools. Often, these are in hot regions and coastal areas that are vulnerable to harsh weather. For people to prepare, rebuild, and feel confident that their families will get back on their feet, they need access to financial services and tools such as insurance, savings, and loans.

<h3 class="graf graf--p">Insurance Should Be Simple and Affordable for More People</h3>
Globally, there are 3.8 billion low- and middle-income individuals without adequate coverage. The <a class="markup--anchor markup--p-anchor" href="http://www.centerforfinancialinclusion.org/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion at Accion</a> and the <a class="markup--anchor markup--p-anchor" href="https://www.iif.com/" target="_blank" rel="noopener noreferrer">Institute of International Finance</a> are researching how to provide affordable <a class="markup--anchor markup--p-anchor" href="https://www.iif.com/publication/research-note/insights-inclusive-insurance" target="_blank" rel="noopener noreferrer">“inclusive insurance” for these underserved consumers</a>.
The purpose of this research is to help insurance companies provide better coverage for those who need it most. Losing everything due to unforeseen events is already devastating, but for people with limited disposable income and no insurance, it is almost impossible to recover. Without insurance, people cannot manage the financial shocks caused by natural disasters. These events can permanently derail businesses and force families into life-altering decisions, such as taking kids out of school and putting them to work.
Microinsurance, one of the topics of the research, makes coverage more accessible to low-income consumers through lower premiums. Insurance companies are updating their offerings due to the demand for these more modest insurance products. There has been a lot of growth in this industry in the last decade. From 2005 to 2016, prominent insurance companies that provide microinsurance grew from seven to 60.
Insurance companies are also finding other ways to update their services and help make coverage more accessible for an emerging middle class around the globe. One example is creating uncomplicated plans, such as pay-as-you-go models.
Another opportunity that is helping widen insurance coverage is coupling services with existing mobile financial products or creating new mobile solutions that bring insurance services straight to a consumer’s phone.

<h3 class="graf graf--p">Everyone Needs a Rainy-Day Fund</h3>
Without money and credit, how can someone rebuild after disaster hits? That’s a big question for the 3 billion people worldwide who lack access to bank accounts, credit cards, loans, or online money-transfer.


[caption id="" align="alignnone" width="1382"]<img class="graf-image" src="https://cdn-images-1.medium.com/max/1440/1*Lv2SX5VDxCVrNebBOI0YZw.jpeg" alt="José Ramón Gómez builds his business with funding from Financiera FAMA in Nicaragua. These loans reinforce his tile-making enterprise so he can help reinforce his neighbor’s roofs." width="1382" height="922" /> José Ramón Gómez builds his business with funding from Financiera FAMA in Nicaragua. These loans reinforce his tile-making enterprise so he can help reinforce his neighbor’s roofs.[/caption]
To address this need, our partners go the extra mile to make financial services more inclusive. For example, one of our partners, <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/7970-2/" target="_blank" rel="noopener noreferrer">Financiera FAMA</a>, is building a digital banking platform in Nicaragua to bring small loans to rural clients, who have long been on their own without access to banks and funding. In Nigeria, <a class="markup--anchor markup--p-anchor" href="http://www.accionmfb.com/Home.aspx" target="_blank" rel="noopener noreferrer">Accion Microfinance Bank</a> is developing a mobile savings-based loan program that will make it easier for lower-income customers to save and access small loans. And <a class="markup--anchor markup--p-anchor" href="http://www.ayefin.com/" target="_blank" rel="noopener noreferrer">AYE Finance</a>, in India, is helping small business owners who lack the financial history to secure a loan through traditional banks by evaluating them based on similar businesses and distributing funds. Thanks to innovative practices like these, people previously left out of the financial system can now take out a loan or start a savings account — simple actions that can prove invaluable in the face of natural disasters.
Improved savings and loan services and inclusive insurance plans are necessary for people to take control of their lives when life feels most out-of-control. Let’s make sure everyone can build their businesses, support their families, and stay resilient in an unpredictable world.

With natural disasters getting more severe, people need money to prepare and rebuild

By Jacqueline van Hartley
Nicaragua has one of the lowest rates of financial inclusion in Latin America. Only <a class="markup--anchor markup--p-anchor" href="http://datatopics.worldbank.org/financialinclusion/country/nicaragua" target="_blank" rel="noopener noreferrer">1 in 5 adults</a> over the age of 15 have access to a formal bank account. Nearly a third of the population lives on <a class="markup--anchor markup--p-anchor" href="https://opportunity.org/what-we-do/where-we-work/nicaragua-facts-about-poverty" target="_blank" rel="noopener noreferrer">less than $2 a day</a>. Not surprisingly, microfinance is incredibly difficult in Nicaragua.
Accion’s partner <a class="markup--anchor markup--p-anchor" href="http://www.financierafama.com.ni/" target="_blank" rel="noopener noreferrer">Financiera FAMA</a> (FAMA) has proven that reaching customers responsibly in such a challenging environment is possible.
In 2008, the financial crisis sparked the “No Pago” movement, and protests erupted across the country. The movement was driven by some microfinance clients who had been <a class="markup--anchor markup--p-anchor" href="https://sptf.info/resources/outreach-to-regulators" target="_blank" rel="noopener noreferrer">hit hard by bad financial practices</a>, including hidden fees, forced saving, and high late payment charges.
While many players exited the market, FAMA adapted — returning to traditional microcredit in order to continue serving entrepreneurs responsibly when they needed it most. Since the “No Pago” movement, the Nicaraguan government has worked to strengthen the sector through a new regulator and supervisor. Through this time period, FAMA continued to perform remarkably well, reaching more borrowers in new areas when other banks were not.
FAMA has expanded financial access to microentrepreneurs for more than two decades. From its beginning in 1991 as a non-profit led by a group of Nicaraguan business leaders with the support of Accion, FAMA has grown to become one of the leading microfinance institutions in the country. Today, it serves 10 percent of Nicaragua’s total microfinance space with 58,000 clients — most of whom are women.
Even as FAMA celebrates its 25th anniversary as a microfinance institution dedicated to microentrepreneurs, it stays focused on the future. With <a class="markup--anchor markup--p-anchor" href="http://www.accion.org/financiera-fama-closes-investment-round-to-expand-access-to-capital-for-the-underserved-in-nicaragua/" target="_blank" rel="noopener noreferrer">fresh funding from Accion</a> and two new investors, <a class="markup--anchor markup--p-anchor" href="https://www.fmo.nl/" target="_blank" rel="noopener noreferrer">FMO</a> and <a class="markup--anchor markup--p-anchor" href="https://www.triodos.com/en/about-triodos-bank/" target="_blank" rel="noopener noreferrer">Triodos</a>, FAMA will continue to innovate and adapt.
After a quarter of a century working together, we’re excited to continue our partnership because FAMA is:

<ul class="postList">
 	<li class="graf graf--li">Creating a social impact: FAMA reached customers with responsible loans despite a highly challenging regulatory environment. The company continues to do so today as one of the key players.</li>
 	<li class="graf graf--li">Filling a market need: With only 15 percent of adults in Nicaragua with formal bank accounts and a high percentage of rural population, there is a clear need for microloans at reasonable interest rates. FAMA lends to their clients at an average rate of 36.6%, slightly lower than the average of competing MFIs.</li>
 	<li class="graf graf--li">Showing an ability to innovate and adapt: FAMA performed well financially and continued to find ways to lend despite the “No Pago” crisis. FAMA is a great example of an institution that innovates in order to serve a market in need. They are looking ahead to create an agent network, build an online banking platform, offer e-wallet service, and provide financial education to its clients using newly injected capital.</li>
</ul>
FAMA’s next step? Reaching more rural communities. In a country where <a class="markup--anchor markup--p-anchor" href="https://openknowledge.worldbank.org/bitstream/handle/10986/9479/537960BRI0Clim10Box345626B01PUBLIC1.pdf?sequence=1" target="_blank" rel="noopener noreferrer">2 out of every 5 people</a> live in these rural areas, that expansion is crucial for financial inclusion. FAMA is building out its own agency network and an online banking platform to make sure more it can deliver financial services to more of the population.
As FAMA enters this next chapter, we look forward to watching it evolve and reach even more people with more services than ever before.

Bringing mobile money to Nicaraguan microfinance: FAMA

FAMA

Filter

Filter

With natural disasters getting more severe, people need money to prepare and rebuild

Bringing mobile money to Nicaraguan microfinance: FAMA