The Financial Regulatory Authority (FRA) has proposed to make life insurance mandatory for those who take up microfinance, Mr Mohammed Omran, the chairman of the regulatory body, has said.
He said that a compulsory and standardised group insurance contract would apply, to cover borrowers against the risk of death and total disability. A unified pricing framework will also introduced, reported Al Mal News. The amount of insurance would be equivalent to the microfinance loan balance of a client.
The FRA is making the proposal because the number of microfinance beneficiaries has been growing, reaching 2.7m by 30 September 2018 compared to 2.1m a year earlier. Financing balances increased to EGP10.6bn at 30 September 2018 compared to EGP6.1bn at 30 September 2017, an increase of 73%.
Mr Omran said that an actuarial study undertaken by the FRA to determine the insurance premium to provide insurance coverage against death and total disability has been completed. The premiums involved for every EGP1,000 ($55.8) of insurance coverage will be discussed with life insurance companies. Pricing will be based on technical principles adopted by insurers in pricing such policies.
He made these statements in the presence of microfinance companies and other organisations.