Why small-scale businesses need to insure against risks

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Peter Nduati

In the recent past Kenya’s economy has been largely driven by small-scale business that make up a large percentage of the country’s revenue. Small and medium enterprises (SMEs) have played a key role in the economic development and job creation.

In 2014, it was notable that 80 per cent of jobs created during that period were dominated by SMEs, which also contributed to 45 per cent of gross domestic product (GDP). Current and past governments have supported business operations especially for the youth, women and people living with disabilities.

They have done this through initiatives like Uwezo Fund, Youth Fund and Access to Government Procurement (AGPO). Fnancial institutions have also supported this agenda by providing resources to support small-scale businesses.

Today it is the hope of every entrepreneur to set up business in the country and build industries through generations. However, it is unfortunate that even with this support, most small-scale businesses will never celebrate their first birthday.

Data from Kenya National Bureau of statistics shows that about to 500,000 SME’s close shop annually, with 2.2 million Micro Small and Medium Enterprises closing shop in the last six years.


This is a worrying trend given that SMEs are expected to be the country’s industrial and economic backbone. Natural and uncontrollable disasters such as fires, theft and political violence can lead to paralysis of a business, forcing it to shut down.

A plastic factory in Nairobi’s industrial area was a victim of such an incident. It lost property worth millions of shillings in an unexpected fire in early 2014. It is because of such incidents that businesses must learn to be risk- averse and make well-calculated decisions to protect their business.

Insurance forex strategy firms play a role in helping businesses protect what they value the most: Their assets! The products to cover business against common risks such as unexpected fires, theft of money and political violence.

With the uptake of these products, emerging and established businesses can protect themselves from risks that could kill their business. Armed with the right products, companies can comfortably guard against uncertainties in the market, particularly those that could lead to massive losses and closures of businesses. The writer is CEO, Resolution Insurance Group

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