In a country like Pakistan, where a large section of the population grapples with economic uncertainty, microinsurance plays a pivotal role in providing financial security and peace of mind to those who need it the most.

The Importance of Microinsurance in Pakistan

Pakistan has a population of over 240 million, and a significant portion of its people live below the poverty line. According to the World Bank, nearly 24% of the population lives on less than $1.90 or PKR 520 a day.

Due to financial constraints, traditional insurance policies are often inaccessible to these low-income groups, exposing them to common risks like health, accidents, natural disasters, and loss of livelihood.

Microinsurance plays a crucial role in providing financial security to low-income families. By offering a range of affordable insurance products tailored to their specific needs, microinsurance helps these families protect themselves against various risks. 

These products cover life, health, agriculture, and asset protection, empowering people to manage unforeseen challenges and recover more easily from financial setbacks.

 Current Landscape of Microinsurance in Pakistan

Pakistan’s microinsurance sector is experiencing slow but steady growth. The Securities and Exchange Commission of Pakistan (SECP) has established a well-structured and supportive framework for microinsurance providers within the country’s insurance industry. 

This has paved the way for local insurance companies and microfinance institutions to make substantial progress in offering accessible insurance products to the underserved population.

1. Life and Health Microinsurance

In Pakistan, life and health microinsurance are necessary to protect low-income households. Life insurance policies provide financial support to the policyholder’s family in the event of their death, ensuring that they have a safety net during a difficult time. 

On the other hand, health microinsurance is designed to cover medical expenses, including hospitalizations and surgeries. Microinsurance products offer peace of mind and financial security to those who may otherwise struggle to afford such essential services.

2. Agriculture Microinsurance

Agriculture is crucial to Pakistan’s economy, but it faces risks like droughts, floods, and market volatility. Microinsurance helps farmers by providing coverage for crop failures and livestock losses.

The adoption of agricultural microinsurance is still in its early stages, but the government and NGOs are actively promoting it. Key players like the National Insurance Company Limited (NICL) and Zarai Taraqiati Bank Limited (ZTBL) offer crop insurance schemes to enhance the farming community’s resilience.

3. Asset Microinsurance

Asset microinsurance covers small-scale assets, such as livestock, vehicles, or business equipment, that are crucial for the livelihoods of low-income families. Many individuals in rural Pakistan depend on livestock or small businesses to make a living, and the loss of such assets can be devastating. 

Asset microinsurance offers financial compensation for loss or damage, enabling families to recover and continue their economic activities.

 Key Players in Pakistan’s Microinsurance Sector

Several players provide microinsurance in Pakistan, ranging from local insurance companies to microfinance institutions and NGOs.

Many microfinance institutions, such as the Kashf Foundation and Khushhali Microfinance Bank, offer bundled microinsurance with their loan products, serving millions of clients with life, health, and agriculture insurance coverage.

Telecom Providers: As mobile technology becomes more prevalent, telecom companies like Jazz and Telenor Pakistan are teaming up with insurance firms to provide mobile-based microinsurance products. 

These services enable customers to easily sign up for affordable insurance policies using their mobile phones, thus making insurance more accessible to rural populations.

Challenges in Microinsurance in Pakistan

While microinsurance holds great promise, the industry faces several challenges in Pakistan that must be addressed to reach its full potential.

 1. Low Awareness and Trust

Most Pakistanis know little about insurance or its benefits, making it difficult for microinsurance to become widely used. Also, people in rural areas don’t trust financial institutions, as formal financial services are limited.

Solution: Microinsurance uptake can be achieved through educational campaigns and engaging trusted community leaders. The government, NGOs, and insurance providers must collaborate to educate people about the significance of insurance and how it can protect their livelihoods.

 2. Affordability and Product Customization

While microinsurance is designed to be affordable, even its small premiums can be a financial burden for many low-income families. Additionally, many insurance products are not well-tailored to the specific needs of the population they aim to serve.

Solution: Insurers should develop highly customizable and flexible products regarding payment options. For instance, offering microinsurance on a pay-as-you-go basis could make it more accessible for people with fluctuating incomes.

 3. Distribution Challenges

Reaching Pakistan’s rural and remote areas poses a significant challenge for microinsurance providers. Traditional distribution channels are often ineffective, and many people in rural areas do not have access to formal banking systems.

Solution: Leveraging mobile technology and digital platforms can help overcome these distribution challenges. Telecom providers can offer mobile-based microinsurance to extend insurance products’ reach to the most underserved areas. 

 4. Regulatory and Policy Barriers

The regulatory structure for microinsurance in Pakistan is still under development. While the SECP has made efforts to promote microinsurance, more must be done to create a conducive regulatory environment that encourages innovation and competition in the market.

Solution: The SECP and government should continue to refine regulations that make it easier for insurance providers to enter the microinsurance space. 

 The Future of Microinsurance in Pakistan

Despite the challenges, the future of microinsurance in Pakistan looks promising. As the government, financial institutions, and telecom companies continue to collaborate, we can expect to see innovative solutions that address the specific needs of Pakistan’s low-income population. 

Increased adoption of mobile-based insurance products and greater regulatory support will likely drive the sector’s growth. Microinsurance has the potential to protect individuals and families from financial shocks and contribute to broader economic development by creating a more secure and inclusive financial system.

 Conclusion

Microinsurance in Pakistan is at a pivotal stage. Despite the progress made in expanding access to insurance for low-income families, significant challenges remain. 

Addressing these challenges demands joint efforts from all stakeholders, including the government, financial institutions, telecom companies, and NGOs. 

With the right support and innovation, microinsurance can become a powerful instrument for improving the financial security of Pakistan’s most vulnerable populations.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post Pakistan & Microinsurance: Where Are We Right Now? appeared first on Smartchoice.pk.

Microinvesting in Pakistan is just starting to take off, with several banks facilitating microinvesting through their banking apps. Notable amongst these are the Zindagi app by JS Bank, as well as the HBL, and Meezan banking apps, which facilitate investments in their mutual funds through their bank accounts. These allow users to invest small amounts, as low as PKR 1,000 into their stock or mutual fund accounts. 

This guide will give you a thorough understanding of micro-investing in Pakistan and outline its advantages. 

What is Micro-Investing?

Micro-investing is a method of slowly accumulating savings by investing small amounts of money. It’s similar to collecting spare change in a digital format and then using it to grow your investments. 

On international platforms, users can link their debit cards to their accounts. Whenever they make a purchase, the app automatically rounds up the transaction to the nearest dollar and invests the leftover change into a designated investment account. This allows people to invest small, manageable amounts over time, ultimately contributing to their long-term financial goals.

Micro-investing is a strategy that involves regularly investing small amounts of money over time. Unlike traditional investing, which typically requires larger sums of capital, micro-investing allows individuals to start with as little as a few thousand. This approach is especially attractive for beginners in the world of investing or for those with limited funds to allocate towards investments.

 The Benefits of Micro-Investing

Micro-investing has gained popularity in recent years due to its unique advantages, especially for individuals new to investing or with limited funds. Here’s a detailed look at the key benefits of micro-investing:

Accessibility:

One major advantage of micro-investing is that it enables you to start with very little money. Traditional investing often demands significant initial capital, which can be a hurdle for many. 

Micro-investing platforms, on the other hand, permit you to start with as little as a few thousand, thus making investing accessible to a wider audience.

Diversification:

While many international micro-investing platforms offer diversified investment options, which helps reduce risk and increases the potential for steady growth.  In Pakistan, we are currently restricted to stocks and mutual funds and cannot spread our money across multiple investment options.

Affordability:

With micro-investing, you can begin investing with very little money. This makes it possible for anyone to start building their wealth, even if they can only contribute small amounts at a time. with the use of banking or investing apps, you can transfer a few thousands into your investment account and earn some additional profit from it. 

Smaller Investments: 

Since micro-investing involves small amounts of money, the financial risk is relatively low. This makes it an excellent option for those who are risk-averse or just starting their investment journey. It allows investors to gain experience and confidence without fearing losing a significant sum of money.

Learning Opportunity:

Micro-investing serves as a practical learning tool. With minimal financial risk, investors can experiment with different investment strategies and learn about the market’s dynamics without the pressure of substantial financial loss.

Consistent Savings Habit:

Micro-investing encourages a consistent savings habit. By investing small amounts regularly, you can develop a disciplined approach to saving and investing, which can pay off in the long run. 

A word of advice: don’t be unsettled by reductions in your investment amount over the short term; it is part of standard stock and mutual fund market fluctuations.  

How to Get Started with Micro-Investing

Unfortunately, there is currently no organized or official micro-investing platform in Pakistan. Most of the apps available require that you open an account with the financial service provider or register with the mutual fund. 

After this, micro-investment can be easily done through the many mutual fund apps, which usually require an initial deposit of PKR 5,000 and monthly contributions of as low as PKR 500. This can be done both through physical visits and through phone apps.

Why Micro-Investing is Important

Micro investing is at the takeoff stage, with many financial institutions beginning to explore avenues for offering investment options for small investors. There are multiple options for large-sum investors like fixed-income certificates, the evergreen SSCs, and DSCs, the small denominations of which are also good options for micro-investments. 

Large investors can also invest in the Stock Exchange, buy prize bonds, SSCs, DSCs, and invest in gold and real estate. Microinvesting allows individuals with smaller amounts to invest and with smaller risk appetites to invest their capital safely. 

Whatever the avenue you choose, the following tips will help you grow your micro-investment pool steadily.

1. Start Small and Be Consistent:

Don’t worry about investing large sums of money right away. Start small and focus on consistency. Over time, these small investments can grow to a sizable amount. 

2. Take Advantage of Educational Resources:

Many micro-investing platforms offer educational resources like articles, videos, and webinars. Utilize these resources in the Pakistani context to learn more about investing and make informed decisions.

3. Be Patient:

Investing is a long-term game. Be patient and avoid making impulsive decisions based on short-term market fluctuations. Stick to your strategy and allow your investments to grow over time.

Conclusion

Micro-investing is an excellent way for beginners to get started in investing. With low entry barriers and the ability to start with small amounts of money, it’s an accessible and effective strategy for building wealth over time. 

You can begin your journey toward financial growth and stability by choosing the right platform, setting up your account, and investing consistently. Remember to monitor your investments, stay informed, and be patient as your nest egg grows through micro-investing.

Sadia Zaheer

Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.

The post A Starter Guide to Micro-Investing: Grow Your Wealth with Small Steps appeared first on Smartchoice.pk.

Let’s get into practical and doable means by which we can manage our expenses to manage our budget and save some money. There are many options to invest money in tangible assets, but we need to do several things to control our monthly expenses as consumers. Some of these may not be practical for the city where you live, but most of these would apply to the four major cities of Pakistan. The budgeting and spending tips will apply to every place in Pakistan.

With global predictions for rising dollar rates and an IMF debt burden that is growing, we Pakistanis can expect rising inflation rates over the next two years, for the very least, as stated by the World Bank. Knowing these predictions for inflation means that we have an opportunity to lock in rates and offers for financing at present rates to avoid further increases.

1. Re-evaluate your expenses and go for a house loan

Building an asset is almost the same as having cash in hand. Property prices in Pakistan’s urban areas are rising. With the current measures for encouraging real estate and house building, many options can be explored. House loans are usually booked at fixed rates, which means that your payments will be locked at a fixed amount.

If you are living on rent, it is definite that rents will rise as inflation rises. Explore options of house loans if you have a stable source of income and look for places where your loan installment would match or be less than your current monthly rent. If you can own the property, it is better to pick a locality with lower prices than renting in a better location where you will always be on rent. Don’t be stuck on brands and appearances and think practically. That being said, please remember to focus on areas where the property will be in demand and where the basic amenities are available, like water, electricity, gas, and sewerage.

Compared to rentals that can be increased every year, house loans are a more practical option to manage rising living costs. They offer the additional incentive of letting you earn towards an asset as you pay off your loan.

2. Explore savings options

The returns on your savings account are never enough to plan a savings fund with. To manage your earnings to save for emergencies, you must explore savings plans offered by mutual funds, insurance, and investment companies.

Saving through a financial institution should yield better returns than a savings account. Returns on money placed in savings certificates and fixed deposit accounts are better than saving accounts.

Investing in a savings plan for each of your children would mean focused savings that would yield returns as and when you need it. Most insurance companies offer policies that let you save up for children’s education and marriage expenses.

Many companies also offer options to include emergency withdrawals or to get an additional policy to cover medical expenses.

3. Finance your assets with loans

As long as you manage your debt to earnings ratio (how much debt you take in proportion to your income), taking debt to finance a strong business idea is a good choice. Keeping your debt burden manageable is while borrowing some money and starting a second revenue stream. Personal debt has the additional advantage of being tax exempt.

This exemption means that if you borrow money to buy an asset to earn form, you will end up with tax savings while building another income source and having a manageable debt payment. Many options can be chosen. You can borrow enough to get a bike and source it for delivery work like in bykea or careem.

You can also invest some funds in small scale food kiosks or carts. Or start an online e-commerce business with minimal investment. Both can be run on your own or through hired staff.

If you can access a larger loan, lease a car and use it for carpooling services to cover the additional loan amount. By the end of a few years, you will have a car of your own and a source of alternate income as well.

4. Improve your spending habits

An essential element of saving is to have a saving tendency. Knowing that costs will rise, try to keep your lifestyle simple. Try to opt for greener and healthier life choices. Instead of going to expensive malls and play areas for family outings all the time, take your children to parks and let them enjoy the fresh air and healthy fruits as snacks.

Instead of gaming and gadgets, let your older children play physical sports like cricket, football, swimming, roller skating. These hobbies require one off expenses for memberships and equipment but will have the added perk of making your child and yourself physically active. Most neighborhoods have sports clubs and skating parks where children can join. Your child develops a healthy hobby, and you save money by avoiding packaged indoor fun that is not healthy.

The same goes for adults. Instead of going to cinemas or restaurants for every outing, you can go for early morning or evening walks or beach drives if you live in Karachi. Many people meet up at chai hotels for tea and snacks to share.

As an incentive, start to invest the specific amount you save from eating out into a health care or education saving policy for your children. Explore insurance companies for the best possible rates and pick one that offers the best rates for monthly premium payments.

5. Be energy conscious

Commuting to work is one of the significant expenses in Pakistani cities. Look for carpooling options or office vans traveling in your route to see what works out for you. If this doesn’t work out, ensure you get a fuel-efficient car since CNG is out of the picture.

Similarly, make sure that your house is energy efficient. Get LED lights and energy-efficient devices like inverter ACs and low consumption fridges and microwaves.

Doing this is a one time expense that would reward you with lower monthly electricity bills. Yet another thing is to save on gas expenses, get solar geysers, cook meals in quicker cook options and avoid slow cooking meals.

All of the above aside, it is also important to switch off unnecessary lights, fans, and devices to cut down on unnecessary energy use.

6. Manage your grocery spending

Making savings a priority is something that we have seen our parents and grandparents do all their lives. But living in urban cities with both or single spouses working can be challenging, and many couples end up losing track of their spending habits.

Buying groceries from the nearest supermarket is always convenient but would be adding to your surplus spending list. Making a list of essentials and buying from the neighborhood grocery store or one of the larger supermarket chains will help control expenses.

Most of the larger chains offer loyalty plans that can help reduce your grocery budget. Knowing what you need and keeping to it also helps control your budget. Similarly, manage your meals so that there is variety, and no one wants to pick an eat out option.

Plan out meals for the week with the entire family’s input to have consensus, and everyone owns the menu. Set days or limits for eating out so that everyone knows when and what they will eat out if needed.

7. Don’t buy trends

The latest sweater, the trending phone model, the latest burger in town are all gimmicks to make you spend money that you shouldn’t be spending. We all get caught up in these hot items, and many of us buy them and stay out of budget. The influencers and personalities promoting their use earn at our expense.

When you need to buy clothes, buy durable, classy clothes that will always remain fashionable. A simple black or white suit is always classy for men and women.

Controlling spending allows you to save money for genuine needs and emergencies.

A basic rule of thumb is to think about what the expensive item will be worth in 6 months or a year. This is particularly effective for female clothes. Clothes that are trending and all the rage in one month are considered ‘old’ or outdated by the mid of the season. To avoid getting trapped and spending unnecessarily, buy a few mix and match items and try to avoid getting trapped in the fashion trap.

8. Be friends with sales

Those of you angry with point no. 7 above, this one is for you. Avoiding trends and staying simple is all good, but for those that can’t resist the charm of a branded price tag. Make sale shopping your new hobby. Many parents I know buy their kids’ stuff from season end sales. Doing this allows them to buy quality products at affordable prices.

Many families shop from outlet malls. They get branded goods and at low prices.

9. Spend on quality products

When you buy a long term good, like a fridge or a washing machine, buy a sturdy product. For instance, instead of buying a local machine that you will need a maid to operate, spend some more and buy an automatic. This will let you save on ongoing maid expenses as well as energy expenses.

10. Make a budget and follow it

Having a budget is a definite plus at any time of life. During inflationary times, having a budget allows you to keep track of where your money is going and which heads will take up more money in the future. For instance, if you start a family, healthcare expenses will grow along with grocery expenses. If your employer doesn’t offer pregnancy or childcare coverage, you will need to put aside money for this.

Budgeting allows you to see where your money is being spent and if you need to control it. Budgeting all expenses will highlight where you spend too much money under a particular head. For instance, if your lunch expenses are over 10,000 a month, maybe you should reevaluate your options for lunch. You can opt for a lunchbox from home or have home cooked meals delivered. Or choose both, as and how it suits your needs.

Conclusion

The high inflation rates in our society at present and the high cost of living in Pakistani cities are making it difficult for people to manage their monthly expenses effectively. However, big cities have better earning opportunities and better growth potential for young families starting their savings and earnings journey.

Following any of the tips given here can help you manage your budget and build up an additional source of income to help with living expenses. These are all options that can apply to almost all of Pakistan’s urban towns and cities.

Like many other challenges in life, inflation can be met with some common sense, some financial planning, and by making sensible, researched financial decisions. Knowing that expenses will increase and planning for this would make it easier to manage them. At this stage of the economy, it is advisable to shop around for a savings scheme with any insurance company that allows you to save for any unexpected event like a sudden illness, unemployment period and plan for the rising costs of living.

Khurram Zahid

The post 10 Practical Ways to Fight Ever Increasing Inflation in Pakistan appeared first on Smartchoice.pk.

HOW TO SHED EXCESS BAGGAGE IN YOUR LIFE?

Personal fitness targets are not the only plans this Pandemic chucked out the window where my self-isolating self couldn’t get at. Tenth Anniversary travel plans with the missus. Oh, I’m sorry are these your plans? OUT THE WINDOW! Planning to blow a little cash on yourself? Sad. OUT THE WINDOW TOO! Just keep the Window open, said the Lockdown, I want to see just how much and how fast I can take your plans and priorities, things you used to think are necessary and toss them where you can’t see them.

For me, the Covid-19 pandemic and the associated Lockdown took sandpaper to my life and started scraping. By the time the Lockdown lifted, I emerged from my home rounder in girth but leaner and slimmer in perspective and outlook. My priorities completely sandpapered down to the simplest basics. Keep my family safe and protected. Keep my family healthy. Keep my family fed and the roof over our heads.

RAYS OF HOPE

And it was surprising for both my wife and me, to learn how little we needed in our lives and in our home, to keep us healthy and happy. The Lockdown added fat to my waist, but removed it from my home, my finances, and made our lives simple again; made us all happy in a strange way. It was the rediscovery of a simplicity my family didn’t know we had lost. And in the middle of the daily, fearful stress of apocalyptic news and rising numbers and fancy graphs that signaled the end of our world, that simplicity was a gentle ray of hope for a different future, a better way of living our lives.

A STRANGE NEW WORLD

The world I have reentered is at once familiar and threatening. Things we once took for granted are now luxuries. Planning seems impossible and survival is what we seem most focused upon. Going shopping is an exercise in paranoia. The act of leaving the house and going to work feels fraught and adventurous. Simple everyday human touch and contact are now dangerous and life-threatening. So, I return to time and again to the light my family and I discovered during the Lockdown; a simpler, ascetic life filled with meaning. And filled with the kabab, imli ketchup chutney, and paratha rolls I make for the family dinner Family that have taken up residence under my belt.

HOW DO I PROTECT MY FAMILY NOW?

The magnificent beast that was the Pandemic is a shadow of its former self, cowering in my shadow by the window it used to dominate. Its once-mighty roar is a meek mewl begging for masks and social distancing, no longer as terrifying as it used to be. But I have decided to keep the window it opened ajar. The Pandemic did me favor; throwing so many things out the window and my life was the right idea. I think I can stand to throw out a little bit more. In the terror, the Pandemic inspired I’ve found something to protect and hold on to.
My wife and I are now more sensitive to other families that may also be struggling; we look for people to help, things to do. And that feels good. I’m proud of the way my family pulled out of the Lockdown more in touch with who we were as a family, with each other. A man’s home is his castle. I stand in its keep, looking over and past the moat to the gate and out to the still scary world beyond my castle walls. My thoughts are filled with protecting the people under my roof. I may still not be safe. But they must be.

THE NEW NORMAL AND ME

If I’ve learned anything from the three months past, I need to secure my family in case something should happen to me. To assume that I’m safe from COVID-19 because I eat a special leaf after each meal, live at a specific address, shove honey-coated roots up my nose, drink some spice and oil combo before I stand on my head or that I’m somehow just too special to contract this virus, is folly. So, I’m considering setting up some sort of safety net for my wife. I can scrape something together each month and put it towards funding a safety net, insurance, just in case. Life Insurance may just be the thing. I know there will never be a convenient time for my wife and me to start saving. Getting the policy right now, especially at this time with all that’s going on in the world, will mean cutting some more corners and tossing more things out the window.

But for a good cause, I think. I can hear it now – “An affordable life insurance premium on monthly installments! Now with added Covid-19 protection power!”– with a nice ad jingle.

And if nothing happens to me, I can make it out the other end with nice fat savings wrapped up in that life insurance policy and celebrate a return to some new form of normalcy. But first, I think the next thing going out the Window is greasy and fried food. Sadly.

Jalal H Curmally is an MBA by qualification, a HOD HR by profession, a BAE to his wife, and BFF to his friends. He aims to gather the remaining 16 letters then his collection of the alphabet will be complete.

Khurram Zahid

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