Why is insurance widely available to those in the developed world, but not the poor—whose demand for insurance, given how close they live to the economic brink, is arguably greater? The answer is simple: transaction costs. The cost of selling and underwriting insurance and of administering a claim does not decrease in proportion to the value of the policy. Using traditional channels and processes, insurance companies simply cannot write policies with values below a certain floor without pricing them unrealistically.

Juliet Agutu, a domestic worker in Nairobi recently delivered her first child at Pumwani, the country’s largest maternal hospital. Like many mothers-to-be in the developing world, Juliet was worried about not having the appropriate medical facilities or the money to pay for neonatal or maternal care. Juliet’s fears are not unwarranted; According to the Kenyan government, only five percent of Kenyans have medical insurance and 56 percent of women put their own life and that of their baby at risk by giving birth at home.

“mi-Life” is available through MTN’s MobileMoney platform and provides users with the opportunity to buy life insurance via their mobile phones. Users will also be able to initiate claims, queries and make premium payments using their handsets. Jeremy Leach from the Hollard Insurance Group considers that in emerging markets, life insurance through mobile money is the next transformational step in the growth of mobile financial services.

In light of the recent publication of “Poor Economics”, the new book by Abhijit V. Banerjee and Esther Duflo, MMU caught up with Dr. Duflo to discuss some relevant themes to help our readers understand the broader impact of mobile financial services in the economics of the poor. Today, we publish the first part of our interview focusing on the topics of financial inclusion and savings.

For more than fifteen years Abhijit V. Banerjee and Esther Duflo have worked with the poor in dozens of countries spanning five continents, trying to understand the specific problems that come with poverty and to find proven solutions. In this second part of the interview, Dr. Duflo discusses the topics of mobile money, insurance and credit.