The European Investment Bank (EIB) is investing USD 20 million in a new fund focused on microinsurance – LeapFrog Financial Inclusion Fund – which will invest in companies that deliver insurance and related financial products to low-income people in developing countries.
On 17 June 2009, the EIB hosted a formal signature ceremony at the Bank’s Luxembourg headquarters to mark the investment agreement, hosted by EIB Vice President Plutarchos Sakellaris. The event was attended by Leapfrog managers – Dr. Andrew Kuper (President and Founder), Dr. Jim Roth (Partner), and Mr. Gary Herbert – as well as the fund’s lead investors, including European Development Institutions such as the FMO and private sector microfinance investors such as the Omidyar Network, Triodos, and Accion International. Together the investors have injected $44m of finance into the microinsurance fund.
Improved access to financial services is one of the pillars supporting poverty alleviation and economic growth – the EIB’s main objectives in developing economies. The investment in LeapFrog by the international financiers is of great significance as it will provide access to insurance products for poor communities in Africa and Asia. Moreover, the Fund will inject equity into insurance enterprises with potential for rapid growth, upholding the EIB’s commitment to encourage private sector growth.
Plutarchos Sakellaris, EIB Vice President responsible for activity in Africa, welcomed the initiative, saying, “Microfinance is a growing sector for EIB activity and one to which we demonstrated our firm support in the past in the ACPs with debt and equity investments totalling over EUR 90 million. This project is particularly important for the EIB as it is our first ever investment in the microinsurance sector. We are confident that LeapFrog’s strong management will ensure the success of this fund and we hope that it is the first of many such operations for the Bank.”
The LeapFrog microinsurance fund will run for a term of 10 years and is incorporated in Mauritius, where the comprehensive regulatory framework favours private sector development. Investments will focus on companies that provide microinsurance products to low-income and financially-excluded segments of the population in both Africa and Asia.
In addition, LeapFrog is establishing a grant-funded technical assistance facility, to which the EIB is considering contributing up to EUR 2 million, to facilitate the development of microinsurance products and distribution which are socially valuable but not necessarily or yet commercially feasible. This includes health insurance products which can have high implementation costs. The technical assistance facility will also be used by LeapFrog to provide skills training and education to the fund’s investee staff and final beneficiaries to ensure continued development of the emerging microinsurance market.
LeapFrog Investments is run by a team of experienced African managers with in-depth knowledge of the sub-Saharan African and Asian markets. The fund has identified an initial deal flow which includes a health insurance company in Uganda, a life insurance vehicle in Pakistan, and a South African insurer that provides cover for individuals usually excluded from cover because of pre-existing illnesses.
Background notes:
EIB Microfinance Activities in the ACPs
The European Investment Bank (EIB) is active in Africa, the Caribbean and the Pacific (ACP) under the Cotonou partnership agreement. EIB loans and investments in these regions aim to reduce and eventually eradicate poverty and encourage sustainable social and economic development.
Microfinance is an important foundation for poverty alleviation and supports other development efforts, including the Millennium Development Goals. The EIB’s microfinance activities are an important element of its financing operations in the ACPs, providing access to financial services which is fundamental to protecting and empowering the poor.
EIB commitments for microfinance projects in ACP countries stand at EUR 90 million in debt and equity. The Caribbean region has been the largest microfinance beneficiary to date, accounting for EUR 54 million or almost 60% of total microfinance commitments in ACP countries. Since 2005, however, the geographical focus of EIB microfinance operations has shifted to Africa where the EIB has participated in 8 microfinance operations to the value of EUR 27 million.