The Assessing of perspective on the Micro Insurance Market in Cambodia

Dr. Kao Kveng Hong* Date: October 01, 2013

ABSTRACT
While the post-war years have witnessed significant efforts by the public and private sector in Cambodia to provide the poor with access to facilities for good livelihood, the Cambodian poor remain largely un-served by effective insurance. Demographics show that the population is growing rapidly with the majority earning less than one US dollar per day. Consequently, they cannot cope with the inherent risks in a developing country such as health risks, property risks and disasters. The existing public healthcare structure often lacks the capability to cope with the national demand for healthcare. Donors and the government have made significant investments in public services, but healthcare infrastructure is heavily biased towards the private sector. Since 2005, the insurance industry in Cambodia has been liberalized to foster the development of the private insurance sector, and third party administrators have been licensed to handle administration within the healthcare industry. The Cambodian Health Committee (CHC) was licensed by the National Bank of Cambodia in 2005 to operate as a microfinance institution. Since then, CHC has contributed to poverty alleviation and hence improved the living conditions of Cambodian destitute. It has also provided financial services and micro insurance products to rural as well as urban poor people at the most affordable prices while ensuring its long-term sustainability. To achieve its objectives, CHC has developed a variety of micro insurance products. Because the insurance scheme is new in Cambodia, this study aimed to assess readiness of CHC-Limited clients to initiate Micro Insurance products. The clients expressed their readiness to embrace the products and services presented in the package. The management staffs of CHC limited were also ready to implement the micro insurance program in Cambodia. But there is a need of proper education so that people will be familiar with insurance programs and the working of these programs. The clients of CHC limited should be informed clearly on their roles, commitments and expectations. The insurance programs should be started in the country on a small scale, and later on should be introduce on large scale. There is a need to expand the operational network of CHC Limited to reach out to more clients across the country. The products and services of the insurance programs of CHC limited should be directly related to the clients and meet their requirements. The role of micro insurance should be publicized through direct contact and the mass media. Finally, CHC should have different approaches of insurance program, which would provide securities to low-income households.

BACKGROUND OF THE STUDY

Micro-insurance is one of the approaches that intend to provide securities to low-income households. Poor households are especially vulnerable to work, both in the event of natural calamities as well as more regular occurrences of illness and accidents. Micro Insurance aims [Type text]

to use human knowledge to help people at risk and that includes people in areas in which there is no particular economic interest. This is especially the case with poor people in developing countries. Microfinance Institutions (MFIs) have played an active role in reducing or protecting against this vulnerability by providing credit for increasing income earning opportunities and by providing saving services to build up resources that can be drawn down in cases of emergencies. However, such events still translate into crisis for many poor households and erode the economic gains they have made as clients of microfinance programs. Credit and saving services are inadequate when households expose to emergency expenses beyond their means. Insurance can be served as a promising response to such client needs. Today microinsurers are providing different forms of insurance for life, health, property, disability, agriculture (Crop) etc. to poor households. Micro-insurance is an important work management, which low-income households use to offset crises. However, the fact that the households have low income by definition places them in highly vulnerable positions. To offset this vulnerability, and to improve coping capacities by providing additional safety nets, it may be possible to develop a range of microinsurance product to meet market needs. In any given society, the interplay of several variables influences the socio-economic life of the people. Cambodia is not an exception as it falls under the category of developing countries undergoing a transition period in almost all aspects of the economy as an aftermath of the genocide which caused a drastic decimation of the population with a severe impact on peoples livelihood. National and international efforts have been made to restore the country to its past glory. Unlike economically developed countries, the concept of insurance is somewhat a new phenomenon in Cambodia; hence, it is not well-understood and majority of the population are poor. Not only does majority of the population battle with poverty, the impoverished face particularly high levels of risk from events such as death, flood, illness, crop failure, among others. These indigents are the most vulnerable and the least able to withstand the impacts of these risks. Most families have little or no savings, and there is no access to credit as well as to all insurance products. In the event of illness or the loss of a family, such families have sunk deep into very desperate living conditions. This has brought about numerous consequences on the survivors. Micro Insurance which is the provision of insurance services to the poor and workers in the informal sector is a new and emerging field, especially in developing countries. Poverty and vulnerability continue their threat on many Cambodians, so alleviation of these problems has become a primary concern of the government. In this circumstance, the importance of Micro Insurance as a means of poverty alleviation cannot be over-emphasized. So far, the need to provide protection for the destitute has been identified, and it is hoped that with proper awareness, the poverty-stricken population gradually overcomes the impact of their predicament. CHC-Limited is one of the Micro Insurance providers in Cambodia and has been offering Micro Insurance services to clients. CHC-Limited has observed that certain issues need to be considered for the smooth implementation and success of the Micro Insurance initiative in Cambodia. First is to create awareness as the people are yet to embrace and appreciate the benefits of Micro Insurance. Other issues include the determination of clients readiness, CHC-Limited readiness, risk of products screening, authorities approval, and preferred Micro Insurance products.

RESEARCH PROBLEM
In Cambodia, there are few MFIs or micro-insurance operators offering microinsurance. The pilot projects of GRET that conducted the ''Health-Insurance Pilot Program" [Type text]

and the two licensed micro finance institutions, CHC-Limited and Vision Fund Cambodia provide insurance projects covering loans and life protection. All other insurance companies conduct services commercially. It means that their operation focuses on the commercial orientation such as operating on vehicles-insurance, property and liability insurance, Engineering insurance...etc. Micro Insurance is still far from those kinds of services. Even under this atmosphere and practice, the Ministry of Economy and Finance, the supervisory body institution, has yet to implement laws/ regulations relating to the micro-insurance except a few regulations for commercial insurance companies only. In the process of this research, it was not easy to determine the experience of Micro Insurance Institutions in their local practice in areas such as: services operation, activities, and legal frameworks. CHC-Limited itself, found it hard to provide the best services at the commencement stage without the external support from RIMANSI members or CARD-MBA which have been operating in the Philippines. However, there are operational differences between Cambodia and the Philippines not only in legal aspects but also among the people and their culture sensitivities. The results of these experiences and the attempt to find a lasting solution to the predicament of needy Cambodians have posed a problem which this research tried to answer.

RESEARCH OBJECTIVE
The objectives of this research are to: 1. To assess the perceptions of CHC-Limited clients on micro-insurance in terms of: (a) products (b) benefits (c) premium (d) requirements. 2. To assess the perceived readiness of CHC-Limited on loan protection insurance. 3. To find out the micro-insurance products that fit the perceived preference of the clients. 4. To provide recommendations for designing a micro-insurance program based on the perceptions of current clients and government policy and / or regulations.

LITERATURE REVIEW The Concept of Micro Insurance

Micro Insurance can be defined in countless number of ways. Some of the simple definitions can be risk-pooling instrument for the protection of low income households, insurance with small benefits, insurance involving low level of premium, or insurance for people working in the non-formal economy. According to IRDA, Micro Insurance is a term increasingly used to refer to insurance characterized by low caps, low economic value or low coverage limits, sold as part of a typical risk-pooling and marketing arrangements, and designed to service low-income people and businesses not served by typical social or commercial insurance schemes.6 The term micro in this definition, refers to the small financial transaction that each insurance policy generates. For example the Micro Insurance Regulations, issued in 2005 by the Indian Insurance Regulatory and Development Authority (IRDA) adopted this definition in explaining micro-insurance products as those within defined (characteristically low) minimum and maximum caps. The IRDAs characterization of micro-insurance by the product features is further complemented by their definition for micro-insurance agents, those [Type text]

appointed by and acting for an insurer, for distribution of micro-insurance products (and only those products). In another definition, Churchill (2006) defined Micro Insurance as a financial arrangement to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. Preker et al. (2002) describe the characteristic features of Micro Insurance. They assert that Micro Insurance is synonymous to community-based financing arrangements, including community health funds, mutual health organizations, rural health insurance, revolving drugs funds, and community involvement in user-fee management.7 Most community financing schemes have evolved in the context of severe economic constraints, political instability, and lack of good governance. The common feature within all, is the active involvement of the community in revenue collection, pooling, resource allocation and, frequently, service provision. From another perspective, Dror (1999) defines Micro Insurance as the use of insurance as an economic instrument at the micro (i.e. smaller than national) level of society.8 Micro Insurance functions on the concept of risk pooling, and likewise, regardless of its small unit size and its activities at the level of single communities. Micro-insurance integrates multiple small units into larger structures, creating networks that enhance both insurance functions (through broader risk pools) and support structures for improved governance (i.e. training, data banks, research facilities, access to reinsurance etc.). This mechanism is conceived as an autonomous enterprise, independent of permanent external financial lifelines, and its main objective is to pool both risks and resources of whole groups for the purpose of providing financial protection to all members against the financial consequences of mutually determined risks.9 Micro Insurance, as defined in the preliminary donor guidelines, is the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. The three words low-income people make a big difference. Micro Insurance is one of several risk-management tools available to low-income households. Micro Insurance, too, has more than one face: a new market for the private sector, and social security to workers in the informal economy and others classed as poor. According to International Association of Insurance Supervisors (IAIS), Micro insurance is insurance that is accessed by low income population, provided by a variety of different entities, but run in accordance with generally accepted insurance practices. Importantly this means that the risk insured under a micro insurance policy is managed based on insurance principles and funded by premiums.10

Related Literatures and Studies: Micro Insurance in Diaspora

The United Nations University Institute for Environment and Human Safety warned that in 2010, we must expect there to be 50 million environmental refugees11. Even before 2010, the world had seen the highest number of natural disasters, including the largest number of destructive floods, devastating earthquakes and catastrophic hurricanes ever recorded in a single year. The absence of disaster-prevention schemes and a lack of awareness were key factors underlying the many catastrophic effects we had seen not only after the tsunami at the end of 2004. The vulnerability of poor people, which had been extremely high, kept on sky-rocketing day by day. Despite global efforts, the knowledge and resources required to [Type text]

take the necessary precautionary measures were still scarcely available. As weather-related natural disasters increase, so does the vulnerability of the poor. We need to build inclusive financial sectors for impoverished communities to help them better cope with risks. In any circumstance, it is mostly the poor who are affected by these natural disasters.

Micro Insurance complements credit and savings and can provide a solution for poor people to better cope with their main risk, which is in most cases related to the severe sickness or even death of the person providing the family's income. Access to insurance enables people to look after their farms or concentrate more on developing their businesses while mitigating other risks to life, health, property or the ability to work.

2.3.2 Most Important Characteristics That Qualify Insurance as Micro

In order to qualify as micro, an insurance policy must possess these important characteristics listed below. 1. It must relevant to the risks of low-income households. 2. It should be as inclusive as possible. 3. It must offer affordable premiums payable in small amounts. 4. There should be provision for small benefit amounts. 5. It should be clearly defined with simple rules and restrictions. 6. It must have easily accessible claims documentation requirements. 7. It must provide fast payment of benefits. 8. There should be specially adapted client education. 9. It should create strategies to overcome the wariness of customers. 10. Micro Insurance attitude should manifest: to help people manage basic risks12.

Understanding and Responding to Risk and Vulnerability

concept of include: One thing the poor do have in common is that most of them dont understand the insurance. They are familiar with risk though, and their ways of coping with risk

retaining risk (self-insurance); sharing risk (informal group-based mechanisms); Transferring risk (social protection). Micro Insurance is likely to complement, rather than displace, existing ways of coping with risk. Insurance education, which aims to change perceptions and financial practices through knowledge, skills and attitudes, must use local concepts and skills. Modern social security has not succeeded for the poor in developing countries, and private insurance is virtually absent from the overall social protection. But the informal economy is the hidden wealth of developing countries; the low income target market holds great potential for insurers. Micro Insurance is also a huge opportunity for reinsurers in the coming decade.

Structures, Focus and Services of Micro Insurance Institutions

According to Sebastian Schwiecker, Micro Insurance Institutions have different ownership structures, focus and services as follows: Ownership structures of MIIs can be of almost any type imaginable. Being a part of the Micro Finance Institutions, they can be government owned like the Rural Credit Cooperative in China,; member owned, like the Credit Unions in West Africa; socially minded shareholders, like many transformed NGOs in Latin America; and profit-maximizing shareholders, like the Micro Finance Banks in Eastern Europe.13 Focus of some providers is [Type text]

exclusively on financial services to the poor while others are focused on financial services in general, offering a wide range of financial services for different markets. Organizations providing financial services to the poor may also provide nonfinancial services. These services can include business-like development services like training and technical assistance or social services such as health and empowerment training.14

2.3.5 Micro-insurance Products

Like regular insurance, Micro Insurance, may be offered for a wide variety of risks. These fall under two categories: Health risks (illness, injury, or death) Property risks (damage or loss). Different kinds of micro-insurance products exist to address these risks. They include among others: crop insurance, livestock/cattle insurance, insurance for theft or fire, health insurance, term life insurance, death insurance, disability insurance, insurance for natural disasters, etc.

2.3.6 Challenges of Micro Insurance

One of the greatest challenges for micro-insurance is the actual delivery to clients. Methods and models for delivering products and services vary according to the organization, institution, and provider involved. Generally, there are four main methods for offering microinsurance the partner-agent model, the provider-driven model, the full-service model, and the community-based model. Each of these models has their own advantages and disadvantages.

Partner agent model: A partnership is formed between the micro-insurance scheme and an agent (insurance company, microfinance institution, donor, etc.), and in some cases a third-party healthcare provider. The micro-insurance scheme is responsible for the delivery and marketing of products to the clients, while the agent retains all responsibility for design and development. In this model, micro-insurance schemes benefit from limited risk, but are also disadvantaged in their limited control. Full service model: The micro-insurance scheme is in charge of everything; both the design and delivery of products to the clients, working with external healthcare providers to provide the services. This model has the advantage of offering microinsurance schemes full control, yet the disadvantage of higher risks. Provider-driven model: The healthcare provider is the micro-insurance scheme, and similar to the full-service model, is responsible for all operations, delivery, design, and service. There is an advantage once more in the amount of control retained, yet disadvantage in the limitations on products and services. Community-based/mutual model: The policyholders or clients are in charge, managing and owning the operations, and working with external healthcare providers to offer services. This model is advantageous for its ability to design and market products more easily and effectively, yet is disadvantaged by its small size and scope of operations. 15

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The principal challenges faced by Micro Insurance could be practically specified under the following: Premium income is low and administration costs are relatively high these are the main reasons why commercial insurers are still reluctant or have not taken more interest in this market. Reaching the people directly is difficult, however. Moreover, the benefit of insurance as a means of saving is often misinterpreted since people do not understand why the premium is not reimbursed if no claims are made. There are organizational problems that need to be solved, such as how to build up the infrastructure and how to reach low-income people, especially the illiterate and persons in remote areas. Another issue is how the cost of handling such a large number of small contracts could be reduced. The issue of legislation to facilitate the insurance of poor people and to protect them against fraud.

Challenges of Extending Insurance to the Low-Income Market

Challenges to the provision of social security to informal and other poor workers include: no mechanism to systematically reach informal workers; workers are unorganized; no employer contribution; the poor may not be able to afford the full cost; insufficient government resources to cover recurring expenses; and inadequate infrastructure to provide appropriate services (e.g. healthcare).

Global and Regional Setting

In developing countries there is great difficulty in establishing insurance markets that in an efficient manner provides insurance for both the high and low income segments under the same scheme. Focus tends to be on the high income segment only, thus leaving the most vulnerable uninsured. Hence, micro insurance has emerged as a means of providing insurance to this vulnerable low income segment. This segment can be defined as that which is being ignored by the commercial insurance companies according to Geneva Papers on Risk and Insurance. Effectively, micro insurance is a phenomenon that is mainly found in developing countries. Services that poor people need and demand are the same types of financial services as everyone else. The most well-known service is non-collateralized micro loans delivered through a range of group-based and individual methodologies. The menu of services offered includes others adapted to the specific needs of the poor, such as savings, insurance, and remittances16. The type of services offered is limited by what is allowed by the legal structure of the provider. Non-regulated institutions are not generally allowed to provide savings or insurance. According to Ledger wood, there are three sources of services: Formal Providers are sometimes defined as those that are subject to not only general laws but also for specific banking regulation and supervision. These include development banks, savings and postal banks, commercial banks and non-bank financial intermediaries17. [Type text]

Formal Providers may also be any registered legal organizations offering any kind of financial services. Semi-formal Providers are registered entities subject to general and commercial laws but are not usually under bank regulation and supervision. Some examples of these are Financial NGOs, Credit Unions, and Co-operatives. Informal Providers are nonregistered groups such as rotating savings and credit associations (ROSCAs) and self-help groups.18 There are numerous ways of providing a micro insurance service and also decisions must be made concerning whether the scheme should be public, hence provided for by the government, or if instead it should be provide by the private sector. Other issues in connection to establishing a micro insurance scheme are if it should be an up scaling or a downscaling. An up scaling would mean formalizing informal insurance scheme, i.e. non governmental organizations are allowed to enter the market and provide the product to low income segment. The other alternative, downscaling, is to have commercial insurance actors provide insurance to low wage segment. However, due to the low, or even negative, profit within micro insurance market commercial insurance actors are less likely to be attracted. It must be considered that commercial actors are obliged to maximize share value and this is not something that is easily done when entering the market for micro insurance. Nonetheless, providing micro insurance can be profitable; it is basically a matter of the sheer number of policy holders that an actor can attract. Considering that a majority of the worlds population live in poverty the issue of small scale operation should not pose as an obstacle. However, the difficulty lies in establishing a scheme that will function as intended whilst at the same time obliging to the rules and regulations covering the insurance markets of the world. Hence, in order for commercial insurance actors to take on micro insurance policy holders, they mush adapt to new rules and regulations since these tend to differ from the actors home and other market in the developed parts of the world. Micro insurance schemes can be found in numerous countries around the world and in almost as many forms. However, they all have the common denominator that they are all found in developing countries and most commonly run by an organization or MFI from the develop world. The most number of organizations working with micro insurance is found in Africa and Asia.

2.3.9 Demand for Micro Insurance

It is pertinent to understand the demand for Micro Insurance because in the absence of market research, Micro Insurance provided has gained limited attention to the match between products and consumer preferences. Consequently, there has been the misplacement of priorities in the supply of adequate products to the market. However, Micro Insurance services are now available in most developing countries.

National Setting
Cambodia is in many ways still a country in transition. The social and economic infrastructure of the country was virtually destroyed by the Khmer Rouge. After the decades of internal conflict and isolation, Cambodia today is one of the poorest countries in Asia Pacific Region. More than 30% of its 14 million citizens live below the poverty line, specifically earning less than one US dollar per day. The signing of the Paris Peace Accord 1991 paved the way for reconstruction. The foundations for growth and developmentphysical, social, human and economic- are slowly being restored. The World Bank reports that Cambodias economy is showing resilience in spite of the challenging international economic environment. Economic growth in 2001 was estimated at 6.3 percent, driven by an expanding tourism sector and robust garment exports. In 2001, there was nearly zero inflation, and in 2002, inflation continued to be low.

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Budgetary performance improved in 2001, with modest increase in revenue and also a modest reorientation of public spending towards the critical social sector.19 Cambodias economy showed unexpected strength in 2005 and 2006 with GDP growth of 13.5 and 10.8 percent, respectively, an expansion of international trade, and stable fiscal and monetary performance. Consumer price inflation decreased significantly, from 6.1 percent in 2005 to about 4.7 percent in 2006. For the year 2008, further GDP growth was expected from agriculture, garments, and tourism industries. The narrow base of the growth remains a concern, although Cambodia had made efforts to diversify its economy through small and medium enterprises. The micro finance institution loan portfolio grew by about 71 percent to US$90 million in 2006, while credit to the private sector as a whole expanded 52 percent. Due to sustained growth over the past ten years, the population living below the poverty line fell to 35% in 2004, from 47 percent in 1994. As private wealth has increased, so had demand for financial services20 Moreover, Cambodia moved up nine places to 131st out of 177 countries between the 1998 and 2005 United Nation Development Program (UNDP) Human Development Report, and its human development index (HDI) increasingly rose from 0.540 in 1995, to 0.547 in 2000, and 0.598 in 200521. These are significant achievements, but the country still faces a formidable array of development challenges. The Royal Government of Cambodia (RGC) has not had sufficient resources to invest adequately in health and education or basic physical infrastructure. While poverty has declined moderately, most poverty reduction occurred in Phnom Penh whereas majority (90 percent) of the poor live in rural areas. Cambodias recent history of civil unrest has also left the country with a legacy of disadvantaged groups, including internally displaced people, former refugees, war widows, orphans, former child combatants, and people disabled during the wars or by land mines.

The prevalence of child labor, the growth of the commercial sex industry, and the trafficking of women and children illustrate the difficulties that poor and vulnerable groups especially women face in securing a more sustainable livelihood.

Financial Services for Cambodias Poor

Cambodia has a population of 14.2 million or about 267 thousand families, 85% of them are living in rural areas. An estimated 36% of the populations live below the poverty line. About 286,000 clients are serviced by commercial banks and 1 million families have received credit from micro finance institutions. Most (70%) credit is short term or less than one year. Long term finance for investments in capital goods is virtually non-existent. It is estimated that total demand for credit by micro and small business entrepreneurs could amount to US$500-700 million. Only 55 to 65 % of this is provided by existing financial service providers. The financial sector is still underdeveloped, lacking banks and limited by a weak rural finance network. Most commercial banks and specialized banks operate only in Phnom Penh and the major province towns. Majority of the rural population has almost no access to formal forms of financial services22.

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Among the banks and the banking system, there is significant liquidity but limited lending taking place. Cambodia is predominantly a cash economy and bank loans represent less than 12% of GDP. Beyond the formal banking system, related financial activities and institutions are active both formally and informally. In the formal financial system, MFIs also feature prominently as the active lenders. The RGC recognizes that the banking system has not been able to address the demand for finance from the poor, to smoothen consumption, build assets and develop microenterprises. This has been expressed by most obvious manifestations of poverty, such as insufficient household income, lack of product assets and inaccessibility of affordable financial services 23. Expert estimate that there is large unmet demand for microfinance, both to extend more credit as well as to introduce other financial services. There is also a growing need for small and medium enterprises (SME) finance and increasingly, consumer finance. To address the need for a diversified, competitive but prudentially sound financial system, the RGC has formulated a long term strategy to develop the financial sector in Cambodia. The Financial Sector Development Plan (FSDP) for 2001-2010 and the Financial Sector Development Strategy (FSDS) 2006-15 pursue the overall objective of supporting the development of a sound market based financial system to support resource mobilization, effective financial resource allocation, and broad based sustainable economic growth24.

The Insurance Sector and the Emerging Micro Insurance Industry

In Cambodia, non bank financial service is essentially limited to insurance. In the years since the adoption of the FSDP 2001-2010, much progress has been made in developing the legal and regulatory framework for insurance. However, the growth of insurance industry has been modest and much remains to be done for the sector to reach its potential as a major component of the country economic life.

The Insurance Sector

The insurance industry in Cambodia is still in its embryonic stage. In 2001, the only insurance company operating in the country was the Cambodia National Insurance Company (CAMINCO), a state-owned monopoly. There are now two (2) privately-owned companies writing property and casualty insurance policies, and a domestic reinsurance company, the Cambodia Re which was organized as a state-owned company. Similarly, CAMINCO is in the process of being privatized. Insurance companies in Cambodia are young and unsophisticated from an international perspective. The total premium revenue reached only US$ 12.5 million in 2006, although industry growth has been steady at 11-13% in the last three years.25 Owing to the small size of the local market and the relatively limited capital base, much of the insurance that is placed in Cambodia must be reinsured, to insure that each companys net retention on any single risk is not excessive in comparison to the companys net worth. There is no life insurance in Cambodia26. Until recently, only a few non life insurance products such as property, health, marine cargo, and motor vehicle insurance had been offered to a limited scope of clients, mostly foreign investors and international organizations. In 2002, compulsory insurance was introduced, such as third party liability motor vehicle insurance, contractors general liability, and passenger transportation insurance. All licensed insurance companies are operated under the supervision of the Ministry of Economy and Finance (MEF). The insurance Law of Cambodia (Preah Reach Kram NS/RKM/0700/02) was adopted on 25 July 2000. Subsequently, the Sub Decree on Insurance [Type text]

No.106 ANKR was issued on 22 October 2001 and Prakas on the Licensing of General and Life Insurance Companies issued by the MEF on 17 January 2007. The regulation demands insurance companies to have a registered capital of at least US$ 7 million, obtain a license from the MEF, maintain a deposit (10% of registered capital), maintain a solvency margin of 50% of the registered capital, and pay license fee, taxes and a levy (0.5% of gross premium) to the government.

While the general framework of the regulatory system is in place, what business they can or cannot engage in is not clear, as the law still leaves many areas to be fleshed out or improved to give transparent guidance to insurance providers and clients. The insurance law establishes the legal basis for defining supervisory authorities and industry business, but some prudential norms (i.e., solvency margin and minimum capital requirements) need to be redesigned as they are unrealistic. For example, the minimum capital requirement for a full-fledged insurance company, set at US$ 7 million, is too high to induce private insurance companies given the market size. Further, detailed supervisory framework and prudential regulations need to be developed to clarify the roles and powers of the regulator, and institute measures for dealing with troubled companies and corporate governance27. A pension system is currently being developed in Cambodia, pursuant to the Law on Social Security that was passed in 2003. The law required all formal sector workers to participate in social security program that provides benefits to survivors in the event of premature death of a participating worker, as well as workers compensation and retirement benefits. However, the regulations necessary to implement this law is yet to be issued, to thresh out details on the rates of contributions, the sharing between workers and employers, and the formula for the workers benefits. Further, there is as yet no legal framework for voluntary personal or corporate pension plans in Cambodia28.

A Fledging Micro Insurance Industry

Around the world, insurance is offered to the poor by the government, MFIs, commercial insurers, community organizations, credit unions and cooperatives. Microfinance institutions are in a unique position to provide micro insurance as they have extensive networks and are already offering financial services to poor clients. They have grassroots information about their clients that is crucial in developing appropriate products and delivery mechanisms. They have also built an infrastructure and acquired skills and capabilities that will make it less costly to deliver micro insurance products. In addition, the problems of adverse selection and moral hazard may be reduced with the screening mechanisms and social networks that MFIs have already set in place. It is, thus, not surprising that many pioneering attempts to provide micro insurance have been closely linked to micro finance programs and MFIs. MFIs operating in Cambodia, as in other countries, have determined that their clients have insurance needs, albeit on a small scale. From a developmental perspective, extending protection to the poor to help them cope with catastrophic events is a logical progression towards their empowerment. From the viewpoint of the credit granting institution, it also makes sense to provide a measure for insuring the ability of poor borrowers to repay their loans. Thus, pilot projects of health insurance, at a micro level, have been undertaken in [Type text]

Cambodia and met with success. Foremost of these is the GRET-SKY Health Insurance Project29, a community based health insurance (CBHI) program supported by the French NGO Group de Research et dEchanges Technologique (GRET) since 1998. GRET-SKY started as an experimental health insurance scheme to complement the micro credit activities of AMRET, an MFI in Cambodia, while GRET-SKY has covered 4,392 individuals or 917 households as of 200530. Several NGOs and MFIs have also developed their in-house CBHI programs, prompting the Ministry of Health to regulate CBHI. The Department of Planning and Health Information (DPHI) of the MOH reported that as of May 2008, nine (9) CBHIs existed in Cambodia, although most had small scale operations and were still in the pilot stage. Two licensed MFIs in Cambodia have also ventured into micro insurance in the recent years. These are CHC Limited (Micro Finance Institution) and Vision Fund Cambodia (VFC). Other MFIs in Cambodia have expressed an interest in developing their own micro insurance in Cambodia, a number of institutions with initial plans to offer micro insurance products have opted to wait for the regulations to be issued by the MEF.

Local Setting
The Cambodian Health Committee (CHC) is a local NGO that provides health care services to the poor in Cambodia, particularly those suffering from tuberculosis (TB) and HIV/AIDs. It started a microcredit program in 1994, after recognizing the link between poverty and disease, and the necessity of the monetary support for health care of those afflicted. The credit and saving program was later transformed into a separate organization, the CHC Limited (Micro Finance Institution) in July 2005, as mandated by Cambodia Laws. CHC Limited received its license as a micro finance institution in September 2005. In the course of implementing its credit and saving programs, CHC-Ltd came to realize that risk protection for poor households in Cambodia is a development imperative that needs to be part of any comprehensive approach to poverty reduction. Clearly, there is a need to protect their clients against losses and asset depletion occasioned by catastrophic events, such as unexpected deaths in their families. Equally clear, there have to be some protection for CHC Ltd resources, since loan repayments become difficult when clients are set back by unexpected shocks. Micro insurance as looked into, as it offers the poor a more proactive and cost effective risk protection instrument compared to use family savings, unplanned borrowing and selling of much needed assets.

RESEARCH METHODOLOGY
Both descriptive and quantitative analyses were carried out in the study. In the descriptive analysis, relevant literatures and information were collected from different sources, and described at appropriate places of the thesis. In the quantitative analysis, necessary charts, tables, percentages were used to analyze the data. The data used for analysis in this research were obtained from both primary and secondary sources. Secondary data relating to microfinance industry in Cambodia, global micro finance industry, micro insurance industry in Cambodia and global micro insurance industry were collected from the National Bank of Cambodia (NBC), National Institute of Statistics (NIS) and Internet. Primary data for the study were gathered from the respondents such as clients of CHC Limited, members of the Board of Directors, Department Managers, Branch Managers, and Credit Assistants in the provinces where CHC Limited operates in Cambodia.

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The researcher used well-structured simple questionnaires to obtain responses from CHC Limited clients, members of the Board of Directors, Department Managers, Branch Managers, and Credit Assistants. For the study, 425 clients were interviewed out of the 1287 clients of CHC limited. In addition to the above sample number of respondents, 13 management staffs, including members of the Board of Directors, Department Managers, Branch Managers, and Credit Assistants, were also taken into account for the study. Probability sampling was adopted to select clients of CHC limited. There were 1287 clients under four branches of CHC Limited. Systematic random sampling was used to select 33% of total clients of each of the four branches of CHC limited. For this, the list of clients under each branch were prepared alphabetically, and the sampling interval was determined by using the formula N/n (Where N = Population size and n= Sample size). In the selection of the clients, the first item was selected randomly by using lottery method, and the subsequent items were selected at equally spaced interval (by taking the sampling interval) until the sample is formed. Thus, a total of 425 clients were selected randomly for the study purpose. Further, 13 management staffs including members of the Board of Directors, Department Managers, Branch Managers, and Credit Assistants, of CHC limited were selected purposively for the study. The selected respondents were administered through the questionnaires.

Data Gathering Procedure

Gathering of data for the research was done in three phases. The first data gathering approach involved desk study on related literatures. In this phase, the candidate referred relevant books, reports, articles, etc. by visiting different libraries, and more particularly websites. In the second phase, separate questionnaires were prepared by looking to the purpose and research questions of the study for the two categories of respondents, i.e., clients and management staff of CHC limited. To know the validity of the designed questionnaires, pilot study was conducted, and necessary improvements were made in the questionnaires as per the feedback from the pilot survey before collecting the data from the respondents. In the last phase, necessary primary data were collected by the candidate through direct personal interview method from the respondents. The researcher was aware that most of the respondents were not good at English, and a majority of the clients were not able to read or speak English. So, the items in the questionnaires were explained to the respondents by the researcher. The respondents were given the option to provide their feedback in the language of their proficiency.

ANALYSIS OF THE RESULT Reasons for Loan Protection

Several reasons could be advanced for taking loans. First is the fact that the people in the low income group faced a lot of risks in life, one of which included the challenges caused by the death of a relative. They were not only vulnerable but also had no savings to fall back to in times of emergency. This prompted the question of how they coped with funding exigencies. Table 4.1 provides the feedback from the clients of CHC limited. [Type text]

TABLE 4.1: HOW TO SUPPORT DEATH/ BURIAL EXPENSES

HOW TO SUPPORT DEATH/ BURIAL EXPENSES Contribution from neighbors and sell livestock Sell properties Borrow money from relatives Village Association for helping the poor Savings at home Loan from CHC Others TOTAL Source: Own survey NO. OF CLIENTS 366 0 0 59 0 0 0 425 % 86% 0% 0% 14% 0% 0% 0% 100%

Data in Table 4.1 show that 86 percent of the clients fellback to contributions from their neighbors or they sold their livestock, but 14 percent said they depended on village association for helping the poor. The chart also reveals a zero response on selling their properties. Obviously there might not be the property to sell. Likewise, they did not borrow from their relatives, perhaps because their relatives were not financially buoyant to lend them money. Significantly, the chart also shows a zero response to savings at home. Worthy of note is the fact that they were not aware of the facilities offered by Micro Insurance Institutions hence none of the respondents had ever taken a loan from CHC Limited to Support Death/ Burial Expenses. The implication was that they could not finance the funeral expenses or bury their dead relatives without support from external sources.

TABLE 4.2: LOAN PROTECTION PROGRAM

LOAN PROTECTION PROGRAM: Will definitely contribute Will probably contribute Will probably not contribute Will definitely not contribute TOTAL Source: Own survey NO. OF CLIENTS % 71% 15% 8% 6% 100%

302 64 34 25 425

Table 4.2 show the response of the clients on contribution of loan protection program to their living standards. Among the 425 surveyed clients, 71 percent said that the program would definitely contribute, 15 percent said it would probably contribute, 8 percent declared that it would probably not contribute while the remaining 6 percent stated that it would definitely not contribute. Thus, a significant proportion of the respondents had the view that the loan protection program would contribute for the improvement of their living standards because of the expected benefits. TABLE 4.3: CHOOSE THE BENEFITS
CHOOSE THE BENEFITS NO. OF CLIENTS %

[Type text]

100% for Client and Spouse 100% for Client, 25% for spouse and 15% for children TOTAL Source: Own survey

978 130 425

88% 12% 100%

With regard to benefits, 88 percent of the clients voted for 100 percent of the benefits for respective client and spouse, and the other 12 percent said 100 percent of the benefits should be for client, 25 percent for spouse and 15 percent for children. TABLE 4.4: WHAT IS THE AMOUNT OF BENEFITS YOU ARE INTERESTED IN? (IN RIEL)
WHAT IS THE HIGHEST BENEFITS YOU ARE INTEREST IN? (in Riel) R500,000 <= R 1,000,000 R1,500,000 R2,000,000 R2,500,000 R3,000,000 R3,500,000 R4,000,000 R5,000,000 R6,000,000 R7,000,000 R8,000,000 R9,000,000 R10,000,000 R11,000,000 R12,000,000 R13,000,000 R14,000,000 R15,000,000 R 16,000,000 above 3 9 60 26 102 17 94 4 68 21 13 0 4 0 4 0 0 0 0 0 2% 14% 6% 24% 4% 22% 1% 16% 5% 3% 0% 1% 0% 1% 0% 0% 0% 0% 0% 1% NO. OF CLIENTS

[Type text]

TOTAL
Source: Own survey

425

100%

Most of the clients had high expectations on the benefits from Micro Insurance. As shown in Table 4.4, 24 percent of the clients had the expectation of benefits of 2,000,000 Riels followed by 22 percent clients having the expectation of benefits of 3,000,000 Riels from micro insurance. The percentages of clients who had the expectations of benefits of 4,000,000 Riels and 1,000,000 Riels from micro insurance were 16 percent and 14 percent respectively. This shows a clear indication for the need for insurance benefits up to a manageable limit by the clients.

Willingness to Pay Contribution

Table 4.5: IF THE FUND WERE MANAGED BY CHC, WHAT WOULD YOU DO?
IF THE FUND WERE MANAGED BY CHC, I WOULD. Definitely be more willing to contribute Probably be more willing to contribute Probably be less willing to contribute Definitely be less willing to contribute TOTAL Source: Own survey

NO. OF CLIENTS 421 0 0 4 425

% 99% 0% 0% 1% 100%

The clients were asked what they would do if the contributed fund were managed by CHC Limited. As can be seen in Table 4.5, 99 percent of the individuals stated that they would definitely be more willing to contribute, while 1 percent of the individual population affirmed that they would definitely be less willing to contribute. This implies that the clients had high degree of trust and confidence in the micro insurance system and its operations.

Ability to Pay
This section presents research findings on the clients contribution to household income, which indicates the ability to pay of the clients. The researcher classified and discussed them under daily, weekly, and monthly income contribution. Among the 425 sample clients, 248 (58 percent) had daily income contribution, 11 (3 percent) weekly income contribution, 41 (10 percent) monthly income contribution and 125 (29 percent) seasonal income contribution. Table 4.6: DAILY INCOME CONTRIBUTION
DAILY INCOME CONTRIBUTION (In Cambodian Riel) < 2,000 2,000 up to 3,000 NO. OF CLIENTS %

0 0

0% 0%

[Type text]

3,000 up to 4,000 4,000 up to 5,000 5,000 up to 6,000 6,000 up to 10,000 10,000 up to 20,000 20,000 up to 30,000 30,000 up to 40,000 40,000 TOTAL Source: Own survey

0 5 5 27 57

0% 2% 2% 11% 23%

18%

45
12%

30 79 248
32% 100%

From Table 4.6, it could be observed that 32 percent of the clients were able to make a daily contribution of 40,000 Cambodian Riels or more. This was followed by 23 percent of the clients could afford a daily contribution of between 10,000 Cambodian Riels to 20,000 Cambodian Riels, and 30 percent of the clients were able to contribute between 20,000 Riels to 40,000 Riels to household incomes daily. It could be asserted that the surveyed clients having the ability to pay were actually in the low-income category. Table 4.7: WEEKLY INCOME CONTRIBUTION
WEEKLY INCOME CONTRIBUTION (In Cambodian Riel) < 40,000 40,000 up to 60,000 60,000 up to 80,000 80,000 up to 100,000 100,000 up to 200,000 200,000 up to 300,000 300,000 up to 400,000 400,000 TOTAL
Source: Own survey

NO. OF CLIENTS 0 1 0 1 1 1 1 5 11

% 0% 13% 3% 6% 13% 13% 9% 43% 100%

Table 4.7 present the weekly income contribution of the clients. 43 percent clients had the capacity to contribute over 400,000 Riels per week to household income. The percentage of households having the capacity to contribute between 40,000 to 60,000 Riels, 100,000 to 200,000 Riels and 200,000 to 300,000 Riels was 13 percent each. Again, this justifies the fact that majority of the clients with paying capacity basically belonged to the low income groups. Table 4.8: MONTHLY INCOME CONTRIBUTION MONTHLY INCOME CONTRIBUTION (In Cambodian Riel) [Type text] NO. OF CLIENTS

< 100,000 100,000 up to 200,000 200,000 up to 300,000 300,000 up to 400,000 400,000 up to 500,000 500,000 up to 600,000 600,000 up to 700,000 700,000 up to 800,000 800,000 up to 900,000 900,000 up to 1,000,000 1,000,000 TOTAL
Source: Own survey

3 2 6 7 7 4 3 2 1 0 5 41

8% 5% 15% 16% 18% 10% 8% 5% 2% 0% 13% 100%

Table 4.8 reflect that the highest percentage of the clients, i.e., 18 percent had the monthly paying capacity between 400,000 to 500,000 Riels followed by 16 percent between 300,000 to 400,000 Riels, 15 percent between 200,000 to 300,000 Riels, 13 percent over 1,000,000 Riels and 10 percent between 500,000 to 600,000 Riels. As revealed from the table, most of the clients contributing monthly incomes to households were in the lower income groups. TABLE 4.9: SEASONAL INCOME CONTRIBUTION SEASONAL INCOME CONTRIBUTION (IN CAMBODIAN RIEL) < 100,000 100,000 up to 200,000 200,000 up to 300,000 300,000 up to 400,000 400,000 up to 500,000 500,000 up to 600,000 600,000 up to 700,000 700,000 up to 800,000 800,000 up to 900,000 900,000 up to 1,000,000 1,000,000 TOTAL
Source: Own survey

NO. OF CLIENTS
0 0 0 3 3 6 0 8 5 4 98 125

% 0% 0% 0% 2% 2% 5% 0% 6% 4% 3% 78% 100%

With regards to seasonal income contribution, Table 4.9 show that a majority of the clients were in the position to make seasonal income contributions. The chart points out that 78 percent of the clients could pay to the tune of 1,000,000 Riels and above. The other range of data reveals that rest of the clients was incapable of paying seasonal income contribution of any amount exceeding 1,000,000 Riels. This statistic was an indicator that most of the clients who were in the agricultural sector of the economy got their income seasonally (specifically during the harvesting season) and not essentially daily, weekly, or even monthly. In effect, they were not in a convenient financial situation until the harvest [Type text]

season. It implies that they cannot manage or cope with risks that could possibly occur during the off-harvest season. They cannot invest because their capital is not in liquid form for the whole period until their crops are harvested.

4.4 Acceptable Amount of Premium

There is the need to determine the clients desire to embrace Micro Insurance products and services. In this section, the researcher presents the opinions of the clients on their readiness to take up an insurance policy and their willingness to pay the premiums. Table 4.10: LIFE INSURANCE PROGRAM
LIFE INSURANCE PROGRAM: Will definitely contribute Will probably contribute Will probably not contribute Will definitely not contribute TOTAL
Source: Own survey

NO. OF CLIENTS 285 98 26 17 425

% 67% 23% 6% 4% 100%

On the issue of contribution of the life insurance program, Table 4.10 indicate that 67 percent clients had the opinion that the program would contribute; 23 percent said it would probably contribute; 6 percent said it would probably not contribute while the remaining 4 percent would definitely not contribute. With a meager daily income and a lot of financial commitments, a contribution toward life insurance would be considered as secondary for the above smaller percentage of respondents. However, most of the clients were found to be ready to take up an insurance policy as they had positive opinion on the contribution of life insurance program, which was a very good sign. Table 4.11: AMOUNT IN RIEL WILLING TO CONTRIBUTE TOWARDS PREMIUMS
AMOUNT IN RIEL WILLING TO CONTRIBUTE R 500 - R 2,000 R 2,100 - R 4,000 R 4,100 - R 6,000 R 6,100 - R 8,000 R 8,100 - R 10,000 R 11,000 - R 20,000 R 21,000 - R 30,000 R 31,000 - R 40,000 R 41,000 above NO. OF CLIENTS

208 106 77 13 17 4 0 0 0

49% 25% 18% 3% 4% 1% 0% 0% 0%

[Type text]

TOTAL Source: Own survey

425

100%

Table 4.11 point out that the clients were not willing to contribute a high amount toward life insurance. There was a tendency to contribute the lowest amount. The percentage of clients who were willing to contribute 500 to 2,000 Riels was 79 percent followed by 25 percent clients between 2,100 Riels to 4,000 Riels, and 18 percent clients between 4,100 Riels to 6,000 Riels. Not a single client was willing to contribute more than 20,000 Riels as premium towards life insurance. This could mean that they were not willing to become part with their paltry income or there was nothing to invest in the form of insurance. The issue of ignorance of the benefits of insurance could be another reason why the clients did not express their interest in this kind of contribution. 2. What is the perceived readiness of CHC-Limited on loan protection in terms of: (a) Reasons for loan protection insurance (Benefits) (b) Technical expertise (Product) (c) Funding requirement (Requirement) (d) Organizational procedure (Requirement) In order to determine the readiness of CHC-Limited on loan protection, 13 management staffs were asked to express their ideas. The specific aspects of the perceived readiness of CHC Limited to undertake the loan protection addressed the four issues mentioned above. REASONS FOR LOAN PROTECTION INSURANCE (BENEFITS) Preference for CHC to have Microinsurance Services in Addition to Credit Services TABLE 4.12: PREFERENCE FOR CHC TO HAVE MICROINSURANCE SERVICES IN ADDITION TO CREDIT SERVICES
NO. OF MANAGEMENT STAFF Yes No Total 4 3 1 5 13 0 0 0 0 0 4 3 1 5 13

CHC Branch Kampong Bay Kampong Trach Kep Phnom Penh Total
Source: Own survey

The responses obtained from management staffs of CHC Limited as presented in Table 4.12 indicate that all the selected 13 CHC staff of the four branches, namely, Kampong Bay, Kampong Trach, Kep and Phnom Penh preferred CHC Limited to have micro insurance services in addition to credit services. It could be said that the staffs had expressed their desire and preference for CHC Limited to have micro insurance services in addition to credit services. All the surveyed management staff supported the opinion that micro insurance services would create added value and generate more income to CHC Limited. 4.6 Technical Expertise (Product) Products and Premium [Type text]

The researcher presented a list of the products and premium that CHC planned to have, and asked the clients to examine their relevance for inclusion as new package for the micro insurance operations. For the sake of clarity, the researcher specified the products and premiums as follows: Life Insurance Program

Benefits:
a. b. In the event of your death, your surviving beneficiaries will receive a cash benefit. The cash benefit will also be made to you in the event of death of your spouse or any children. In the event of your death, your surviving beneficiaries will receive a cash benefit.

Contribution/Premium: Assurance:
You will be given a certificate of insurance to evidence that you are covered by this life insurance service. The ratings of Good/Interesting which means expresses interest in insurance products would indicate a positive feedback (A) while a lack of interest in insurance products rated Not Good/Not Interesting would indicate negative feedback (B). Generally, there was no response to indicate a negative feedback because all the respondents rated (A) which implies an expression of interest in the products and premiums offered. These included life insurance program in which surviving beneficiaries will receive a cash benefit in the event of the death of the client, and a cash benefit would also be made to the client in the event of death of clients spouse or any children. On contribution and premiums, clients beneficiaries will receive a cash benefit, as an assurance, client would be given a certificate of insurance to evidence that he or she was covered by the life insurance service.

Expression of Interest in Insurance Products

TABLE 4.13: WHAT ELSE YOU LIKE ABOUT THE INSURANCE PRODUCTS
If positive what else would you like about the product 1. Good Product and Services 2. Helping people in case of death 3. Protect client and add value to CHC 4. The product covers both clients and their spouses 5. Policy is shown with the certificate
Total

NO. OF CHC STAFF 6 2 2 2 1 13

PERCENT AGE TO TOTAL

46 16 15 15 8 100

Source: Own survey

Table 4.13 shows that 46 percent of the management staffs liked good products and services in general. The next 16 percent of the staffs said they liked the service of helping the people in case of death while 15 percent admired the idea of protecting the clients and adding value to CHC Limited as well as ensuring that the product covers both clients and their spouses. The remaining 8 percent was pleased with the idea of assurance in which the policy is guaranteed with a certificate. Table 4.14: RESPONDENT RATING TO THE INSURANCE PRODUCT [Type text]

LIFE INSURANCE PROGRAM: Will definitely support Will probably support Will probably not support Will definitely not support TOTAL Source: Own survey

MAMAGEM ENT STAFFS 12 1 0 0 13

PERCENT AGE 92% 8% 0% 0% 100%

On the issue of respondent rating to the insurance product, 92 percent of the management staffs agreed that they would definitely support the product; 8 percent said they would probably support the product, but there were no responses on the negative side either probably or definitely not supporting the product.

Funding Requirement
Table 4.15: HIGHEST AMOUNT IN RIEL WILLING TO CHARGE
HIGHEST AMOUNT IN RIEL WILLING TO CHARGE 5% of Loan amount R 500 - R 2,000 R 2,100 - R 4,000 R 4,100 - R 6,000 R 6,100 - R 8,000 R 8,100 - R 10,000 R 11,000 - R 20,000 R 21,000 - R 30,000 R 31,000 - R 40,000 R 41,000 above TOTAL Source: Own survey NO. OF MANAGEME NT STAFFS 1 2 1 5 0 2 0 1 0 1 13 PERCENTA GE 8% 15% 8% 38% 0% 15% 0% 8% 0% 8% 100%

Table 4.15 detail the response from the management staffs on the highest amount in riel they were willing to charge. It was found that 38 percent of the management staff would charge a maximum of 5 percent of the total value of the loan. The next 15 percent said a highest charge of 500 to 2,000 Riel would be adequate. The same percentage applies to the respondents for the sum of 8,100 to 10,000 Riel. A quadruple 8 percent of the management staffs were willing to charge the highest amounts of 2,100 to 4,000 Riel, 6,100 to 8,000 Riel, [Type text]

21,000 to 30,000 Riel, and 41,000 and above respectively. There could be the notion that the management staffs opinions varied according to their consideration that the clients did not have an equal economic status, even though they belong categorically to the low-income group. Table 4.16: LOWEST AMOUNT IN RIEL WILLING TO CONTRIBUTE
LOWEST AMOUNT IN RIEL WILLING TO CONTRIBUTE 3% of Loan amount R 500 - R 2,000 R 2,100 - R 4,000 R 4,100 - R 6,000 R 6,100 - R 8,000 R 8,100 - R 10,000 R 11,000 - R 20,000 R 21,000 - R 30,000 R 31,000 - R 40,000 R 41,000 above TOTAL Source: Own survey NO. OF MANAGEME NT STAFFS 1 6 5 0 0 0 1 0 0 0 13 PERCE NTAGE 8% 46% 38% 0% 0% 0% 8% 0% 0% 0% 100%

The above table and chart present the response from the management staffs on the lowest amount in riel they were willing to charge. It was found that 46 percent of the management staff would charge a maximum of 500 to 2,000 Riel. The next 38 percent said a lowest charge of 2,100 to 4,000 Riel would be adequate. Another 8 percent of the management staffs submitted that 8 percent of the total value of the loan would be appropriate, yet another 8 percent of the management staff opted for a minimum charge of 6,100 to 8,000 Riel. This is also an indication that the management staffs opinions varied according to their considerations that the clients did not have an equal economic status, even though they belong categorically to the low-income group. TABLE 4.17: WHAT IS THE HIGHEST BENEFITS YOU ARE INTERESTED IN? (IN Riel)
WHAT ARE THE HIGHEST BENEFITS YOU ARE INTEREST? (in Riel) R 500,000 R 600,000 R 700,000 R 800,000 NO. OF MANAGEME NT STAFFS 0 0 0 0

PERCEN TAGE 0% 0% 0% 0%

[Type text]

R 900,000 R 1,000,000 R 1,200,000 R 1,400,000 R 1,500,000 R 1,600,000 R 1,800,000 R 2,000,000 R 2,000,000 above Accumulative amounts minus 20% 150% of Loan amount TOTAL Source: Own survey

0 2 0 0 2 1 0 2 4 1 1 13

0% 15% 0% 0% 15% 8% 0% 15% 31% 8% 8% 100%

Table 4.17 show that while 31 percent of the management staffs desired highest benefit of 500,000 Riel, a triple 15 percent of the management staff were interested in 1,000,000 Riel, 1,500,000 Riel, and 2,000,000 Riel respectively. Another triple 8 percent showed interest in respective 1,600,000 Riel, Accumulative amounts minus 20%, and 150% of the total amount of the loan. Table 4.18: THE LOWEST BENEFITS YOU ARE INTERESTED IN? (In Riel) WHAT IS THE LOWEST NO. OF BENEFITS YOU MANAGE ARE MENT INTERESTED IN? STAFFS (in Riel) R 400,000 2 R 500,000 1 R 600,000 1 R 700,000 0 R 800,000 0 R 900,000 0 R 1,000,000 3 R 1,200,000 0 R 1,400,000 0 R 1,500,000 3 R 1,800,000 0 R 2,000,000 0 R 2,000,000 1 above Accumulative amounts minus 1 20% [Type text]

PERCE NTAGE

15% 8% 8% 0% 0% 0% 23% 0% 0% 23% 0% 0% 8%

8%

100% of Loan amount TOTAL

1 13

8% 100%

As shown in Table 4., 23 percent of management staffs said that they were interested in 1,000,000 Riels and 1,500,000 Riels each as the lowest benefit they were interested in, whereas, 15 percent expressed their interest in 400,000 Riels. There was a fifth recurrence of 8 percent of the management staff who desired the lowest benefits at 500,000 Riel, 600,000 Riel, 2,000,000 Riel and above, accumulative amounts minus 20%, and 100% of the amount of loan.

3. What micro-insurance products can be designed to fit the perceived preference of the clients? (a) Relevance of Micro-insurance Products (Requirement) (b) Needs of the Micro-insurance Products (Benefits) (c) Designed Micro-insurance Products (Products) (d) Trust Assessment (Requirement)

Relevance of Micro-insurance Products

The researcher presented a list of the products and premium that CHC planned to have, and asked the management staff to examine their relevance for inclusion as new package for the micro insurance operations. For the sake of clarity, the researcher specified the products and premiums as follows:

Benefits:
a. In the event of your death, the unpaid portion of any outstanding loan with the institution will be considered fully paid. b. The paid amount of your loan will be paid to your beneficiary.

Contribution/Premium:
Contributions of 6% of the principal amount of loan will be automatically deducted from your loan.

Assurance:
You will be given a certificate of insurance to evidence that you are covered by this loan protection service. The ratings of Good/Interesting which means expresses interest in insurance products would indicate a positive feedback (A) while a lack of interest in insurance products rated Not Good/Not Interesting would indicate negative feedback (B). Generally, there was no response to indicate a negative feedback because all the respondents rated (A) which implies an expression of interest in the products and premiums offered. These included a benefit package in which the unpaid portion of any outstanding loan with the institution would be considered fully paid in the event of death of a management staff, and the paid amount of t he staffs loan would be paid to his or her beneficiary. On contribution and premiums, 6% of the principal amount of loan would be automatically deducted from the staffs loan. The staff would also be given a certificate of insurance to evidence that he or she was covered by the loan protection service. [Type text]

4.9 Needs of the Micro-insurance Products TABLE 4.19: MANAGEMENT STAFFS OPINION ABOUT THE INSURANCE PRODUCT
If positive list what else you like about the product: 1. Good Services 2. Benefits for clients and their spouses 3. Benefits to clients and CHC against risks 4. Insurance policy is shown with the certificate Total (positive factors you like about the product) NO. OF MANAG EMENT STAFFS 7 1 4 1 13 PERCENTA GE 54% 8% 31% 8% 100%

It can be seen from the above table and chart that 54 percent of the management staff liked the insurance products as good services; 31 percent said it would provide protection to clients and CHC against risks; 8 percent admired backing the insurance policy with a certificate while another 8 percent liked the idea of benefits for clients and their spouses.

Designed Micro-insurance Products:

According to the result of the research showed that 64 percent of the management staff would like CHC Limited to have savings and money transfer scheme; 18 percent voted for others including agriculture insurance; 9 percent preferred financing staff and staff loan, while another 9 percent favored child and disability insurance.

CONCLUSION AND RECOMMENDATION Conclusion

Based on the findings summarized above, people in the low income group need a great deal of financial support to help them alleviate poverty. There are only a few provinces in Cambodia in which micro insurance business is carried out. The population is confronted with the challenges associated with poverty, hence they cannot manage risks on their own, and they have no immediate place for recourse. As a result, Micro Insurance would be a welcome idea if the products and services are attractive in all respects by giving priority to the clients needs. Cambodia as a developing country needs such industries as Micro Insurance institutions which will work alongside and complement the services rendered by Micro Finance Institutions. In other words, in microfinance initiative, it has become necessary to include micro-insurance as a safety net to microfinance initiative. CHC Limited has the capacity to introduce and operate Micro Insurance services in Cambodia. In conclusion, with proper orientation, the CHC Limited clients would be ready to initiate Micro Insurance products in Cambodia as a positive step towards poverty alleviation.

Recommendations
The researcher considers it necessary to give some recommendations since Micro Insurance is at an embryonic stage in Cambodia. Much as the people are not yet familiar with [Type text]

insurance programs and how they work, the need for proper education should not be overlooked. The clientele need to be well informed on their roles, commitments and expectations. It would be a good idea to start on a small scale and go through the ladder of progress over time. As it stands, Micro Insurance services should not be restricted to a selected few. The country is yet fraught with the majority of people who are below the bread line. This category in the low income group are the most vulnerable, and so should constitute the priority population. They are located in the rural areas where there is a lack of basic amenities and infrastructure. Therefore, the operational network of CHC Limited should be expanded to reach out to more clients across the country. Awareness should be created in order to clarify the micro insurance process and alienate clients fears and concerns. The products and services, in order to be successful, ought to relate directly to the clients and address their immediate needs. There should be more publicity of the role played by micro insurance through direct contact and the mass media. In fact, CHC should follow the approaches that intend to provide securities to low-income households. That is what Micro Insurance is all about.

References
1. www.grameenfoundation.org 2. See Roth and Steinwand (2004), (die Bereitstellung Finanzinstitutionen haben) p.2 3. CGAP, 2007; Stuart, 2000; Center for Micro Finance Advice and Consulting, 2007) 4. Churchill, (1999), F.C., (1999), Calmeadow: Client-Focused Lending, The Art of Individual Lending, Canada 5. Ibid 6. Churchill C. (ed.) (2006). Protecting the Poor: A Microinsurance Compendium. Geneva: ILO. 7. Alexander S. Preker, Guy Carrin, David Dror, Melitta Jakab, William Hsiao, Dyna Arhin-Tenkorang (2002). "Effectiveness of community health financing in meeting the cost of illness". Bulletin of the World Health Organization (Geneva: WHO) 80 (2): 143 150. 8. Dror, D, Jacquier Ch (1999), "Micro-insurance: Extending Health Insurance to the Excluded". International Social Security Review (Geneva: ISSA) 52 (1): 71 97.doi:10.1111/1468-246X.00034 9. Ibid 10. IAIS 11. Schloss Hohenkammer, Micro Insurance Conference, (2005), Making Insurance Work for the Poor: Current practices and Lessons Learnt, Munich, Germany 12. Schloss Hohenkammer, Micro Insurance Conference, (2005), Making Insurance Work for the Poor: Current practices and Lessons Learnt, Munich, Germany [Type text]

13. Schwiecker, S., (2004), sebastianschwiecker@googlemail.com Retrieved on September 15, 2007 14. Ledgerwood (1998), J., Sustainable Banking with the Poor, in Micro Finance Handbook: An International and Financial Perspective, Washington DC, IBRD/The World Bank, 15. www.accion.org 16. CGAP, (2007) 17. Ledgerwood, J., (1998), Sustainable Banking with the Poor, in Micro Finance Handbook: An International and Financial Perspective, Washington DC, IBRD/The World Bank, 18. Ibid 19. World Bank, Cambodia Country Brief: www.worldbank.org 20. Financial Sector Diagnostic, June 2007. www.ifc.org/ifcext/mekongpsdf.nsf/attachmentsBytitle/Financial-DiagnosticCAM/$FILE/Financial-Diagnostic-CAM.pdf.p.1-2. 21. HDI looks beyond GDP to a composite measure of three dimension of human development: www.hdrstart.undp.org/data_sheets/ cty_ds_KHM.html. 22. BWTP Asia Resource Center for Microfinance, Cambodia:www.bwtp.org/arcm/Cambodia/I_country_profile/Cambodia_country_profile. htm 23. Royal Government of Cambodia, Financial Sector Development Strategy 2006-15, p.41 24. Royal Government of Cambodia, Financial Sector Development Strategy 2006-15, p.4 25. Asian Development Bank, Technical Assistance to the Kingdom of Cambodia for Improving Insurance Supervision Dec. 2002. Available at www.adb.org/Documents/TARs/CAM/tar_cam_36593.pdf. 26. Royal Government of Cambodia, Financial Sector Development Strategy 2006-15, p.57. 27. Royal Government of Cambodia, MEF: Financial Sector Development Strategy 2006-15, p.57. 28. Royal Government of Cambodia, Financial Sector Development Strategy 2006-15, p.56. 29. SKY is the acronym for Insurance for our Families in the Khmer language. 30. Ibid 31. Jamie Aristotle B Alip, and Ma Chona O. David, Micro Insurance in Cambodia, ISBN, 2008 32. CHC Limited 33. Ledgerwood, J., Sustainable Banking with the Poor, in Micro Finance Handbook: An International and Financial Perspective, Washington DC, IBRD/The World Bank, 1998 [Type text]

34. Churchill, F.C., (1999), Calmeadow: Client-Focused Lending, The Art of Individual Lending, Canada 35. CGAP: About Micro Finance: Consultative Group to Assist the Poor (CGAP) Retrieved on June 13, 2007 36. Schwiecker, S., (2004), sebastianschwiecker@googlemail.com Retrieved on September 15, 2007 37. Craig Churchill, (2006), Protecting the Poor: A Micro Insurance Compendium, Germany, ISBN: Adapted from McCord, 2005

*Dr. Kao Kveng Hong is Professor of Business & Economics at Angkor Khemara University, Phnom Penh, Cambodia. He holds a Bachelors Degree in Economic Science, a MBA and a Ph.D. in Business Administration. Prior to entering academic life Dr. Hong was active in business; he remains the CEO of Asia Marketing Solution Company, a company he founded in 2006. Dr. Hong is also a qualified teacher. He began his career as an English and Japanese teacher in private schools in Siem Reap. These days he teaches Marketing, Media, Management and sales subjects to undergraduates and MBA students. He may be reached at kvenghong@ams-groups.com

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