KUALA LUMPUR: The Ministry of Finance (MoF) sees a pressing need for insurance protection among small and medium-sized enterprises due to the escalating climate change and other risks, said Secretary General of Treasury Datuk Johan Mahmood Merican.
He said that there has been a disproportionate emphasis on credit-based financial solutions for MSMEs such as loans or lines of credit while neglecting insurance and other resilience-enhancing measures.
“Most financial solutions for MSMEs to date have heavily focused on excess credit. Insurance is not widely adopted by businesses in Malaysia despite the increasing need. It is estimated less than 5% of MSMEs have any form of insurance in the Asean region,” he said in his speech read out by MoF fiscal and economics division deputy undersecretary Dr Nirwan Noh at the launch of a joint research report by Generali and the United Nations Development Programme (UNDP) focusing on MSMEs yesterday.
The joint research report titled “Building MSME Resilience in Southeast Asia” focused on selected value chains in Thailand and Malaysia. The report proposes an alternative approach to identifying the risks and needs of micro, small and medium-sized enterprises (MSMEs), developing risk management and insurance services, and delivering these solutions to the MSME community.
The report finds that SME growth and survival are threatened by a range of risks, including climate change, business interruptions, and limited access to capital markets. These risks are intensified by the lack of risk management, coping mechanisms, and insurance coverage.
The alternative approach outlined in the research starts by segmenting MSMEs to understand their risk profiles and address their specific needs, exploring priority value chains including natural rubber, food and accommodation, wholesale and retail, and electrical and electronics.
From this MSMEs can build resilience through holistic solutions that consider both risk transfer and risk mitigation tools, and which include bundling insurance solutions with new technologies or digital platforms and leveraging alternative distribution partners to reach MSMEs more effectively.
Generali CEO International Jaime Anchústegui Melgarejo said the MSME community in Malaysia, Thailand and the broader Asia region are an indispensable part of the growth and development stories of these markets.
“However, they face very real and intensifying risks from climate change and other factors that are affecting business continuity and their ability to capture emerging opportunities. Insurance is at the heart of the solution for making SMEs and MSMEs more resilient and is the driving force behind Generali’s partnership with UNDP,” he remarked.
UNDP Malaysia Resident representative Niloy Banerjee said with SMEs make up 48.2% of national employment and 38.4% of GDP, the crucial role they play in the economic ecosystem is beyond doubt.
“Yet they remain most vulnerable to shocks, whether from natural disasters exacerbated by climate change, pandemics or other disruptions to the manufacturing or logistics continuum. We must rapidly support the building of resilience and staying power of SMEs against all foreseeable risks through holistic and innovative instruments and solutions. Insurance would be one of the most significant safety nets for SMEs,” he said.
UNDP Global and Corporate Lead on Insurance and Risk Finance, Head of the Insurance and Risk Finance Facility, Jan Kellett, said: “In the Asean, where MSMEs make up 45% of regional GDP, their vulnerability to rapidly rising climate and other risks is not only a development challenge but an immense opportunity for public and private sectors to come to together and help businesses develop their capacity to understand and manage these risks.”
