Abstract
In a developing country such as South Africa many individuals remain excluded from formal financial products and services. In recent years the debate regarding economic growth has expanded to include the notion of financial exclusion as a barrier to economic development along with the need to build an inclusive financial system.
Reforms that promote financial inclusion are increasingly at the forefront of the international development agenda for policymakers and development institutions. In South Africa there have been a number of recent overhauls of the policy and framework in the financial services industry, chief among these is the microinsurance regulatory framework.
This paper seeks to evaluate microinsurance as a legal concept and investigate whether microinsurance has the potential to provide low-income earners with access to financial products.
In doing so a definition of microinsurance is established by canvassing various incarnations of the concept both locally and further afield. To evaluate the role of microinsurance as a formal financial service, the level of current financial inclusion amongst South Africans is evaluated. This is followed by an overview of all the recent regulatory and framework developments in the financial services sector. A discussion on microinsurance product innovation and distribution follows and an opinion is fashioned on the potential of microinsurance to assist in alleviating poverty and enhancing financial inclusion.
The paper concludes by stating that the law has a major role to play in bringing about change. The introduction of the microinsurance legal principles will indeed provide low-income earners with access to financial products and assist in the goal of financial inclusion. However, it cannot take on this mammoth task alone. In conclusion it is stated that if we are to see significant growth in financial inclusion and the financial sector as a whole, microinsurance needs to be fully integrated with other financial products and services such as microfinance and simplified banking, as once these mechanisms are combined they will prove to be much more effective in achieving the goal of financial inclusion.
LL.M. (Commercial Law)