Small and medium enterprises (SMEs) are again at the center of attention – and this is excellent news because in many countries these businesses are the backbone of the economy and they employ large numbers of people. Unfortunately, the environments in which SMEs operate are not always conducive for their growth and development.
Poor people’s need for domestic payments is often large, whether it is spurred by migrant labor remittances, informal support networks of friends and family, government welfare payments, or utility payments.
Financial inclusion is expanding, bringing access to financial products and services to millions of previously unbanked, low-income consumers. Managing your money also brings risks however, many of which are difficult for even experienced consumers to handle, and much more for new market entrants.
Some say that insurance does not have a natural ‘fit’ with financial behaviors of low-income households, given that benefits are deferred in time and limited to just those few who claim. But, the shocks experienced by those lacking good risk-management tools have such devastating effects on livelihoods, that it is important not to abandon insurance as a development tool only because the ‘fit’ is not obvious.
Taking a closer look at specific client segments to understand their sources and flow of income and expenses and their strategies for investment and savings can help providers develop financial products they meet their needs and complement the solutions they already employ.