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.
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 firstname.lastname@example.org
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