Embedding insurance into loans boosts financial resiliency and improves healthcare access for Africa’s unbanked population while simultaneously de-risking lending portfolios, according to a new report by Turaco, a pan-African insurtech.
- Partnering with Turaco, One Acre Fund gave borrowers the option to embed insurance into its loans to protect against health emergencies that can impact repayment.
- The financial outcomes were notable among the insured group with 65 per cent of borrowers reporting their loan repayments are a lesser burden, 60 per cent decrease in default rates and 18 per cent increase in loan repayment times.
- Beyond financial resilience, borrowers saw a marked improvement in health and overall well-being. Borrowers reported that their health visits increased by 66 per cent.
“Without insurance, families across Africa are vulnerable to devastating catastrophic health risks, which can ruin them financially. This also puts lenders at greater risk of loan defaults. By embedding insurance into loans, both borrowers and lenders are protected. We are dedicated to improving the financial resilience of low-income families, and helping lenders get repaid is a key way to get that done,” Ted Pantone, Turaco CEO/founder said.
There was nearly an even breakdown in the utilization of claim payouts among medical expenses [37 per cent], household expenses [36 per cent], and repaying family and friends for healthcare costs [31 per cent], illustrating the flexibility of insurance to cover immediate expenses borrowers face in light of a financial shock. Additionally, 63 per cent of borrowers reported reduced stress levels, as they spent less time worrying about money.
With 85 per cent of jobs found in the informal sector in sub-Saharan Africa, the vast majority of adults lack access to employer-based insurance and must pay out-of-pocket for healthcare expenses, putting them at risk of financial ruin due to costly medical bills. According to the World Health Organization, 14 million low-income households across the continent are plunged into poverty every year due to out-of-pocket health expenses.
“We believe that farming is the engine of Africa’s development. We are on a mission to help boost food security and build pathways to prosperity among the 50 million farm families in sub-Saharan Africa. Integrating insurance into loans allow smallholder farmers to focus on growing their crops without the fear of getting derailed by unexpected medical bills,” said Hepsiba Chepng’eno, One Acre Fund’s Director of Product Strategy.
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