Saturday, December 28, 2019 / 08:35PM / By Ekerete
Ola Gam-Ikon* MNIM, CPP / Header Image Credit: The Sherpa Project
In most developing economics especially across
Africa and Asia, huge support systems exist attempting to provide better
livelihood for their expansive populations and more investments have been
planned for the next decade. Indeed, these support systems are becoming
sub-sectors in most countries as their contributions to their respective Gross
Domestic Product (GDP) are now in the conversations of global economic analysts.
Diaspora remittances, intervention schemes of
governments, contributions by socially motivated groups and politically
sponsored programmes mostly make up what comes into these support systems.
Lives are actually transformed in many cases and the persons affected never
think they will return to their previous lives for any reason besides the
deliberate act of the "givers and providers" to stop their good deeds.
The Size
According to the World Bank's Migration and
Development Brief published in April 2019, "annual remittance flows to
low- and middle-income countries reached $529 billion in 2018, an increase
of 9.6 percent over the previous record high of S483 billion in 2017."
The report also stated that "among
countries, the top remittance recipients were India with $79 billion,
followed by China ($67 billion), Mexico ($36 billion), the Philippines
($34 billion), and Egypt $29 billion)."
Then the brief noted "Remittances to
Sub-Saharan Africa grew almost 10 percent to $46 billion in 2018,
supported by strong economic conditions in high-income economies. Looking at
remittances as a share of GDP, Comoros has the largest share, followed by the
Gambia, Lesotho, Cabo Verde, Liberia, Zimbabwe, Senegal, Togo, Ghana, and
Nigeria."
In Nigeria, the Central Bank of Nigeria, last
October clarified that diaspora remittances was $2.6 billion and not S26
billion as widely reported in the media.
Notwithstanding, the sums attributable to
diaspora remittances coupled with internally generated funds from social and
political programmes means we have supported ourselves to undertake numerous
ventures.
The Application of
the Funds
A cursory examination of the projects that
attract diaspora remittances and other contributions in developing economies
like Nigeria reveal that most go to meet immediate needs while relatively
little are committed to long-term investments, commonly building assets (homes
and to some extent, infrastructure). Recently, real estate development
financing, not personal homes development, have dominated discussions between
those in diaspora and their friends and relatives at home.
This relatively active flow of funds through
diaspora remittances are expected to exceed foreign direct investments and
development funds in future as more countries are developing better regulatory
framework for them.
A very important benefit to be derived from
these support systems we have come to rely on will be the attainment of some of
the Sustainable Development Goals (SDGs), IF AND ONLY IF the principles and
practices of insurance are applied.
Enriching the
Cycle of Poverty
Due to the fact that most of the inflows from
diaspora remittances, government's intervention schemes, socially motivated
contributions and politically sponsored programmes are used to maintain
consumption lifestyles with little investment in economic activities that boost
our GDP, we actually end up enriching the cycle of poverty in Nigeria and
Africa!
Just if insurance was deliberately added to
these support systems, not only will the level of dependency reduce but also
the likelihood of sustainability will increase as more people will exit such
programmes to allow others join.
Let me explain...
Invest in Insurance
Insurance is a legal framework for Nigerians and
Africans in diaspora and others that are contributing to the support systems to
see better articulated outcomes and meaningful impact.
Consider some of these "immediate
needs" that these inflows support: children education, trading,
micro-infrastructure development, healthcare, association levies, building of
worship centres and social activities including wedding, giving traditional
titles etc.
For example, the beneficiaries could be enlisted
in a short-term insured entrepreneurship programme where
some of the inflows are put in investment plans
offered by financially solid insurance companies that will enable beneficiaries
get lump sum payouts at expiration that can be used as start-up capital.
Also, the beneficiaries could rather be enrolled
in health plans offered by credible Health Management Organisations (HMOs) to
address the rampant reports of "Papa is sick and we have no money to take
him to the hospital" and more.
This will not only improve the condition of the
insurance industry in Nigeria and Africa knowing that there will be demands for
the right behaviours to be displayed by insurance operators especially with
respect to claims settlement but also the public apathy towards insurance will
change positively as people will begin to enjoy the real benefits of insurance
as we see in advanced economies.
Whatever we are trying to do to help our people
live better lives or in better conditions, in my opinion, are hidden in
insurance and we now need to unpack it to reach those benefits and consciously
avoid the current system that feeds the cycle of poverty.
Interestingly, there are successful models in
Asia, specifically China and India (leading remittances recipients), that we
can adapt, thanks to the emergent digitization and insurtech ecosystem.
We can rejig and return to our "wealthy
ways" by adding insurance to the support systems we are increasingly
relying on into the future.
About The Author
Ekerete Olawoye
Gam-Ikon, MNIM, CPP is a
management consultant with specialization in Strategy and Insurance. He can be
reached vide telephone on +234-806-648-1111 and +234-802-585-0344 or by e-mail
vide olagamola@gmail.com
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