Micro Insurance, Natural Complement of Microcredit Part.I

After demonstrating his interest in developing countries, micro-insurance - like micro-credit - investing developed countries. As proof, two offerings aimed at micro insurance. Little publicized the world of micro nevertheless exciting. According to a study of DCASPL, 1 January 2004 there were 2.39 million in France microenterprises alone that too, more than 95% of European companies. All of these micro-employed 5,798,700 people, that is to say one quarter of salaried jobs, and generated the same year more than 8% of exports. In other words, micro enterprises are companies that have real economic importance, and much more, social.

Interesting phenomenon, according to INSEE figures for 2004, more than 220,000 microenterprises have been established. And nearly a third of the creators were unemployed (half for more than a year). That is to say that a large proportion of these newly created small organizations, which are inherently fragile, are supported by people particularly vulnerable.

To address this vulnerability, micro entrepreneurs can find support from actors to promote economic initiatives such as PACE, ADIE. In addition to expert advice, these players offer solutions to meet the needs of two main creators: to finance their project and manage risks.

Broadly, there are three main types of risks faced by micro entrepreneurs:

* The damage that the company may suffer in case of disaster;
* The damage could cause the company to third parties;
* Risks that relate to people (health, disability ...).

While microcredit is now well accepted in France among the types of funding, micro insurance is currently not among the first their risk management solution. Yet it is a natural extension of microcredit, to secure and sustain the long term activity initiated by the micro-entrepreneur.
The first offering micro insurance was launched in France by Contractors of the City in December 2006. This "First Insurance Package" provides a standardized insurance policy covering the three major types of risks faced by micro entrepreneurs and comprehensive coverage including professional liability, Welfare and Health.

Country Risk Part.III

During the introduction of the Cooke ratio, depending on whether the country was a member of the OECD or not, the commitments to residents of foreign countries were weighted at 0% or 100%. A debt security issued by a government could therefore not return in the calculation of the Cooke ratio, which consequently gave an advantage to OECD countries until 1994 and the opening of the more "modest”.

As part of the Basel II regulations, the IRB approach (Internal Rating Based) implies the existence of a probability of default for counterparties. But is it really possible to speak of "default" for the country? The S & P introduced the notion moreover SD (Default Selected) to report that states do not honor their debts, since technically they cannot be made bankrupt and businesses. Of default of a country therefore requires analysis of the creditworthiness of the state. It is thus necessary to understand properly the impact of the fiscal capacity of the State concerned on its ability to repay and to define an acceptable level of debt for sovereign debt. However, these problems are more related to the concept of sovereign risk than that of country risk as a whole; demonstrate once again that the concepts are very similar.

Investing in emerging high growth is an important trend as evidenced by the proliferation of funds BRIC (Brazil, Russia, India and China). However, although the results are quite encouraging, these investments are not safe because these countries are not immune to political tensions, as their market is very volatile at times and finally as a big part of the investment is located in the energy. That's why the rating agencies are requested by the fund managers to reassure investors, the country risk analysis and must rest.

Country Risk Part.II

Country risk is actually a combination of a multitude of risks influenced by three types of factors:

* Economic and financial factors (banking systems failing, unstable tax system, poor management of public finances ...)
* The political (legitimacy of governments, political repression, censorship, ...)
* (Socio-cultural attitudes and traditions, unequal access to resources ...)

The diagram below provides a framework for country risk analysis, the aim being to understand that country risk can be approached through a large and varied risk factors (both domestic and international).


What are the measurement tools available to risk such a company wishing to conduct an operation of setting up abroad? Two main tools are characteristic of the analytical framework for country risk:


The rating is the most used tool in the evaluation of country risk faced by business entities that have concluded a contract on an international scale. The ratings are mechanical projection of reality on a scale of one-dimensional notation. Rating procedures use criteria (economic, financial, political, social ...) very objective to make the mechanics 'scientific'.

These are essentially specialized agencies that are responsible for developing the ratings. These institutions are in most of the rating agencies (Fitch Ratings, Political Risk Services, Moody's and Standard & Poor's), but also specialized firms (Business Environment Risk Intelligence and Economic Intelligence Unit) and financial newspapers (Institutional Investor). In Europe, such as credit insurers Coface (French Insurance Company for Foreign Trade) have a role in that country risk analysis. Indeed, COFACE is often the preferred partner of SME exporters who lack the internal resources of country risk analysis.

Anticipation instruments par excellence, the risk scenarios is another essential procedure in the analysis of country risk. They aim to make combinations of multiple risk factors (economic, political ...) in "stressful" varying characteristics and for different time horizons (short, medium and long term). Scenario results then allow investors or bankers to have a more comprehensive range of their potential gains and losses, which will influence their choice whether to launch the operation.

Country Risk Part.I

The Mexican debt crisis in 1982 which forced the country to introduce a moratorium is one of the first and most contemporary manifestations of country risk. The concept also takes full extent over the 90 years with the crisis countries. Emerging from 1997 Asian crisis, Russian crisis in 1998 etc. Indeed, given the globalization of the economy and the succession of crises due to the expansion of capital movements in the world, economic agents and financial choices for their particular investment and acquisitions, need accurate information on the assessment of risk profiles of the countries covered.

A single definition of country risk is difficult to provide to the extent that it is a composite concept. Country risk encompasses all actual future events that may affect a financial investor in the conduct of its operations in relation to a country called "at risk". The risks mentioned are related to the state of the country, regardless of the quality of the debtor or the project.

However, if the concept is difficult to define exhaustively, his analysis is far from insurmountable. Many tools and procedures are available for players to understand this risk.

First, the concept of country risk and sovereign risk are often confused. Sovereign risk is the risk for financial institutions to see the sovereign (central government, ministries, local governments and regional ...) which they have granted loans, unwilling or unable to meet its payment obligations to them. Country risk in turn has a much broader scope because there is no concept of "sovereign", the entity in question is the entire country. The two concepts are nevertheless closely related. Indeed, as part of a scoring, note the Sovereign cannot be too far from the rating of the country, the quality of the first depends on the country's environment and the decisions of the Supreme rarely without consequence on the functioning economy.

China raising up ...

China is emerging as both leading markets and rising economic power, and meeting with impressive rates of double-digit growth for several years. China's financial sector also benefits from good economic policy. countries, also following the path of openness and market liberalization in accordance with agreements signed by China to the WTO in January 2001 emerging well.

Historically, between the restructuring of agriculture, industry and the banking sector, the government, in the early 1980 gives priority to primary and secondary sectors to the detriment of the banking sector which will bear the cost of the transition economy. This position has resulted in delaying the development of banks in China and weighed on the accounts of the major institutions with bad debt rates sometimes exceeding 40%. Faced with the need for modernization of the Chinese banking, the government changed tack and have signed the WTO agreement to liberalize the banking market in 2001.
Since then, many international banks, anxious to find alternatives to growing their domestic market less dynamic, investing heavily in emerging countries and primarily in the "Middle Kingdom" which presents serious advantages …

Since January 2007, the news is full of examples of foreign investment through equity, joint ventures or acquisitions in the Chinese banks. We made especially Citigroup, which won the "Guangdong Development Bank" in front of the SG, Bank Of China 10% owned by RBS or the Construction Bank of China 9.1% owned by Bank Of America. Overall, although the role of foreign banks is negligible - they represent less than 2% of Chinese assets - their position continues to grow.

Chinese and foreigners have much to gain from the recent opening of the market (2001). Indeed, the Chinese banking sector needs foreign players to upgrade the profession and make a transfer of skills; foreign players in turn reap the benefits of Chinese growth.

However, prudential Chinese are real barriers to entry for foreign banks: capitalization of at least 1bn Yuan, exposure to a single client must not exceed 10% stake in the subsidiary and the ratio of loans / deposits do not exceed 75%.

But the stakes are: market access abysmal savings of Chinese households is worth the investment for many banks and foreign insurers. Candidates rush to the office of the CBRC (China Banking Regulatory Commission) and the Chinese newspapers that tell of six banks, want to establish subsidiaries of Chinese law. Several big names such as HSBC, Citigroup, Deutsche Bank or JP Morgan have also applied. It's a safe bet that the list will grow as and regulatory developments and market opening...