Explore the country and target locations of the investment opportunity.
Country
Cambodia
Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector
Education
71% adults have access to financial services, along with 59% of adults (60% females; 57% males) who have access through formal providers. 29% of adults remain excluded from access to any form of financial services (27% female; 31% males) due to an inability to fulfil the documentation requirements from formal institutions and the mismatch in return expectations of the customers. (1)
aims to enhance financial inclusion by increasing access to quality formal financial services, reducing financial exclusion of women by half from 27% to 13%, and increasing usage of formal financial services from 59% to 70% by 2025, as well as improving household welfare and supporting economic growth.(2)
With ~12% of adults (12% males; 13% females) using only informal financial services, women are more likely than men to save and access credit from informal channels or family and friends.(1) Moreover, most MFIs in the country do not offer unsecured loans to small businesses or entrepreneurs. (3)
Although access to formal financial services among Cambodian men and women is almost equal, there is a significant gender gap in loans and savings mobilization. On average, men get larger loans and deposit higher savings amount than women. Women (70%) tend to have more passive saving accounts than men (56%).(4)
The NFIS 2019-2025 provides guidance on the action plans to achieve the vision of the Royal Government of Cambodia in enhancing financial inclusion in Cambodia as stated in the Financial Sector Development Strategy 2016-2025.(2)
Financial sector is characterized by high dollarization, foreign ownership and concentration. Access to finance in Cambodia is characterized by high interest rates and the need for collaterals. Limited development of financial markets prevents investors to divest /exit their investments through an IPO.
Sub Sector
Insurance
In 2021, Cambodia’s insurance penetration was 1.1% (1.04% in 2020), and insurance density was USD 17.5 per capita (USD 16.3 in 2020).(5) Insurance policy holders (life and non-life) per 100,000 adults were 25,931 in 2017 and 24,436 in 2018. (2) ~30% of Cambodia’s 15.5 mn people were covered by social health insurance schemes in 2021.(6)
Cambodia Strategic Development Plan for Insurance Sector 2021-2030
a compulsory insurance system for motor vehicle and new insurance products will be promoted including micro-insurance products for women such as health insurance, pregnancy and childbirth insurance.
High (~60%) out-of-pocket expenditure on healthcare in Cambodia has catastrophic implications in rural areas, particularly with people forced to sell assets and borrow money from local lenders at extremely high interest rates to pay for medical expenses.
Insurance plans which are affordable and accessible for rural population can help avoid this catastrophic expenditure and protect the future of at-risk communities. (7) Furthermore, Covid-19 has undermined Cambodia’s progress in poverty reduction. Vulnerable groups such as women and migrant workers are especially at risk of health hazards.
The crisis will lead to an estimated loss of 570,000 jobs and threatens to push an additional 1.1 mn people into moderate poverty and 205,000 people into extreme poverty. Adequate health coverage and insurance can help protect vulnerable communities from being pushed into poverty. (8)
The majority of Cambodians (89% of women and 92% of men) still do not have health insurance and 95% of adults have no insurance coverage at all. Stability and rapid economic growth of Cambodia, together with an increasing demand for financial and health protection provide significant potential for growth of life and health insurance.(5)
Lack of understanding and awareness about insurance restricts the growth of the sectors in Cambodia. Many people do not trust insurance companies, and educating them about the benefits of insurance requires time and effort. People lack adequate disposable income for investing in insurance.
Industry
Insurance
Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area
Affordable Insurance Solutions
Life Insurance and General Insurance, particularly Health and Agri-Insurance for Low Income Population
Business Model
Invest in low-cost insurance solutions targeting low-income population (including life insurance and general insurance covering crop/weather protection), specific business lines or micro-insurance companies
Milvik (Cambodia) Micro Insurance Plc. or BIMA Cambodia (BIMA), founded in 2014, is a subsidiary of Milvik BIMA. It provides mobile-delivered insurance and health services. In Cambodia, they have over 500,000 policyholders, with premiums as low as USD 1 per month. They have partnered with Smart Axiata (mobile service provider) in Cambodia and have paid >USD 1.2 mn in claims.(9)
Funds raised: > 2017: USD 96.6 mn from Allianz X at pre-money valuation of ~USD 260 mn, resulting in a post-money valuation of ~USD 300 mn (10) > 2020: USD 30 mn from CreditEase Fintech Investment Fund (CEFIF), LeapFrog Investments and Allianz. (11)
Prevoir (Kampuchea) Micro life Insurance Plc (Prevoir), founded in 2011, is a micro insurance provider in Cambodia, offering health, personal, term, and credit life insurance. They offer insurance services to individuals and companies, in packages as low as USD 15 per person.
Forte Insurance, founded in 1996, is a large insurance company offering car, asset and life insurance at ~USD 0.13 a day. (14) Additionally, they also offer crop and social health insurance to serve low-income farmers [target customers with average land size of 2.5 hectares (ha)]. Its investors include Emerging Markets Investments Pte. Ltd.
Learn about the investment opportunity’s business metrics and market risks.
Market Size and Environment
Market Size (USD)
USD 100 million - USD 1 billion
Critical IOA Unit
Insurance policy holders (life&non-life) per 100,000 adults-25,931 in 2017 and 24,436 in 2018 (2)
Insurance sector contributed 1.1% to Cambodia's gross domestic product (GDP). The claims paid out to policy holders in 2020 were USD 11.3 mn. (5)
Due to Covid-19, microinsurance market in Cambodia declined by 21.7% in premiums in Q3 2020, while the overall insurance market saw an 8.2% increase in premiums compared to the same period in 2019. (12)
Indicative Return
IRR
10% - 15%
GPM
Insurance industry grew by 9.5% year-on-year (yoy), with total premium of USD 293.4 mn in 2021 (5)
Success of micro-insurance depends on a business achieving a low customer acquisition cost. BIMA has partnered with Smart Axiata to leverage its large network in Cambodia.
In 2021, gross premium of general insurance market rose by 7.4% yoy to USD 123 mn, and of life insurance market rose by 11% to USD 170.4 mn. (5)
BIMA has paid >USD 1.2 mn in claims as of 2022. (9)
Investment Timeframe
Timeframe
Medium Term (5–10 years)
As per expert consultations, businesses in this space can generate a return in 5-10 years.
BIMA was launched in 2014, and achieved a pre-money valuation of ~USD 260 mn (and post-money valuation of ~USD 300 mn after raising USD 96.6 mn) in 2017. (10)
Ticket Size
Average Ticket Size (USD)
> USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Entry costs for a new-entrant in the insurance industry is high due to reserve-requirements. Moreover, government regulations have a strong impact on operations and affect returns, especially for the category of low income clients.
Business - Supply Chain Constraints
Population that is currently underserved by insurance services and would require digital solutions with last-mile reach, is also the one with the lowest internet access (only 39% of rural households have access to internet at home, and only 21% have access to internet outside their home).
Market - High Level of Competition
As existing players, including large and well-established companies, start offering micro-insurance products, the level of competition adds to the price pressure on new entrants who are unable to bear the burden of further reduction in premium amount.
Read about impact metrics and social and environmental risks of the investment opportunity.
Sustainable Development Need
Mindset transformation is required to make people understand the importance of investing in insurance. Majority of Cambodians use their savings or credit to manage their risks, jeopardizing their financial stability when an unexpected event occurs.
Digital microinsurance platforms can provide emerging market consumers access to health and insurance services on a single, easy to use platform which can offer protection for millions of first-time buyers of insurance who would otherwise remain unprotected and at risk. (13)
Insurance penetration can increase by improving cost-effective distribution channels and the development of digitalized solutions to offer insurance products.
Gender & Marginalisation
Health insurance schemes should cover informal sector workers and dependents of formal sector workers who are currently, not covered. Since 2016, the National Social Security Fund (NSSF) has implemented a social health insurance scheme with a contributory approach for formal sector workers.
Affordable insurance products can help reach more communities, specifically unserved and underserved rural markets by expanding access and growing portfolio of products, including crop or weather insurance. (7)
Adequate insurance coverage can help assist in welfare provision where government budgets are scarce, reducing the amount of/effects of time and agricultural production lost due to illness, thereby contributing to improved economic growth. (14)
Expected Development Outcome
Reduce the impact of contingencies (reduce inequalities, mitigate production disruptions and reduce impact of disaster), particularly financial impact, by protecting families and farmers from potential indebtness.
Improve financial literacy to educate people on the importance of insurance. Cambodia ranked lowest among 143 countries in S&P Global Financial Literacy with a financial literacy rate of 18%, indicating that majority population has an impaired ability to engage in financial services. (1)
Increase insurance penetration rate by promoting digital insurance transformation which can help ensure last-mile reach.
Gender & Marginalisation
Improve financial inclusion for women by the introduction of tailored insurance products to meet the needs of women and children, who are particularly vulnerable during financial shocks.
Provide insurance that is right-sized for the economy where it's being sold (10), including critical coverage to meet the large unmet insurance demand. The need for insurance is further accentuated by Covid-19. (13)
Establish and strengthen sales and marketing channels across regions to expand access for insurance products into these previously inaccessible rural markets. (7)
Primary SDGs addressed
3 - Good Health and Well-Being
3.8.1 Coverage of essential health services
Current Value
The % of the population covered by social health protection system i.e. Health Equity Funds and Social Health Insurance schemes is 23% in baseline 2015 (15)
Target Value
The target % of the population covered by social health protection system i.e. Health Equity Funds and Social Health Insurance schemes is 50% in 2030 (15)
1 - No Poverty
1.2.1 Proportion of population living below the national poverty line, by sex and age
Current Value
17.8 % in 2020 (16)
Target Value
6% in 2030 (15)
Secondary SDGs addressed
5 - Gender Equality
8 - Decent Work and Economic Growth
10 - Reduced Inequalities
Directly impacted stakeholders
People
People gain from establishing safeguards and protection against potential losses in future. This need has further been exacerbated by Covid-19 induced uncertainties.
Gender inequality and/or marginalization
Farmers and other rural communities benefit from digital platforms which offer last mile connectivity for insurance benefits
Planet
Reduce environmental burden as companies can leverage technology with digital transformation of insurance products.
Corporates
Insurance companies stand to gain from a growing market base comprising of an expanding middle class with disposable incomes and willingness to uptake financial products.
Public sector
Inclusive finance helps underbanked and underinsured customers, and plays a role in sustainable local and national economic growth.
Indirectly impacted stakeholders
People
People benefit from increased financial security and stability in the long-run.
Gender inequality and/or marginalization
Underserved population benefits from improved financial literacy which allows them to be fully aware of their financial decisions and repercussions.
Planet
Reduction in CO2 emissions because of reduced burden on transportation services for travelling to visit customers (for agents), insurance companies (buyers).
Corporates
Profitable companies can develop new and innovative insurance based investment products to increase profitability and diversify portfolio
Public sector
Ease the burden on the government to address the needs of the population at a time of severe loss to property and life.
Outcome Risks
Premiums for micro-insurance are very price sensitive to costs such as distribution costs.
Tighter regulations for microinsurance may force insurers to play safe and stay committed to target markets, such as middle-income or high-income customer segments.
Quality and timely delivery of services provided is important to build trust in these products. The absence of these will lead crisis hit individuals, households and businesses to use out of pocket money and other negative coping mechanisms.
COVID 19 has severely impacted micro-insurance companies as many low income families could not afford to pay even small contributions for premiums. In such a scenario, returns are likely to stay low.
Gender inequality and/or marginalization risk: Vulnerable sections of society will only be able to afford low-premium based products, thus requiring more innovation in insurance product offering.
Impact Risks
Low insurance penetration would increase RGC's burden to bear the cost of providing compensation and risk cover in case of national disasters.
InsurTech platforms require strong internet connectivity. Thus, limited accessibility for insurance coverage can restrict the improvement in quality of life of the underinsured population.
Failure to adapt the product design and delivery for rural, low resource settings might see the product scaling only to high income populations.
Absence of adequate customer education could hamper policy renewal and premium payments process, leading to high dormancy rates. Absence of customer protection measures could result in data breaches.
Gender inequality and/or marginalization risk: Lack of regulation and control may result in exploitation of underserved population.
Impact Classification
C—Contribute to Solutions
What
Providing affordable insurance products to improve insurance penetration in Cambodia and safeguarding the population from potential financial losses in times of calamity.
Who
Underserved; Microinsurance benefits low-income population that cannot afford high premium policies. Farmers benefit from insurance which offers protection in case of crop spoilage.
Risk
Natural calamities causing loss of jobs may result in non-payment of premiums by vulnerable groups, while also adding the pressure on insurance companies to pay out claims.
Contribution
Despite Covid-19, Cambodia's insurance sector grew by 9.5% yoy in 2021 through the contribution of 18 general insurers, 14 life insurers, 7 micro-insurance and one reinsurance firm.(5)
How Much
Insurance policy holders (life&non-life) per 100,000 adults-25,931 in 2017 and 24,436 in 2019 (2)
Impact Thesis
Improve insurance penetration rate to mitigate financial shocks caused by unexpected events and increase financial inclusion for the underserved.
Explore policy, regulatory and financial factors relevant for the investment opportunity.
Policy Environment
Cambodia Strategic Development Plan for Insurance Sector 2021-2030: a compulsory insurance system for motor vehicle and new insurance products will be promoted including micro-insurance products for women such as health insurance, pregnancy and childbirth insurance.
Recovery Plan 2020-2023: Promote the implementation of Crop Insurance and the principle of Sustainable Consumption and Production (SCP) through the PPP mechanism.
Financial Sector Development Strategy: set up a unit that is responsible for formulating policy for the Cambodian insurance sector in order to ensure that the policy framework supports sustainable development of the industry.
Financial Environment
Fiscal incentives: There is no tax incentive. However, it is recognized that an incentive structure would be needed to increase voluntary uptake of insurance by the population.
Regulatory Environment
Insurance Law 2014: is enacted with the purpose of regulating insurance protecting the legitimate rights of the parties to insurance, strengthening supervision and control over the insurance business and contributing to the development of the insurance industry.
Insurance Law 2014, article 39 is in relation with micro-insurance. A microinsurance contract can have a maximum term of one year and a maximum amount of benefits equal to ~USD 4924. The minimum capital for a microinsurance company is ~USD 147,710.
Sub-decree 275 on Insurance (30 Dec 2021)
Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.
Private Sector
Corporates: BIMA Cambodia, PREVOIR, Forte Insurance, Cambodia People Micro Insurance (CPMI), Cambodia Life Insurance (Camlife), Mekong Microinsurance, Serendib Microinsurance Investors: Allianz X, CreditEase Fintech Investment Fund (CEFIF), LeapFrog Investments
Government
Ministry of Economy and Finance, National Bank of Cambodia, General Insurance Association of Cambodia (GIAC), Insurance Regulator of Cambodia (IRC)
Multilaterals
International Labor Organization, International Finance Corporation, World Bank, United Nations International Children's Emergency Fund, Asian Development Bank
Non-Profit
GRET, Syngenta foundation for sustainable agriculture, Insurance Association of Cambodia, Tycoon Global Investment Save Death Association
Public-Private Partnership
Forte Insurance and Syngenta foundation for sustainable agriculture crop insurance, World Vision Cambodia, Forte Insurance Company, and Syngenta foundation for sustainable agriculture for aquaculture insurance
See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
To ensure 100% financial inclusion, business models must have a last mile reach such that the most vulnerable communities, especially in rural areas, and farmers get access to insurance.
Sector Sources
(1) UNCDF. (2017). Cambodia Financial Inclusion Country Report 2017. https://finmark.org.za/system/documents/files/000/000/223/original/Cambodia_Synthesis-Note_28-September-2017.pdf?1601985666#:~:text=Cambodia%20has%20a%20moderate%20level,financial%20services%20through%20formal%20providers
(2) Measuring Progress: Financial Inclusion in selected ASEAN countries, 2020 (UNCDF)
(3) Badzmierowski, B. (2022). Investing for a Purpose in Cambodia: Sevea and Boost Capital. https://cambodiainvestmentreview.com/2022/03/15/investing-for-a-purpose-in-cambodia-sevea-and-boost-capital/
(4) BD Trust. (2019). Financial Access for MSMEs. https://www.unescap.org/sites/default/files/Session%205%20Financial%20Access%20for%20MSMEs.pdf
(5) Khmer Times. (2022). Cambodia Insurance Total Premium Grows 9.5% in 2021. https://www.khmertimeskh.com/501036816/cambodia-insurance-total-premium-grows-9-5-in-2021/#:~:text=Despite%20the%20economic%20fallout%20from,Regulator%20of%20Cambodia%20(IRC).
(6) Masaki, E., Hyder, Z. & Boudjadja, M. (2021). How Cambodia can Meet its Health System Financing and Pandemic Response Challenges. https://blogs.worldbank.org/eastasiapacific/how-cambodia-can-meet-its-health-system-financing-and-pandemic-response-challenges
(7) Reach52. (2022). Expansion of Reach52's Insurance Services into Cambodia. https://reach52.com/expansion-of-reach52s-insurance-services-into-cambodia/
(8) Asian Development Bank. (2021). Cambodia Agriculture, Natural Resources, and Rural Development Sector Assessment, Strategy,and Road Map. https://www.adb.org/sites/default/files/publication/718806/cambodia-agriculture-rural-development-road-map.pdf
IOA Sources
(9) BIMA. (n.a.). About BIMA. https://bima.com.kh/en/about/#:~:text=BIMA%20launched%20in%20Cambodia%20in,over%20%241.2%20million%20in%20claims.
(10) TechCrunch. (2017). Bima Raises $97M from Allianz for Microinsurance Aimed at Emerging Markets. https://techcrunch.com/2017/12/19/bima-raises-97m-from-allianz-for-microinsurance-aimed-at-emerging-markets/
(11) African Private Equity and Venture Capital Association.(2020). LeapFrog's BIMA Raises $30MN. https://www.avca-africa.org/newsroom/member-news/2020/leapfrogs-bima-raises-30mn/
(12) Chakraborty, R. (2020). Cambodia: Pandemic Affects Microinsurance Market. https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/74793/Type/eDaily/Cambodia-Pandemic-affects-microinsurance-market
(13) Lunden, I. (2020). BIMA Nabs $30M More for Micro-Health and Life Insurance Aimed at Emerging Markets. https://techcrunch.com/2020/09/07/bima-nabs-30m-more-for-micro-health-and-life-insurance-aimed-at-emerging-markets/
(14) UNDP. (2013). The Understanding and Need of Low-Income Populations Regarding Microinsurance. https://www.kh.undp.org/content/cambodia/en/home/library/poverty/microinsurance-study.html?utm_source=EN&utm_medium=GSR&utm_content=US_UNDP_PaidSearch_Brand_English&utm_campaign=CENTRAL&c_src=CENTRAL&c_src2=GSR&gclid=Cj0KCQjwg_iTBhDrARIsAD3Ib5g5X62MySuY1xzdOhL4-phWGZPB71JekzIs8qltpS4xmZEoCFxxxe4aAsXTEALw_wcB
(15) Royal Government of Cambodia. (2018). Cambodian. Sustainable Development Goals (CSDGs) Framework (2016-2030). https://data.opendevelopmentmekong.net/dataset/3aacd312-3b1e-429c-ac1e-33b90949607d/resource/d340c835-e705-40a4-8fb3-66f957670072/download/csdg_framework_2016-2030_english_last_final-1.pdf
(16) MOP 2021