Insurance as a veritable risk management tool is critical in helping Small and Medium Scale Enterprises (SMEs) manage shocks and build financial resilience for sustainable growth, experts say.
Experts who spoke at the Coronation Insurance Plc and Coronation Life Assurance Ltd jointly hosted a live webinar held in Lagos said efforts must be geared to strategically make SMEs bond with insurance as they pursue their growth plans.
The webinar with the theme: ‘Importance of Insurance for Small and Medium Enterprises (SMEs): Requirements for growing businesses had participants cut across the insurance sector, Coronation as well as small business clients.
Gbenga Ismail, vice president, the Lagos Chamber of Commerce and Industry speaking at the event said insurance represents a key financial cushion to manage shocks and build financial resilience in the first years of SME growth.
He stated that with only 0.5 percent of Nigerian SMEs insured, compared with 54 percent globally; the country should focus squarely on developing an insurance environment more accommodating of and appealing to SMEs.
Ismail highlighted the significance of Nigeria’s 40 million SMEs for the growth, development, and future security of the Nigerian economy.
He noted that Nigeria had lost 2 million SMEs to the Covid-19 pandemic, stating that most new SMEs struggled to achieve scale quickly enough to realise the opportunities for which they were created due to Irregular and delayed payments was also a critical hurdle. The result was that most new SMEs failed within 18 months of start-up.
“Despite 90 percent of SMEs currently not paying tax, SMEs represented a huge potential to drive economic inclusion, broaden prosperity, and power the future growth of the Nigerian economy. As such, Ismail argued that it was critical to provide SMEs with the support to ensure survival in the first critical years.”
With this challenge in mind an expert panel, consisting of Adebowale Adesona, executive director, Technical, Coronation Life Assurance Ltd., Louis Alozie, country manager, Wordplay and Ayo Olojede, head of Emerging Business, Africa Access Bank Plc, and moderated by Wole Famurewa, CNBC’s West Africa Markets Editor had a robust discussion proffering solutions.
According to them, there was no doubt that Nigerian SMEs faced risk. Damage to business property and vehicles, legal liability and general product, key persons and goods-in-transit risks cost SMEs dearly. Just insuring a few of these basic risks could save Nigerian SMEs billions annually and improve survival rates significantly.
Since not all SMEs were exposed to all risks, however, it was important for SMEs to consult insurance professionals to identify only those risks that were critical to the survival of their business. Insuring only one to two key risks didn’t cost a lot but could make a significant contribution to survival and growth rates, they noted.
It would also help SMEs to understand the difference between external risks, like flood and fire, and internal risks, usually arising from the people SMEs employed or the systems they used. While technology, for example, was a great leveller for SMEs, helping them compete effectively with the big guys, it also exposed them to cybercrime and other information security risks.
Read also: Kwara enrolls 21,750 indigents in free health insurance
They also observed that knowing your customer processes were also important in helping SMEs identify and mitigate client risk. Seeking the right advice on people processes and systems could also help manage fraud or employee risk – often by simply training staff to correctly understand and observe basic internet security protocol.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
