May 06, 2010

An announcement from global microinsurance fund LeapFrog Investments today affirmed the potential of microinsurance as a business proposition, as opposed to a charitable enterprise. LeapFrog announced its final close on $137 million for investments in Africa and Asia. Major new investors include J.P. MOrgan, TIAA-CREF and Porparco, as well as the Waterloo Foundation and ACE Group."As leaders from around the world and across sectors gather here at IFC headquarters," said Andrew Kuper, president and founder of LeapFrog, "we mark a historic moment: the birth of a new social-purpose asset class that will generate profits for investors while lifting tens of millions out of poverty."

None other than former U.S. President Bill Clinton has lauded LeapFrog's "profit-with-a-purpose" approach to microfinance. LeapFrog says that its portfolio companies should reach 25 million low-income people in Africa and Asia with transformative financial services. The organization says that the companies will offer a range of products including health and life insurance, low-income housing and weather index insurance.

John Buley, Jr., managing director of social finance at J.P. Morgan expressed pride on behalf of his company for helping to provide low-income communities with the financial security necessary to increase income, build assets and escape poverty. "We believe that microinsurance is a key innovation that will further the development of business in the social sector, and represents a massive opportunity to meet the inclusive financial services needs of low-income people in developing countries," Buley said.

Scott Budde, Managing Director of Global Social and Community Investments at TIAA-CREF made a similar observation: "From an impact perspective, we see microinsurance as a valuable complement to other socially responsible financial services for low income clients, while also providing competitive returns to investors."

J.P. Morgan committed $10 million and TIAA-CREF $7 million to the fund, according to LeapFrog.

It's all very well for these executives to be proud about a social mission, and if that's what it takes to recognize the business viability of microinsurance, then it's all to the good. However, if microinsurance is indeed a viable business, then we should look forward to companies like J.P.Morgan touting its profitability rather than emphasizing its social value. Charity may or may not be effective, but a business proposition that truly benefits both parties to the deal will ensure that capital will continue to flow to places where it can do great good.If microinsurance is indeed a viable business, then we should look forward to companies like J.P.Morgan touting its profitability rather than emphasizing its social value. Charity may or may not be effective, but a business proposition that truly benefits both parties to the deal will ensure that capital will continue to flow to places where it can do great good.

ABOUT THE AUTHOR
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek ...