GERMANY’S international aid agency has partnered with an insurance company to develop a disaster microinsurance product which will be offered to small businesses.
The micro disaster risk insurance (MicroDRI) product is expected to cover 10,000 micro, small and medium enterprises (MSMEs) by mid-2018, the Department of Trade and Industry (DTI) said.
Deutsche Gesellschaft fur Internationale Zusammenarbeit GmbH (GIZ), the DTI, and AXA unit Charter Ping An came together in a public-private partnership to offer the insurance product, which will be distributed by Cebuana Lhuillier Insurance Solutions.
Undersecretary Zenaida C. Maglaya said that the idea of providing MicroDRI came about after typhoon Yolanda in 2013 and was refined over the years to address affordability concerns.
“What we do now is increasing level of awareness and participation of MSMEs in business continuity plans. That’s the first thing [we considered],” she added.
“It was not difficult for us to convince them to prepare themselves. We had to find ways to really look into who we can have partnerships with to see what we can do to protect the MSMEs, especially the micro-enterprises.”
Ms. Maglaya said that only 30% of enterprises affected by the typhoon renewed their licenses.
In a study conducted by GIZ, 25% of MSMEs fail to reopen after being hit by a major calamity. Also, these businesses are estimated to lose between P250,000 to P10 million during disasters, making it harder for them to bounce back.
GIZ Philippines program director Antonis Malagardis said that MSMEs typically lose one-third of their financial capacity, which makes it hard to repay loans.
“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 operation of their businesses,” he added.
Mr. Malagardis said insurance should be considered an investment instead of a cost.
The DTI will conduct financial literacy training to help MSMEs build resiliency against future calamities, through its Negosyo Centers.
The MicroDRI product will be developed by AXA using a grant from GIZ.
Cebuana Lhuillier vice-president and group head Jonathan D. Batangan said the company can tap its branch network and add more outlets which can serve as distribution platforms.
“We can reach the maximum number of MSMEs. In the next few years, we plan to add more partners including sari-sari stores [as part of the group’s] remittance business,” he added. — Anna Gabriela A. Mogato