Disaster risk insurance for MSME under dev’t
The German government through GIZ Philippines, the Department of Trade and Industry (DTI), Cebuana Lhuillier and AXA are teaming up to introduce a first-of-its-kind disaster risk insurance product that will cater to the country’s micro, small and medium enterprises (MSMEs).
With the Philippines’ high exposure to natural catastrophes and the huge contribution of MSMEs to the economy, the parties found the necessity to develop a micro disaster risk insurance (MicroDRI) product intended for MSMEs.
The MicroDRI product is under development and will be formally launched and introduced through the assistance of the DTI by the middle of the year.
AXA will design the MicroDRI product and will serve as insurer of the product, which will then be made available to the public through Cebuana Lhuillier’s wide branch net- work.
The product, which will be a first of its kind globally according to GIZ Philippines, is initially targeted to be bought by 10,000 MSMEs across the country by 2020.
Aside from the development of the product, the collaborating parties will also provide financial literacy training for entrepreneurs through DTI business centers and the development of knowledge materials supporting the product.
MSMEs currently make up more than 95 percent of all industries in the Philippines, employing 65 percent of the labor force and are a major source of government income through their tax payments.
Despite the MSMEs’ huge contribution to the Philippine economy, the DTI said there is a lack of comprehensive insurance products that would protect their livelihood and interests, leaving them vulnerable to threats and damages brought by natural calamities including typhoon and earthquakes.
According to the latest GIZ study, 25 percent of MSMEs do not reopen once hit by a major disaster.
“Recently, a GIZ-led study on Global Initiative on Disaster Management found out that there is little protection available to MSMEs, which is long considered the foundation of the Philippine economy. When disasters strike, MSMEs lose between P250,000 to P10 million, making it particularly hard for them to recover,” GIZ Philippines program director Antonis Malagardis said.
“With the MicroDRI product, our goal is to come up with a financially-sustainable product that will provide the protection that these MSMEs need to ensure operations of their businesses. We are happy to work with our long-time collaborators on this project, and are hopeful that this will bring change to the MSME industry,” Malagardis added.
GIZ has been implementing projects to promote economic, ecological and social development in the Philippines on behalf of the German government.
With the country’s MSMEs considered among the most vulnerable from natural calamities, Trade Undersecretary Zenaida Maglaya said the partnership is an opportunity for the country to make its MSMEs more resilient.
“For DTI, we are mandated to grow and develop our MSMEs. And one of the best ways to do this is to make sure they are protected,” Maglaya said.
“Cebuana Lhuillier is proud to work with AXA, GIZ, and DTI on this milestone initiative. We are honored to be given the opportunity to become a partner for change for many MSMEs and hope that through the MicroDRI product, we can help improve not only their businesses, but their lives as well,” Cebuana Lhuillier president and CEO Jean Henri Lhuillier added.