Country: Ghana

The potential of the cell captive structure for sub-Saharan Africa

Our partner for our Risk, Remittances and Integrity Programme – Cenfri, produced a study that explores the potential role of cell captives in the development of insurance markets in sub-Saharan Africa (SSA).

What is cell captive insurance?

Cell captive insurance is a relatively new concept that grew out of the captive insurance concept. Captive insurance is a model where a corporate entity self-insures its own assets by setting up its own dedicated insurance license. The cell captive concept follows a hub-and-spoke model whereby one central licensed insurer (referred to as the “sponsor” or “promoter”) forms ring-fenced cells issued to other organisations (referred to as the “cell owners”) for the insurance of the cell owner’s own assets or the insurable risks of its client or membership base.

The cell captive insurer is accountable for all regulatory compliance and holds the insurance license that covers the business of all the cells. The cell captive structure thus emerged as a way entity to access the benefits of captive insurance without setting up its own insurance company. Cell captives have been one of the most important steps in the evolution of the captive insurance space and have become an integral component of the self-insurance market in many of the established captive domiciles.

A cell captive in practice

In Ghana, a recent insurance diagnostic study by Cenfri (2018) showed that certain sectors of the economy (such as oil and gas or the energy sector) are unable to fully access appropriate insurance policies from the local insurance industry due to the market’s lack of capacity to cover large, specialised risks. This situation is likely to continue with the expected increase in the growth of the Ghanaian oil and gas sector. At the same time, local content requirements imply added costs and procedures for local corporates to access foreign cover. Cell captive arrangements could, in principle, address this constraint by allowing corporates to capitalise a cell accounto self-insure their risks via a cell captive arrangement, tailoring the coverage to meet their specific needs. Should this be the case, the cell captive arrangement would be hosted by a local insurer licensed for this purpose, with centralised reinsurance arrangements as appropriate, and would serve to crowd in capital from the large players in the extractive industries for each cell.

At present, cell captives, have yet to be extensively explored or implemented across the SSA region. Cell captive innovations in SSA are largely concentrated in S.Africa, Mauritius, Namibia and Seychelles.  An example from S. Africa is the SA Taxi which is a company that provides credit to finance the purchase of minibus taxis. SA Taxi decided to branch out into the provision of insurance cover to its clients. It wanted autonomy in the design of its offering to fit the realities of its particular customer base but lacked in-house insurance experience and expertise and therefore acquired a cell with trong>Guardrisk, the largest South African cell captive insurer, rather than set up its own insurance license.

Read more on how cell captives could stimulate insurance markets in sub Saharan Africa here.

CAHF 2017 housing finance in Africa yearbook (8th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2017 Housing Finance in Africa Yearbook.

The eighth edition of the Housing Finance in Africa Yearbook covers 54 African countries and five regions – an addition of three country profiles this year. CAHF have again sought out new data and refined our approach to the affordability graphs. CAHF have been monitoring the news so that the 2017 Yearbook reflects the current situation of housing finance markets on the African continent.

Download the yearbook here.

CAHF housing finance in Africa yearbook 2016 (7th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2016 Housing Finance in Africa Yearbook.

The seventh edition of the Housing Finance in Africa Yearbook covers 51 African countries and five regions – an addition of three country profiles this year. CAHF have again sought out new data and refined our approach to the affordability graphs. CAHF have been monitoring the news so that the 2016 Yearbook reflects the current situation of housing finance markets on the African continent.

Download the yearbook here.

CAHF housing finance in Africa yearbook 2015 (6th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2015 Housing Finance in Africa Yearbook.

Innovation in housing finance –in terms of products, players, and approaches, not to mention target markets – is a key feature across the continent, creating new opportunities for investment and delivery. As both local and international investors chase growth opportunities in a sluggish global economy, they are employing diversification strategies to manage the risks of their traditional targets – and in this, residential property is increasingly becoming an option. And while established players are getting better at what they do, new players are adding to the mix and competing for opportunities.

Investors are faced with a paradox, however. By their very nature, they are drawn to the high income markets. It is in these markets that they can price adequately for risk and realize the returns they seek. However, the real story – the scale opportunity just waiting to be cracked – is in the lower income market segments. The arguments for investment in residential – high urbanization rates, a growing middle class, a shortage of supply – these are all arguments for moving down market into the uncharted waters of affordable housing. Can investors and developers do it? In 2015, this is a very real focus.

Five stories characterize Africa’s housing finance markets in 2015:

1. Innovation in financing
2. Growing awareness of the opportunity in residential
3. The identification of niche markets and an appreciation of the affordability challenge
4. Policy & regulatory evolution to match investor interest
5. Growing experience and investor sophistication

Of course, the challenges are not insignificant. But increasingly, investors and developers are noting that the potential benefits outweigh the risks. And, as governments come to appreciate the potential that this interest offers, their efforts to streamline development processes and enable their local housing markets to grow are creating new opportunities that are beginning to change the face of African cities.

This is the sixth edition of the Housing Finance in Africa yearbook. Since last year, CAHF have added five country profiles and one regional profile bringing the total to 48 country profiles and five regional profiles. CAHF have again sought out new data sources, and rethought their approach to the affordability graphs. CAHF have been monitoring the news so that this yearbook reflects the current situation of housing finance markets on the African continent in 2015.

The Yearbook is intended to provide housing finance practitioners, investors, developers, researchers and government officials with a current update of practice and developments in housing finance in Africa, reflecting the dynamic change and growth evident in the market. It is hoped that it will also highlight the opportunities available for new initiatives, and help practitioners find one another as they strive to participate in the sector. While the general aim of the Yearbook is to offer a broad overview of housing finance and housing development in Africa, special emphasis is placed on the key challenge of housing affordability, and the critical need for housing products and finance that are explicitly targeted at the income profiles of the majority.

This has been a desktop study. Using the CAHF’s research as baseline material, further information on more recent developments was accessed from media reports, journal articles and practitioner websites. In some cases, material was shared with in-country practitioners. Of course, the yearbook is not comprehensive, neither in the scope of countries covered nor the data provided. It is intended as an introduction, with the hope that the detail provided will whet the appetite for more. CAHF invites readers to provide comment and share their experiences on what they are doing in housing finance in Africa.

Download the yearbook here.

An empirical risk assessment of savings groups

FSD Africa’s partner, the SEEP Network has published a new Learning Brief. The purpose of this risk assessment is to identify and assess the main risks that affect Savings Groups – based on the frequency and severity of negative outcomes – and ultimately inform the development of targeted consumer protection initiatives for Savings Groups. The study – based on a survey of 1,600 groups, individual members, trainers and community stakeholders in four Sub-Saharan African countries – identifies and explores several risk factors related to group survival, membership, training and support, governance, saving and lending, and safety of group assets.

The study examines several observed risks that merit attention from stakeholders who are creating and supporting Savings Groups; and the findings serve as an initial evidence base on which to monitor, investigate and address the risks faced by Savings Groups.

The learning brief can be downloaded here.

Savings groups and consumer protection: government regulation, rules and guidelines

What role do governments play in protecting Savings Groups as financial service providers and their members as financial consumers? This brief paper assesses emerging government efforts to regulate and register Savings Groups in Sub-Saharan Africa. Most of the regulatory developments identified in this report are quite recent and formal evaluations of their impact are not yet available. Despite the limited evidence, the trend merits further discussion: the regulation of Savings Groups has important implications for market and development actors, and the rights and responsibilities of groups and members.

Download the SEEP Network case study here.

CAHF 2018 housing finance in Africa yearbook (9th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2018 Housing Finance in Africa Yearbook

The 9th edition of the Housing Finance in Africa Yearbook covers 54 African countries and five regions, and is produced in both English and French. Targeted at housing finance practitioners, investors, developers, researchers and government officials, the 2018 Yearbook provides an up-to-date review of practice and developments in housing finance and delivery in Africa, reflecting the dynamic change and growth evident in the market of each country over the past year. In addition to 54 country chapters, regional profiles for Southern, West, North, Central and East Africa discuss trends and provide useful reviews of regional developments, including infographics to present and summarise critical data points, including mortgage lending terms, the price of the cheapest newly built house, and rankings on the ease of doing business.

The publication is produced annually by FSD Africa’s partner, the Centre for Affordable Housing Finance (CAHF), with the contributions of over 30 local experts throughout the continent.

This year, CAHF focus on the theme of innovation, and highlight the examples of innovation that can be found along each link in the housing value chain, as government, the private sector, households and communities find their places in the housing ecosystem. Each of these innovations is identifying a market niche and then working with the opportunities provided by new technologies, adaptive experience, and entrepreneurial curiosity to develop real products and services that are essentially creating brand new markets. Innovation along the value chain and at the local level is making headway and creating precedent that is bankable. The 2018 Yearbook highlights these potential investment opportunities available in each country context, and helps practitioners find one another as they strive to participate in, and advance, the sector.

Download the yearbook here.

Blockchains and distributed ledger technology can reduce the cost of remittances to Africa

Nairobi, Monday 14th August 2017 – The volume of remittances to Africa is growing year by year but prices for international transfers are still relatively high. Blockchain and Distributed Ledger Technology (DLT) can assist to; reduce the cost of remittances, increase speed of settlement, reduce settlement risk, decrease entry barriers for financial institutions, improve the interoperability of different financial instruments and enhance the regulatory frameworks that oversee funds transfers such as Know Your Customer (KYC) and Anti-Money Laundering (AML) processes.

This is according to a new report, entitled ‘Blockchains, Distributed Ledgers and Funds Transfers: An Overview’, published today by the Financial Sector Deepening Africa (FSD Africa) in partnership with Consult Hyperion. The report states that DLT presents opportunities for new ways of performing funds transfers, payment settlement and regulatory oversight, due to its decentralised, replicated and transparent nature.

It comes at a time when FSD Africa has just released a report on ‘Reducing Costs and Scaling UP UK to Africa Remittances through Technology.’ The report finds over 1 million people born in Africa and living in the UK are paying more than £300 million a year to send money to friends and family back home. Nine out of ten send money through agents and just one in ten send money digitally, which makes Africa the most expensive place to send money in the world.

Commenting on the report, Salome Parulava, Associate Consultant at Consult Hyperion and the author of the report said: “Blockchain and DLT can provide a foundation for needed infrastructural changes in expensive and inflexible funds transfer models. But although opportunities are promising, there are many issues that arise when considering the widespread adoption of the technology, which should be taken into account. The report aims to give an overview of both benefits and problems of the DLT usage in funds transfers.”

The report concludes that, DLT has the potential to act as a reliable ‘store’ of identity information available in near real-time and as a generator of dynamically changing identity attributes (such as creditworthiness). However, this is not straightforward. Reliability comes from intrinsic DLT characteristics (such as amend-only transaction history across parties and cryptographically secured transactions), but not exclusively from them.

To ensure trust and reliability, it is important that DLT solutions are developed in accordance with national laws and security standards, and take into consideration the views of all stakeholders.