Microinsurance and Loan PDF

MF 111 Microfinance and Development Siera B. Belardo Instructor Topic 5: Microinsurance and Loan  Lesson Objectives: At the end of the lesson, learners will able to: discuss and explain microfinance products, like microinsurance and loan; and learn to compute the micr...

MF 111 Microfinance and Development Siera B. Belardo Instructor Topic 5: Microinsurance and Loan  Lesson Objectives: At the end of the lesson, learners will able to: discuss and explain microfinance products, like microinsurance and loan; and learn to compute the microfinance loan.  What Is Insurance?  INSURANCE According to Section 2(a) of Republic Act No. 10607 known as The Insurance Code states,” A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.”  What is Insurance? ⮚Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. (www. investopedia.com) GENERAL PRODUCTS OF INSURANCE 1. Life Insurance – products that insure human lives or anything connected to a human’s health and death. 2. Non-life Insurance – products that do not insure human lives or anything connected to it. ⮚ Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer.  What is MICROINSURANCE?  MICROFINANCE in a NUTSHELL Know more about the basic features of Microinsurance products in accordance with the existing laws in the Philippines, and other regulations issued by the Insurance Commission.  What is MICROINSURANCE According to Section 187 of Republic Act No. 10607 known as “The Insurance Code” defined Microinsurance is a financial product or service that meets the risk protection needs of the poor where: (a) The amount of contributions, premiums, fees or charges, computed on a daily basis, does not exceed seven and a half percent (7.5%) of the current daily minimum wage rate for nonagricultural workers in Metro Manila; and https://www.facebook.com/CARDMBAOfficial  What is MICROINSURANCE (b) The maximum sum of guaranteed benefits is not more than one thousand (1,000) times of the current daily minimum wage rate for nonagricultural workers in Metro Manila. https://www.facebook.com/CARDMBAOfficial TYPES OF MICROINSURANCE PRODUCTS 1. Micro-Life Insurance Examples: Term insurance, Credit life insurance, Personal accident insurance. 2. Micro-Non-Life Insurance Examples: Casualty and Liability Insurance, Various Property Insurance. Example : home insurance, car insurance, commercial property insurance, product liability insurance, renters' insurance, workers compensation insurance etc How Microinsurance Works? MICROINSURANCE COMPANIES  BENEFITS 1. Affordability. Microinsurance products are affordable to low-income households. 2. Protection against risks. Microinsurance provides low-income households with a vessel that can help protect themselves against uncertainties. 3. Different coverage offered. Microinsurance offers various types of coverage. They can choose life insurance or non-life insurance. 4. Minimal requirements. The providers typically ask for minimal documentary requirements making it easy to understand for those who want to get insured. 5. Shorter claim period. They can get claims typically after 10 working days upon submitting the required documents.  What is Microinsurance? https://www.facebook.com/CARDMBAOfficial https://www.facebook.com/CARDMBAOfficial https://www.facebook.com/CARDMBAOfficial https://www.facebook.com/CARDMBAOfficial  What is Microinsurance? https://www.facebook.com/CARDMBAOfficial Functions of Microinsurance  Functions of Microinsurance “If the goal of microfinance is putting money in people’s pocket, the goal of microinsurance is putting tranquility in people’s hearts at time of crisis.” - AM Dimaculangan  Functions of Microinsurance Microinsurance is another weapon for poverty alleviation. Microinsurance is a safety net for microentrepreneurs. MICROFINANCE combined with MICROINSURANCE creates SYNERGY. https://www.facebook.com/CARDMBAOfficial Microfinance Product - Loan *LRF – Loan Redemption Fund Php 5000 principal amount - How much is the interest in 4 months? - How much is the total value of loan plus interest? - How much is the weekly loan due? Php 5,000 - principal amount x 10.24% - interest ____________ 512 - loan interest in 4 months + 5,000 ____________ Php 5,512 - total amount of loan plus interest ÷ 16 - number of weeks for 4 months ______________ 344.5 round off to the nearest next whole value (5, 10, 15 and so on…) Php 345 - weekly loan due in 4 months (amortization schedule) Php 10,000 principal amount - How much is the interest in 3 months? How much is the total value of loan plus interest? How much is the weekly loan due? How much is the LRF? Php 10,000 - principal amount x 7.68% - interest ____________ 768 - loan interest in 3 months + 10,000 ____________ Php 10,768 - total amount of loan plus interest ÷ 12 - number of weeks for 3 months ______________ 897.33 round off to the nearest next whole value (5, 10, 15 and so on…) Php 900 - weekly loan due in 3 months (amortization schedule) Php 10,000 X 0.36% Php 36 - LRF in 3 months Php 10,000 – 36 = Php 9,964 total loan amount received Php 150,000 principal amount - How much is the interest in 1 year? How much is the total value of loan plus interest? How much is the total weekly due if the MFI has mandatory minimum of Php 50 for savings and Php 20 for insurance? How much is the LRF? Php 150,000 - principal amount x 28% - interest ____________ 42,000 - loan interest in 1 year + 150,000 ____________ Php 192,000 - total amount of loan plus interest ÷ 50 - number of weeks in 1 year ______________ 3,840 round off to the nearest next whole value (5, 10, 15 and so on…) Php 3,840 + 70 = 3,910 total weekly due (amortization schedule) Php 150,000 X 1.50 % Php 2,250 - LRF in 1 year Php 150,000 – 2,250 = Php 147,750 total loan amount received Exercise 1. Aling Maria decided to take a loan in microfinance amounting to Php 15,000 to start a sari-sari store. How much will she pay weekly in six months? Php 15,000 - principal amount x 16% - interest ____________ 2,400 - loan interest in 6 months + 15,000 ____________ Php 17, 400 - total amount of loan plus interest ÷ 25 - number of weeks for 6 months ______________ 696 round off to the nearest next whole value (5, 10, 15 and so on…) Php 700 - weekly loan due for 6 months (amortization schedule) Exercise 2: Mrs. Alejandro borrowed Php 25,000.00 as start-up capital for a milktea shop business. How much is the maturity value of the loan? How much will she pay weekly in five months? How much will she receive if LRF is deducted? Php 25,000 - principal amount x 12.8% - interest ____________ 3,200 - loan interest in 6 months + 25,000 ____________ Php 28, 200 - total amount of loan plus interest ÷ 20 - number of weeks for 6 months ______________ Php 1,410 - weekly loan due for 5 months (amortization schedule) Php 25,000 x 0.60% 150 - LRF in 5 months Php 25000 – 150 = Php 24, 850 total loan amount received End Of Discussion Thank you!