A look at how micro-finance and micro-insurance tools can be used in developing countries to drive and support safer building construction.

1. Homeowner-Driven Model
Contract
income
Grants
Homeowner-Driven
w/ Financing Model
Financial
Institution
/Partner
Homeowner/
Customer
Donor-Driven Model
Contract
income
Grants
• Traditional post-disaster model
• Transitional housing
• Little to no homeowner involvement
o Least satisfied
o High cost per unit
• Little to no capacity building
• Most reliant on donor funds
• Proven pre- and post-disaster model
• Permanent housing/retrofitting
• Homeowner involvement
o Most satisfied
o Lower cost per unit
• Capacity building
o Technical training
o Community outreach
o Resource development
• Combination of donor and homeowner
funds
• Emerging pre and post disaster models
• Permanent housing/retrofitting
• Homeowner involvement
o Bundled financing with technical assist
o Innovative economic incentives
• Capacity building
o Technical training
o Community outreach
o Resource Development
• Least reliant on donor funds
Financing Earthquake Resistant Design
and Construction: 3 Models
Homeowner
/Customer
Least Sustainable Most Sustainable
Seed
Capital
CONSTRUCTION/RECONSTRUCTION/RETROFITTING/TECHNICAL ASSISTANCE

2. Sustainable Finance Models
Micro-
Finance
Home Improvement
Loan
Loan contingent on
technical assistance.
Micro-
Insurance
Catastrophe
Insurance
Payout tied to
technical assistance.
Joint
Venture (JV)
Partner
Discounted Building
Supplies
Discounted building
supplies are reward
for participating in
govt. program.
Institution Product Example Bundling Example

3. Advantages of Sustainable Finance Models
Microfinance
Micro-
Insurance
Joint Venture
•Institutions are in operation and addressing
the financial needs of the poor;
•Distribution channels exist;
•Focus is already on keeping costs low.
•Market size is huge and largely untapped;
•Products and distribution channels can be
tailored to the customer;
•Viability can be enhanced by public and
private partnerships.
•Joint ventures with retailers and service
providers offer ready-made distribution
channels and customer base;
•Joint ventures create opportunities for
innovative economic incentives (e.g.,
customer reward programs, product
discounts, etc.).
Model Advantages

4. SogeSol MICRO-FINANCE Model in Haiti
Homeowner
Build Change
Technical Assistance
SogeSol
Micro-Finance
Bank

5. MICRO-FINANCE Model
in Zambia
CETZAM
Micro-finance Bank
Micro-irrigation
Technology
Suppliers
FARMER
Customer
Farmer-driven:
Farmer applies for loan from bank; bank
links loan to purchase of micro-irrigation
technologies and technical assistance.
Farmer uses technology to increase
income generation and repays bank loan.
Lessons Learned:
•Loan officers need to understand
customer-specific issues;
•Loan products should be tailored to
customer needs;
•Borrowers need training about
borrowing.

6. MICRO-INSURANCE Model
EARTHQUAKES
AND OTHER
NATURAL
DISASTERS
Micro-Insurance
Products
for
Households
Products
for Lenders,
Governments
Prevention
Linked with Micro-
Insurance
1) Risk Analyses
2) Risk reduction
activities
3) Contingency Planning

7. Micro-Insurance Products
• Many product examples to choose from but
possibilities are endless
• Innovation and tailoring are critical
• Policies/certificates can be issued privately,
publicly, or in some combined fashion
• Linkage with risk assessment and risk reduction
encourages better planning and prevention
• Quick payouts break the cycle of poverty
perpetuated by natural disasters

8. MICRO-INSURANCE Model
in the Caribbean
Lending
Institution
Micro
Insurance
BROKER
• Issues Loan Portfolio
Cover (LPC) to Lending
Institution
• Insures again risky
lending
Public/Private
Partners
SEED $
EDUCATION
• Caribbean
Catastrophe Risk
Insurance Facility
(CRRIF)
• Munich RE
Homeowner-driven
home improvement
loans

9. JOINT VENTURE Model:
Government and Insurance Provider
Ethiopia (HARITA)
Household
Insurance
Provider
Government
The government of Ethiopia
launched a Productive Safety Net
Program (PSNP) in 2005 w/ funding
and support from international
donors. An optional work for micro-
insurance benefit was added in 2009
as a pilot project.
The in-kind premium payment model is
financed by the Ethiopian government and
requires continued funding from
international donors. Micro-insurance
coverage is provided by Nyala Insurance.
Nyala Insurance is reinsured by Swiss Re.
Any Household in the
government’s
Productive Safety Net
Program (PSNP) has
the option to
purchase disaster-
related insurance with
either cash premiums
or “in-kind” activities
related to
vulnerability
reduction.

10. Joint Venture Concept for Build Change
Brick-Making Co-Op; Padang, Indonesia
Brick-
making
Co-op
Microfinance
Institution
Government
The People’s Business Credit
(KUR) program in Indonesia
improves livelihoods and reduces
poverty by helping empower
micro/small businesses. KUR
loans are issued by partner banks,
guaranteed by the government,
and have a fixed interest rate of
less than 1%.
Approximately 33 banks execute KUR
loans, including Bank Mandiri and BNI
in Padang.
• Calculate risk
reduction associated
with improved brick
quality.
• Quantify savings to
microfinance
institution/govt. for
reduced risk.
• Hire Build Change to
ensure brick quality
through education
and technical
assistance.

11. JOINT VENTURE (Service Provider)
Model in Colombia
Micro-
Insurer
(MAPFRE)
Electric
Company
(CONDENSA)
CUSTOMER
Home-
owner
DRIVEN BY ECONOMIC INCENTIVE
•Electric Company rewards Homeowner
with easy access to low cost insurance.
•Homeowner purchases insurance
through existing electric company billing
channels.
•Micro-insurance Provider issues policy,
manages payouts, and shares profit with
Electric Company
LESSONS LEARNED
•Joint Venture partner types with proven
success: micro-insurance, reinsurance,
banks, retailers, mobile phone companies,
electric companies, climate investment
funds, government agencies.
•Venture structure should be tailored to
desired outcome (e.g., layaway
opportunities, customer reward
programs, micro-insurance distribution
networks).