Background

Small businesses (SMEs) are vital to economic development, yet they are exposed to a wide range of risks and struggle more than larger businesses to cope with them. This is partly a matter of resources – small businesses have far fewer resources to cope with the risks they face – but it is also made worse by the environment they operate in and a shortage of skills and tools to manage these risks.

Insurance offers an important tool to help SMEs better manage risks: it provides them with financial protection for many risks, while also boosting productivity and increasing access to finance. Yet, SMEs are generally underinsured or have no insurance at all. This problem is particularly acute in developing countries, where a very small percentage of SMEs have ever bought any insurance policy.

Insurance for small businesses represents a promising market for insurers. Nonetheless, it poses three significant challenges. The first is product design – many insurers do not sufficiently understand small businesses and their risks, and do not offer suitable and valuable products. Secondly, once a product is designed, insurers face challenges in designing an appropriate distribution strategy to get it into the hands of their clients. Since small businesses are heterogeneous and only loosely grouped, it is difficult to find aggregators. Finally, insurers face limited demand and poor understanding and trust of insurance among small businesses.

Purpose

Through a series of capacity building activities, this project targets both the supply of and demand for insurance in Egypt.

On the supply side, the goal is to help the insurance industry in Egypt closing the knowledge gaps that hinder the development of inclusive insurance in the country. This will allow insurers in the country to offer products that are valuable to underserved clients, such as SMEs, and sustainable to their organizations.

On the demand side, the project aims to raise awareness of Egyptian SMEs on risk management and insurance. SMEs lack access to quality insurance, but oftentimes this is blocked by the companies’ own knowledge gap about this tool and how it complements other risk management mechanisms and strategies. The project therefore aims to raise the awareness of SMEs about the different risks to which they are exposed, and the different mechanisms available to them to manage these risks, being insurance one of the risk transfer options.

Activities

Under this partnership, the following activities will be carried out:

• Capacity building of the Egyptian insurance industry, through a series of inclusive insurance trainings to this segment and close knowledge gaps that prevent the development of the market.
• Capacity building of Egyptian insurance local trainers, to create a sustainable offer of inclusive insurance trainings in Egypt in the years to come.
• Capacity building of SMEs from two chosen sectors, to raise their awareness about risks, risk management and insurance.