Technical Assistance Democratic Socialist Republic of Sri Lanka: Microinsurance Sector Development

In order to receive support in rehabilitating conflict- and tsunami- affected areas, and to supplement the on-going Asian Development Bank (ADB) assistance for the Rural Finance Sector Development Program (RFSDP), the Sri Lankan Government proposed an advisory technical assistance (TA) grant that would mitigate risks for poor and low-income households and facilitate their economic recovery and rehabilitation. This technical assistance (TA) report reflects the understanding reached by the ADB fact-finding mission with the Sri Lankan Government on the objectives, scope, cost, financing, implementation arrangements and terms of reference of the TA. The report describes:

• The issues that the TA addressed, such as:
  • The lack of access to formal institutional mechanisms of risk mitigation for the poor;
  • The lack of regulation of informal insurance schemes;
  • Reasons for the scarcity of insurance services for the poor;
  • The need for a policy review and amendments based on successful international experiences.
• The potential impact and outcome of the TA, that include:
  • Improved risk mitigation and reduced vulnerability of the poor with a focus on the tsunami- and conflict-affected areas;
  • A better understanding of microinsurance as a poverty alleviation tool.
• The TA methodology and key activities that include:
  • Policy and legal review;
  • Market assessment;
  • Awareness campaigns;
  • A pilot microinsurance scheme.

The report also discusses the cost and financing of the TA and its implementation arrangements. It concludes with the President's Decision to support the TA program.