Cambodia's finance sector should increase insurance accessibility to its smallest lenders to help protect against indebtedness at times of disaster, an industry expert said at a conference in Phnom Penh yesterday.

Speaking at the Hotel Cambodiana to an audience of industry representatives on rural entrepreneurship, Jaime Aristotle Alip, founder and managing director of the Center for Agriculture and Rural Development Mutually Reinforcing Institutions, said Cambodia’s microfinance institutions (MFIs) should move to the “next level” and offer more micro-insurance options to help protect micro-businesses from the burdens of loan default.

“If something happens to the entrepreneur and if they are insured for their life, then there will be benefits given to the family,” he said.

Micro-insurance products can help to cover a part or all of someone’s loan repayments in the event of death or loss of earnings from injury or disaster. MFIs partner with insurance providers to sell products to MFI loan customers.

Alip said Cambodia has regulations in place to support micro-insurance, it is just a matter of MFIs developing the right products.

MFIs are beginning to catch on, with many running pilot programs.

Samic Microfinance has partnered with the Measure for Economic and Accelerated Development for All (MEADA), to offer micro-life insurance. It began as a pilot project in 2007 with 1,300 clients and has grown to over 19,700.

Through a MEADA loan-protection product when a client takes a loan of $1,000, they pay a premium of $14 to $15 per year. In the event of death or a serious accident all the client’s loan repayments are covered.

Khem Sary, executive director of MEADA, said that micro-insurance helps to spread risks and makes customers feel less vulnerable. “It is time for MFIs to develop this program for their clients,” he said.

VisionFund Cambodia is in the process of working with Prevoir Kampuchea Micro-life Insurance on health insurance products.

Angkor Mikroheranhvatho Kampuchea is working with Forte Insurance and plans to introduce a product as early as next month.

National Bank of Cambodia director general Chea Serey agreed that insurance can play an important role in protecting micro businesses against loan default and also during natural disasters.

Serey cautioned, however, that with an industry in its infancy there were stringent standards that need to be applied to organisations looking to sell insurance.

“Before allowing banks and MFIs to act as agents, the NBC closely examines these institutions’ (insurance providers) capability to absorb such additional burden from the risk management, consumer protection, the operational and human resource perspective,” she said.