Riskebiz is setting up a microfinance fund to invest in Tier 2 and Tier 3 Microfinance Institutions (MFIs).

The fund will be an investment package of equity and quasi-equity investments, active governance, technical assistance, and management advice. This means that, in addition to the capital investment in the form of equity, Riskebiz will also provide related technical assistance and advice to the microfinance institutions (MFIs) that the fund invests in.

The investment manager for the fund will be PlaNIS, the financial advisement business unit of PlaNet Finance Group.

Technical assistance and management advice will be provided through the Technical Services Facility (TSF).

The fund will seek to make investments in those MFIs with solid operations, strong credit profiles, and future strategic and financial prospects, so as to maximize the fund's risk adjusted return on capital.

The aim of the fund is to provide superior financial and social returns to investors (double bottom line).

Investments will be made primarily in MFIs but may also include microfinance "infrastructure" companies that work with MFIs.

According to CGAP survey, equity investment in microfinance is small, but growing fast. As of December 2008, there were 24 specialized microfinance equity funds with total assets of US$1.5 billion under management. Institutional investors are also showing interest in this new market niche. Leading pension funds, such as TIAA CREF in the United States and ABP in Europe, have made microfinance equity allocations of over US$100 million as part of their socially responsible investment (SRI) strategies. Others are researching the field and waiting for clearer market conditions to invest. Venture capital companies such as Sequoia and a few large private equity funds such as Legatum4 are testing the market with small equity investments in MFIs, with near term potential for an initial public offering (IPO) in key emerging markets, like India.

The Riskebiz Technical Services Facility ("TSF") supports capacity building in MFIs through the implementation of microinsurance schemes.

The objective of the TSF is to increase the valuation of MFIs.

We believe that a microinsurance scheme is the most effective tool for accomplishing this objective and in the process offer a distinct competitive advantage over competing funds.

Although microinsurance has not received the same attention that microcredit has, investors, governments and financial institutions have slowly come to realize that microfinance entrepreneurs need a range of financial services of which micro insurance services are crucial parts.

Riskebiz provides technical assistance to develop and deliver microinsurance products to MFI clients. Insurance companies have the insurance skills, but lack an understanding of the market. Development practitioners know the market, but lack expertise in insurance. Our technical assistance (TA) program aims to build capacity and fill these knowledge gaps.

Microinsurance is one of the financial services associated with microfinance, along with savings and fund transfers, and is increasingly being sold in conjunction with the distribution of microcredit loans. Microinsurance is insurance characterized by low premiums and coverage limits, designed to service low-income people and businesses not served by typical social or commercial insurance schemes.

The most frequent microinsurance products are:

• Life microinsurance (and retirement savings plans)
• Health microinsurance (hospitalization, primary health care, maternity, etc.)
• Disability microinsurance
• Property microinsurance – assets, livestock, housing
• Crop microinsurance

A microinsurance scheme encompasses both the design and delivery of insurance products to clients, which will primarily be borrowers. Designing a sound microinsurance scheme is challenging and complex requiring specific technical expertise and/or data that most MFIs do not posses.

Implementation of a microinsurance scheme will include development of the following:

• Insurance products (in conjunction with insurance carrier or captive)
• Distribution and marketing channels (through mobile phones)
• Mobile money transfer solutions (for premium and claim payments)