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- Building resilience [among micro, small and medium enterprises], she said, was key to economic growth, job creation and job retention but requires understanding of shocks that impact micro, small and medium enterprises.
Micro, small and medium enterprises remain one of the most vulnerable sectors of the economy despite the critical role they play in terms of gross domestic product contribution and employment, according to Financial Sector Deepening Uganda.
Speaking during a stakeholders’ engagement in Kampala, Ms Rashmi Pillai, the Financial Sector Deepening Uganda executive director, said there was need to secure micro, small and medium enterprises by ensuring that they access insurance to insulate them against shocks that have become more apparent due to Covid-19.
“Despite the critical role they play towards economic stability and diversification, majority of them remain vulnerable to financial shocks which limit their growth and sustainability,” Ms Pillai said, noting Financial Sector Deepening Uganda would focus on sensitising such businesses about insurance given that they comprise 90 per cent of the informal sector and are responsible for most jobs in Uganda yet they remain highly vulnerable.
Building resilience [among micro, small and medium enterprises], she said, was key to economic growth, job creation and job retention but requires understanding of shocks that impact micro, small and medium enterprises.
According to a May study by Insurance Regulatory Authority, it was found that only 43 percent of surveyed micro, small and medium enterprises were aware of formal insurance with majority having no idea of what it meant to have an insured business.
The study also found that 96 percent of micro, small and medium enterprises had never sought insurance , thus remaining exposed to risks such as fire, burglary and theft, among others.
Insurance penetration has over the years stalled standing at below 1 per cent.
The IRA survey had sought to explore the potential among micro, small and medium enterprises.
Mr Jeremy Gray, the Cenfri resilience team lead, said that whereas it is important to sensitise small businesses, they need to voluntarily embrace insurance to insulate themselves against shocks.
“It is really important to think about how we can ensure that enterprises are able to survive for a substantial period of time,” he said, noting insurers need to build products that are tailor made for micro, small and medium enterprises.
The stakeholder meeting also noted that there is low intake of insurance services because micro, small and medium enterprises are prone to a catalogue of shocks, exacerbated by high risk exposure and poor risk management strategies.