Insurance for Micro, Small, and Medium-Sized Enterprises
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This brief looks at the important role that better risk management, including insurance, can play in improving access to finance.
Small and medium-sized enterprises (SMEs) are a key component of every economy. Studies fill the literature with the importance of SMEs as employment generators, innovators, factors in the supply chains of larger enterprises, and important contributors to gross domestic project.
In developing countries, the formal SME sector is competing with a large informal sector. Moving informal SMEs into the formal economy tops the agenda in countries where informality is high. Improving on the World Bank’s “doing business” parameters and providing fiscal incentives is needed to formalize the MSME sector, as are attractive financial sector solutions that support government agendas for a gradual reduction of informality.
Recently, special regulation has been developed to improve access to insurance for low-income people, but little effort has been made in insurance for MSMEs. Nonetheless, some MSME needs call for insurance products that cannot be offered under most existing insurance regulations.