News & Events

Microinsurance for MSMEs launched

Two of the country’s industry leaders, Cebuana Lhuillier and AXA, have joined forces with GIZ Philippines and the Department of Trade and Industry (DTI) in the introduction of a micro disaster risk insurance (MicroDRI) product especially intended for the country’s micro, small, and medium enterprises (MSMEs).

MSMEs make up more than 95 percent of all industries in the Philippines, employ 65 percent of the labour force, and are a major source of government income through their tax payments. MSMEs have an economic value of 35.7 percent, of which small industries make up 20.5 percent of all goods and services produced.

Despite their huge contribution to the economy, MSMEs do not have enough protection due to the dearth of comprehensive insurance products for the sector.

This leaves MSMEs vulnerable to threats and damages brought by natural calamities, including typhoon, earthquakes, and even man-made large fires, all of which are detrimental to both the lives and business of entrepreneurs.

According to the latest GIZ study, 25 percent of MSMEs do not reopen once hit by a major disaster.

In 2009, following Typhoon Ondoy and Pepeng, damages cost MSMEs a total of $4.4 billion, about 2.7 percent of that year’s GDP.

To contribute in the financial stability of MSMEs, GIZ partnered with insurer AXA, microinsurance distributor Cebuana Lhuillier, and the Department of Trade and Industry. Aside from the micro DRI product, the collaboration will also focus on the provision of financial literacy training for entrepreneurs via the DTI business centers and the development of knowledge materials supporting the product.

GIZ Philippines has been at the forefront of implementing economic, ecological, and social development in the Philippines since 1970, through the assistance provided by the German government.

The latest assistance is a grant intended to fund the development of the MicroDRI product for MSMEs.

“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. 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,” said Dr. Antonis Malagardis, program director of GIZ Philippines.

Serving as the gateway to reach across MSMEs is Cebuana Lhuillier, currently the country’s leading microinsurance distribution channel.

“Cebuana Lhuillier is proud to work with AXA, GIZ, and DTI on this milestone initiative. We are honoured 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. On its own, Cebuana Lhuillier has already covered up to eight million Filipinos or 30 percent of the 26.6 million Filipinos covered by some form of microinsurance and has served to be one of the leading contributors in the government’s push for microinsurance coverage,” Jean Henri Lhuillier, president and chief executive officer of Cebuana Lhuillier said.

The MicroDRI product under development will be formally launched and introduced to MSMEs through the assistance of DTI. AXA will design the micro SME insurance product and will serve as insurer of the product, which will then be made available to the public through Cebuana Lhuillier’s wide network.