Small and Medium-Sized Enterprises are set to benefit from a new political risk insurance product amid unrest due to the ongoing countrywide protests.
The product, will come as one of the packages offered under the Linda biz, initiative offered by Old Mutual and ABSA Bank.
The plan will offer insurance for losses against fire, political violence, riots and strikes, floods, business interruption, burglary, loss of money and theft by servants.
It also covers employees of businesses against injury, disablement or death in accordance to the workmen injury benefit act.
Absa Bank Kenya MD and CEO Abdi Mohamed underscored the need to invest in the SME sector.
“This strategic partnership is anchored on our mutual goal to introduce bespoke insurance solutions that directly address the unique requirements of our SME customers, who cater for 30 per cent of our GDP,” said Mohamed.
Mohamed further noted that simplifying SMEs’ access to insurance would ensure long-term business success and drive up insurance penetration in the country.
Additonally, Old Mutual Group CEO Arthur Oginga reiterated the insurer's need to protect young business owners from unplanned risks.
“SMEs form the backbone of our country’s economy and as such, need enhanced support from financial service providers to derisk their businesses ensuring they can thrive in today's dynamic business landscape,” said Oginga.
Latest data from the Insurance Regulatory Authority Enterprise Penetration report indicates that the insurance industry has continued to be characterized by low penetration levels at about 3 per cent.
This, the authority says, is attributed to a multiplicity of factors such as access to insurance, willingness and ability to pay for insurance, existing distributions channels, adverse selection and information asymmetry among others
Additionally, KMPG's Insurance Industry report placed Kenya as the third lowest insurance penetration rate in Sub-Saharan Africa with South Africa leading at 17 per cent.
This is because most of Kenya’s population perceiving insurance as a “nice-to-have/easy to discard” product rather than one that is essential, said the report.
According to data from World Bank, SMEs account for most businesses worldwide and are important contributors to job creation and global economic development.
Industry data further shows they represent about 90 per cent of businesses and more than 50 per cent of employment worldwide.
Informal SMEs contribute up to 40 per cent of emerging economies' national income (GDP).
The Kenya Bankers Association 2021 Micro, Small, and Medium Enterprises Survey Report notes that the sector employs more than 15 million people and contributes about 30 per cent to the GDP.
This is said to have made it a key sector in the growth of the Kenyan economy.