Lack of insurance among Zambian SMEs hinders growth

Aug 13, 2011

Buseko market, located in Zambia’s capital Lusaka, is usually a hive of activity with various items being sold, ranging from foodstuffs to building materials. On 21 June 2011, fire swept through parts of the market, destroying goods and leaving over 160 traders without shelter.

55 year old Evans Minganja has been in trading at Lusaka’s Buseko market for over 10 years, trading manly in timber.
He lost goods worth over US$ 1000. “I lost all my goods and capital in that fire", said Evans. “Unfortunately I have not been involved in any saving scheme, therefore I am stuck now.”

Lowest insurance rate in the region

What Evans is going through is a reflection of what happens to many Small and Medium Entrepreneurs once they experience loss of business capital. Although there is a growing recognition of micro-insurance opportunities among insurance companies in Zambia, very few know what benefits it offers SMEs. “I have heard about insurance, but don’t know much about it”, Evans said. “I have never thought I needed it.” He said given another chance in business, he would unquestionably consider insurance because one can be compensated after a loss. The Pensions and Insurance Authority (PIA) which is the country’s pensions and insurance regulator bemoaned the low insurance penetration levels in the country, especially among those in the low income group. Registrar Martin Libinga said Zambia currently has about 4 percent insurance penetration, which is lower than most countries in the region. “The larger part of the country comprises people who are in the low income group, but have potential to participate in the economic development through insuring some of their assets", Libinga added. He says it is important that insurance companies in the country create insurance awareness and start offering appropriate products to target this group. "This will enable most of the people stay in business and even grow." "People don't realize the need for insurance"

Professional life assurance General Manager Simachila Makwembo expressed the need for more dissemination on the role of insurance among the population. "We usually have some markets being gutted almost annually, but people still don't realize the need for insurance.” He said some life contingencies such as loss of business capital can be dealt with if persons have insurance cover because there are insurance products to cover for business interruption or loss of profits. Makwembo adds that “small and medium business people, especially those in markets, can either individually or in a group make arrangements to pay a specified amount per week or day towards insurance.”

Evans Minganja has now resorted to selling brooms made of dried grass. However, still without capital, Evans gets supplies from the whole sellers on credit. “Every day I get the grass for about US$ 6 and rubber for tying the brooms at US$ 1” he said “I earn something like US$ 10 from which I have to pay the supplier back what I got, leaving me with almost US$ 2 to cater for food and other essentials.” Cynthia Mukwasa, Radio Christian Voice, Lusaka, Zambia