How can insurance providers leverage value chain aggregators to serve MSMEs?

Despite being heavily underfinanced, micro, small, and medium enterprises (MSMEs) are integral drivers of economic growth and contribute substantially to employment and innovation. They account for 50% of global employment and 90% of all businesses. MSME’s are also exposed to a wide range of risks. They struggle more than larger businesses to cope with these due to a combination of factors including, limited resources, an exposed environment, and a lack of skills and tools to manage them. Insurance can help MSMEs better manage risks, enable them to access a greater variety of risk management tools (including loans and savings), and give them confidence to take more productive, perhaps riskier, investment decisions.

However, MSME’s lack of awareness around insurance and the of high heterogeneity their risk profiles, along with regulatory barriers, a lack of knowledge about this potential target market and difficulties accessing it, mean insurance providers struggle to serve MSMEs. One way to tackle these challenges and better serve MSMEs is to leverage value chain aggregators to offer and distribute tailored insurance products. This brief explores why value chain aggregators are suited to distributing insurance to MSMEs, what role they can play and what insurance providers need to consider when partnering with value chain aggregators.

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