Photos at http://picasaweb.google.com/africanjones2go/AfricaPics#
We began today with a trip out to the University of Ghana to meet the professor we have been working with in collecting rainfall and crop data. Photos of the University of Ghana and us our meeting on a patio at a campus restaurant (under an umbrella). The campus is huge!! They actually have taxis that just take people around campus.
As we talked, I realized how fortunate we had been in choosing to work with her. I located her through an actuarial grad student from Ghana. She had been her math professor in her undergraduate studies. (Thanks Genevieve!!).
As she went through the data with us, she told us the story of how it was collected, where the data came from, and how reliable each data set was. (Turns out that there are different types of rainfall collection stations (synoptic, climate, agro-meteorological, and simple rainfall stations and data integrity depends on which one it comes from. ) She has written a book on data collection and was explaining how things have changed in that so much more of the information is available in electronic data form now rather than just recorded in books. This was certainly a currently at this transitional stage is a story unto itself. At this point we arguably have the most comprehensive and data set available in Ghana.
I think it is promising that given the electronic data now available, and how the data could become easily accessible in the future with a few enhancements in the system (such as adding new, faster computers at certain collection points and formalizing the data collection protocol) a market could develop as investors could rely on the ability of the system to provide quick feedback on the data in order to determine the appropriate level of indemnification. In addition to a private contract, Ghana has a developing stock market that might also be able to provide some capital. Will look into that later.
For the rest of the day, a business developer in Ghana, who happens to be the father of yet another actuarial student at ISU that works with me (yes the odds of that are quite fantastic), took us around in his air-conditioned car. (Thanks for setting this up Mukthar!!!). Our first stop was with an executive at Bank of Ghana who talked to us about rural banks. The bank of Ghana provides loans to these banks that in turn make loans to the various communities throughout Ghana. A typical rural bank might be comprised of about 2500 loans. This would be broken down into around 100 groups, with about 25 members in each group. The group usually has some common interest such as farming, or handcrafts, or small stores. The average amount of a loan is 200 CETIs ($150). Most of the people receiving loans are women. Each of the 25 members selects their executive, secretary, and treasurer. The group meets once a week to collect their payments (principal and interest) and they usually handle the situations where some person falls behind. The Ghana bank then collects the loans payments from each of the groups weekly. Although the default rate on loans is very low, the bank is interested in the concept of having some kind of an indexed-based product to provide protection to rural banks, especially in the north where the rainfall is a bit more variable. They set up a meeting with us for tomorrow to meet with the APEX organization that has loans from many banks like Bank of Ghana loans, including some from the government itself. The postcard view of downtown Accra with the impressive, ship-shaped building and the ocean in the background was taken from the bank. The building in the picture is their performing arts theater. I left one of our nice ceramic coasters with the rendering of the ISU College of Business building on it. It was a perfect gift as it could be used as a paperweight too. They still have fans and open windows there, so they have lots of paperweights.
Our next stop was at the Social Security National Insurance Trust (SSNIT) where we met with an actuary who had gone to school at Ball State. is like the SSA in the U.S. He explained that 18 percent of the income of workers is set aside for retirement benefits, disability (which they call invalidity) benefits, and survivor benefits. What was most interesting is that they have recently set up an “Informal Pension System” that permits small, self employed people to contribute to the system and receive benefits. The way it works is that some employees of SSNIT go around and educate the people in the local markets about the program. The government places such an importance on these people enrolling them in the system that it pays a commission for enrolling people in the Informal Pension System. It struck me that this distribution system (which currently only exists in major cities) could be used for private life insurance too. The problem in the past was how do you distribute micro insurance? The administrative costs are too high. I will be talking to companies about this option later in the week. I met the mom Genevieve’s mom who works at SSNIT. (Your Mom says “Hi” Genevieve :-)). SSNIT is an organization that would be a good place for ISU actuarial students to work and do a study abroad/internship. It would be a great experience and valuable for everyone.
We met briefly with SIC, the largest and oldest insurance company. The CEO had to go to
another meeting so we had to reschedule that for the next day. I was impressed by how much it looked like a regional mutual company you might see in the U.S. It had nice friendly people, dressed in business suits (they actually dress much more formally than we do in the U.S. especially in air-conditioned buildings like this). I guess that is the British influence. They had their mission statements, vision statements, and photos of “Best Worker” on the wall. I could definitely see our students doing summer internships in a place like that. Will meet with them again tomorrow.
The talk among local people is the impending arrival of President Obama. He will be here June 10th. The World Cup Finals. The really big news was the Champions League Finals between Manchester United and Barcelona. Lots of people in the restaurant tonight watching the game.
Bye for now.
Jim
Wednesday, May 27, 2009
Tuesday, May 26, 2009
Day 1 Overview
May 26
Accra, Ghana
Just before bed time.
We had our first day in Accra. We went to Accra mall. (Similar to mall in Bloomington except with palm trees). We bought a phone ($20). Went to Osu market and bought some "formal" African clothes for meetings ($18). We went to Internet Cafe for some quick blogging. Then strolled around the Kwami Nkrumah Circle market (a mile of open air vendors ). Then took taxi back to hotel to meet with our contact who is arranging for us to meet with insurance companies tomorrow.
All of this is cataloged in photos at:
http://picasaweb.google.com/africanjones2go/AfricaPics#
Enjoy!
Some observations along the way:
Bye from Ghana.
Jim
Accra, Ghana
Just before bed time.
We had our first day in Accra. We went to Accra mall. (Similar to mall in Bloomington except with palm trees). We bought a phone ($20). Went to Osu market and bought some "formal" African clothes for meetings ($18). We went to Internet Cafe for some quick blogging. Then strolled around the Kwami Nkrumah Circle market (a mile of open air vendors ). Then took taxi back to hotel to meet with our contact who is arranging for us to meet with insurance companies tomorrow.
All of this is cataloged in photos at:
http://picasaweb.google.com/africanjones2go/AfricaPics#
Enjoy!
Some observations along the way:
- People here are really helpful. Everyone was so willing to go out of their way to show us around, introduce us to people, and make sure we had a good experience.
- The taxi cab driver complimented us on our negotiating with him from his original offer to take us to town for 7 Cedis to 5 Cedis. He took us all around and was very helpful.
- Everything is fairly inexpensive.
- Many taxi drivers are from war torn countries (Ghana is very welcoming of foreigners and they can find employment easily as taxi drivers) but they don't know where anything is. (Bring a cell phone and a map).
- We heard American country and western music in the restaurants (the music world is definitely flat).
- They recycle everything (and even make goods from discarded materials) I hope you wont mind the potato chip bag coin purse as a present, and they are very energy conscious (with shutoff switches on every outlet).
Bye from Ghana.
Jim
Arrived In Ghana
Day 1-May 26
Dateline Accra, Ghana
We arrived in Accra last night around 8:30 p.m. local time. We are five hours ahead of folks at ISU. The plane from London was packed. I was surprised at how many people were actually wearing business suits and sports jackets, especially since we were heading to place where it was 90 degrees (at night).Most of passengers were African but there were a few Americans going there working on projects in Ghana. I sat next to a twenty-something guy who works for Open Society Institute that promotes transparency in government (Ghana is a leader in this),and behind me was an engineering student who had developed a way to make bikes from bamboo that have the tensile strength of carbon steel. He is trying to find an investor to actually build the bikes here and ship to U.S.Only a senior in college.
Horace and I arrived without difficulty at hotel. Nice place. Inexpensive by American standards. I am blogging from restaurant connected to hotel. It is all wireless. Answered my emails earlier this morning.Very easy. Will be heading to town to exchange money, buy a wireless phone, and then make a couple of contacts. Tomorrow will be first full day of meetings.Bye for now.
Jim
Dateline Accra, Ghana
We arrived in Accra last night around 8:30 p.m. local time. We are five hours ahead of folks at ISU. The plane from London was packed. I was surprised at how many people were actually wearing business suits and sports jackets, especially since we were heading to place where it was 90 degrees (at night).Most of passengers were African but there were a few Americans going there working on projects in Ghana. I sat next to a twenty-something guy who works for Open Society Institute that promotes transparency in government (Ghana is a leader in this),and behind me was an engineering student who had developed a way to make bikes from bamboo that have the tensile strength of carbon steel. He is trying to find an investor to actually build the bikes here and ship to U.S.Only a senior in college.
Horace and I arrived without difficulty at hotel. Nice place. Inexpensive by American standards. I am blogging from restaurant connected to hotel. It is all wireless. Answered my emails earlier this morning.Very easy. Will be heading to town to exchange money, buy a wireless phone, and then make a couple of contacts. Tomorrow will be first full day of meetings.Bye for now.
Jim
Friday, May 22, 2009
Welcome to Ghana Trip 2009 blog
Welcome to my Ghana trip blog. I hope to continually update this blog as I travel through Ghana beginning May 25th through June 11th. The background on this trip, our grant, and our rationale are included in the section on the side entitled, About The Trip and Katie School Project.
We have two overarching goals for this trip.
1) Help collect data and information that will support our initial grant-funded project related to developing an indexed-based insurance project that could be used to manage risk for farmers for crop losses. I have a number of people supporting us on that including Dr. Aslihan Spaulding, an assoc. professor of Agribusiness at Illinois State University, three ISU actuarial students (two are even from Ghana), the ISU actuarial program director Dr. Krzysztof Ostaszewski, FSA, CFA, CERA, MAAA . and Dr. Danso-Manu, Chair of Math Department, at University of Ghana in Accra and Dr. Charles Quanseh, professor of agriculture and crop science at KNUST the University of Science and Technology in Kumasi. The following abstract summarizes this part of our project and the rationale behind it:
Extreme weather events impede development of agricultural production and place developing countries at risk. As the backbone of many African countries, agriculture represents 37 percent of Ghana’s GDP and 56 percent of the labor force. Climate change leading to adverse weather events such as drought and flooding now place these developing economies in even greater peril.
Currently very few pre-event risk mitigation solutions exist. Traditional individual indemnification insurance mechanisms are challenged by high transaction costs, adverse selection, poor distribution, and other challenges which have increased the costs and reduced the availability of protection. Furthermore, post-event response in the form of emergency aid, debt forgiveness, and grants are at risk following recent economic crises. Such public capital does not usually help create independent private solutions and can be inequitable and untimely.
However, one possible solution is weather-indexed insurance, a financial product based on local weather indices (like rainfall) that are correlated with local economic loss, morbidity, and mortality. This type of financial product yields payouts based on pre-determined indices which historically is correlated with economic loss and humanitarian need. This type of protection would provide greater economic stability for agricultural production and the economies of countries relying on this.
This project will collect and analyze weather event, crop loss, and other health and economic data in Ghana to develop a weather-indexed financial product that would mitigate agricultural losses.
Ghana’s stable government, yet vulnerable agricultural economy make it a good country for a weather-indexed insurance product. By reducing covariant risk the development of this insurance product would promote private capital to help not only farmers in Ghana, but farmers in more drought prone regions as well.
2) The second goal is to seek out information about future projects that could involve both ISU students and faculty related to microfinance and microinsurance. To that end, understand the risk management needs for the people and small businesses of Ghana is critical. We also need to develop partnerships that could be helpful in future projects. To assist me with this second goal, I will be travelling with Horace Melton, an assistant professor of marketing who has worked on projects involving ISU students working in emerging markets.
Our end goal is to have students doing internships/summer study abroad in Ghana working on sustainability issues like microfinance and miroinsurance. We believe that the educational experience from working in a developing country with emerging markets would be life-altering and invaluable.
We believe that in order for microinsurance to be sustainable it must be self-supporting and not reliant on the gifts of donors or foreign aid. Our hypothesis is that microinsurance is a viable, self-sustaining product for insurers and reinsurers for the following reasons (which we will attempt to corroborate with research in-country):
1. The potential market is enormous and insurers in Africa, especially Uganda, already have had some success on various microinsurance products including life and health insurance.
2. Early entrance into a country’s microinsurance market allows a company to build a brand image and establish a reputation among customers and prospects for reliable service and prompt payment. Microinsurance customers over time will move upscale to consume the brand’s higher value insurance products.
3. The microinsurance market may provide an immediate gateway to offer products to higher income markets, such as city dwelling wage earners who support relatives who are subsistence family farmers, and who cover their relatives’ losses from insurable events such as death of a family member or loss of crops.
4. An insurer may gain more regulatory leeway to enter a country’s market if also providing coverage at affordable rates for the country’s lower income market. The regulatory agencies may allow the firm to offer a broader portfolio for diverse markets if the insurer also includes coverage for the low income market. In fact, this involvement in rural microinsurance may even be a regulatory requirement for insurers.
5. The opportunity exists to form strategic partnerships to make microproducts more viable. Microinsurers and microlenders could use the distribution system and underwriting data of the microlender to insure assets purchased with the use of microcredit.
6. The potential for product innovation which could be applied elsewhere is immense.
7. Insurers benefit from positive publicity in their home market because of their efforts to combat poverty through sustained risk management commerce in developing countries.
We certainly wish to respect the traditional culture of Ghana and we will be meeting with tribal chiefs as well as government officials and business people to help make sure that we have an appropriate respect for their traditions and incorporate those into our project ideas. There are plenty of things that we can learn from African society that would benefit us in the Western World.
I hope you will follow this blog as I travel through Ghana meeting with people along the way.
-Jim Jones
Director-Katie School of Insurance
Katiepedia.com
africanjones2go@gmail.com
We have two overarching goals for this trip.
1) Help collect data and information that will support our initial grant-funded project related to developing an indexed-based insurance project that could be used to manage risk for farmers for crop losses. I have a number of people supporting us on that including Dr. Aslihan Spaulding, an assoc. professor of Agribusiness at Illinois State University, three ISU actuarial students (two are even from Ghana), the ISU actuarial program director Dr. Krzysztof Ostaszewski, FSA, CFA, CERA, MAAA . and Dr. Danso-Manu, Chair of Math Department, at University of Ghana in Accra and Dr. Charles Quanseh, professor of agriculture and crop science at KNUST the University of Science and Technology in Kumasi. The following abstract summarizes this part of our project and the rationale behind it:
Extreme weather events impede development of agricultural production and place developing countries at risk. As the backbone of many African countries, agriculture represents 37 percent of Ghana’s GDP and 56 percent of the labor force. Climate change leading to adverse weather events such as drought and flooding now place these developing economies in even greater peril.
Currently very few pre-event risk mitigation solutions exist. Traditional individual indemnification insurance mechanisms are challenged by high transaction costs, adverse selection, poor distribution, and other challenges which have increased the costs and reduced the availability of protection. Furthermore, post-event response in the form of emergency aid, debt forgiveness, and grants are at risk following recent economic crises. Such public capital does not usually help create independent private solutions and can be inequitable and untimely.
However, one possible solution is weather-indexed insurance, a financial product based on local weather indices (like rainfall) that are correlated with local economic loss, morbidity, and mortality. This type of financial product yields payouts based on pre-determined indices which historically is correlated with economic loss and humanitarian need. This type of protection would provide greater economic stability for agricultural production and the economies of countries relying on this.
This project will collect and analyze weather event, crop loss, and other health and economic data in Ghana to develop a weather-indexed financial product that would mitigate agricultural losses.
Ghana’s stable government, yet vulnerable agricultural economy make it a good country for a weather-indexed insurance product. By reducing covariant risk the development of this insurance product would promote private capital to help not only farmers in Ghana, but farmers in more drought prone regions as well.
2) The second goal is to seek out information about future projects that could involve both ISU students and faculty related to microfinance and microinsurance. To that end, understand the risk management needs for the people and small businesses of Ghana is critical. We also need to develop partnerships that could be helpful in future projects. To assist me with this second goal, I will be travelling with Horace Melton, an assistant professor of marketing who has worked on projects involving ISU students working in emerging markets.
Our end goal is to have students doing internships/summer study abroad in Ghana working on sustainability issues like microfinance and miroinsurance. We believe that the educational experience from working in a developing country with emerging markets would be life-altering and invaluable.
We believe that in order for microinsurance to be sustainable it must be self-supporting and not reliant on the gifts of donors or foreign aid. Our hypothesis is that microinsurance is a viable, self-sustaining product for insurers and reinsurers for the following reasons (which we will attempt to corroborate with research in-country):
1. The potential market is enormous and insurers in Africa, especially Uganda, already have had some success on various microinsurance products including life and health insurance.
2. Early entrance into a country’s microinsurance market allows a company to build a brand image and establish a reputation among customers and prospects for reliable service and prompt payment. Microinsurance customers over time will move upscale to consume the brand’s higher value insurance products.
3. The microinsurance market may provide an immediate gateway to offer products to higher income markets, such as city dwelling wage earners who support relatives who are subsistence family farmers, and who cover their relatives’ losses from insurable events such as death of a family member or loss of crops.
4. An insurer may gain more regulatory leeway to enter a country’s market if also providing coverage at affordable rates for the country’s lower income market. The regulatory agencies may allow the firm to offer a broader portfolio for diverse markets if the insurer also includes coverage for the low income market. In fact, this involvement in rural microinsurance may even be a regulatory requirement for insurers.
5. The opportunity exists to form strategic partnerships to make microproducts more viable. Microinsurers and microlenders could use the distribution system and underwriting data of the microlender to insure assets purchased with the use of microcredit.
6. The potential for product innovation which could be applied elsewhere is immense.
7. Insurers benefit from positive publicity in their home market because of their efforts to combat poverty through sustained risk management commerce in developing countries.
We certainly wish to respect the traditional culture of Ghana and we will be meeting with tribal chiefs as well as government officials and business people to help make sure that we have an appropriate respect for their traditions and incorporate those into our project ideas. There are plenty of things that we can learn from African society that would benefit us in the Western World.
I hope you will follow this blog as I travel through Ghana meeting with people along the way.
-Jim Jones
Director-Katie School of Insurance
Katiepedia.com
africanjones2go@gmail.com
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