Insurance; catalysing MSMEs growth in Ghana

Many economic watchers believe small business is the motivating force for emerging markets to catch up with advanced countries. In the next decade, Africa will be home to countries with a majority youthful population driving an entrepreneurial economic growth spurt. The Anisha Prize 2020 report shares how young entrepreneurs are positively influencing job creation in Africa.

The role of Micro, Small and Medium-Sized Enterprises (MSMEs) in job creation and its contribution to Ghana’s GDP cannot escape anyone. There have been various governmental and non-governmental interventions aimed at encouraging and sustaining the growth of SMEs. The Ghana Enterprises Agency (formerly NBSSI) is a state institution set to promote the development of Micro, Small and Medium-Sized Enterprises (MSMEs). It is now a common thing to find Banks and other financial services providers having a special unit or focus on MSMEs. Multinationals and other non-governmental organizations are equally interested in the growth of the MSMEs and are committing millions of dollars into various projects. In April this year NBSSI and Mastercard Foundation announced an GHS90m support for MSMEs who were affected the Covid-19. All these interventions point to the significant role of the growth and sustainability of MSMEs in ensuring economic development of Ghana.

Notwithstanding these interventions, there is a very high mortality rate for MSMEs in Ghana. Many factors may account for account for their failure and disasters such as fire outbreak, flood, burglary, third party liability suits, death or critical illness affecting staff of the business are key. In advanced countries MSMEs use insurance to cater for these risks and thus get the needed peace of mind to concentrate on other activities required to grow and sustain the business. This is however not the case in Ghana as access to the appropriate insurance products suitable and affordable to MSMEs is not the required levels.

An appropriate insurance for MSMEs enables the business owner to have a fallback plan just in case something goes wrong. This fallback plan means they can focus on building their businesses, worry-free. Such well designed products should have in contemplation the dynamics of the MSMEs and customize the product to meet both their business and legal needs.

What does a well-designed Insurance Product for MSMEs look like?

Given the structure of MSMEs, any well-designed insurance package must contemplate all the assets, resources and activities that can be secured through insurance. It must cover the employees, properties, possible third-party liabilities etc of the business. The following policies could for instance be packaged to meet such needs:

  1. Group Life Insurance for Workers

This policy covers death (natural/accidental), total permanent disability (accidental/illness), accidental total partial disability and critical illness of all covered employees.

  • Asset All Risk Insurance

This policy covers assets such as buildings, machines, office equipment, furniture, stock, raw materials etc against fire, lightning, explosion, flood, riot, strike & civil commotion, collapse of building, earthquake, and many other risks.

  • Public/Third Party Liability insurance package

This insurance pays compensation to any third party who suffers loss through accidental bodily injury whether fatal or not and accidental loss of or damage to property because of their resulting from the operations of the policyholder.

Although these policies are readily issued to corporate businesses, same cannot be said of MSMEs. This may be since the MSMEs themselves are not aware of such solutions or that insurance companies are not willing to insure them as they are deemed high risks largely due to their operations. They may only be considered when they have taken a loan from banks and insurance of their assets is a condition precedent to the disbursement of the loan.

Thankfully, progressive insurance companies such of Hollard Insurance have come to the table to join forces with the various stakeholders that are ensuring the growth and sustainability of MSMEs by designing appropriate insurance packages aimed at catalysing the growth and sustainability agenda.

With a little as GHS360.00 a Ghanaian MSMEs can get the right insurance cover for up to five (5) employees, assets worth up to GHS50,000.00 and a third-party liability limit of GHS20,000.00. Whatever the size of the business, Hollard has a solution the Ghanaian MSME.

It is thus time to say goodbye to the days when the occurrence of a fire, flood, death or critical illness of a business owner or employee and a legal liability towards a third party meant the collapse of the business, a dip in employment and a subsequent deterioration of the nations GDP. The solution is to get covered and now, with Hollard.

By Emmanuel Owusu Agyei Ampem, National Service Personnel, Hollard Life Assurance