By Bernie Cahiles-Magkilat
The Department of Trade and Industry (DTI) has launched a pilot micro disaster risk insurance (MicroDRI) project initially targetting coverage for 10,000 micro, small and medium enterprises at affordable premium rates.
DTI Undersecretary Zenaida Maglaya led the project launch in partnership with GIZ Philippines as grant provider for the MicroDRI, AXA as insurer, and Cebuana Lhuillier, the country’s leading microinsurance distribution channel. The Insurance Commission is also supporting the project.
“We are making sure MSMEs are protected as well. This is an opportunity for us to make sure that after a disaster hit they can be back into business because these microenterprises are covered by an insurance,” said Maglaya.
DTI is now identifying MSMEs nationwide and areas that are most vulnerable to natural disasters to be covered this business resiliency project.
Jonathan Batangan, general manager of Cebuana Lhuillier, said they will be crafting the insurance products for roll out in the second semester this year.
Initially, they are looking at very affordable premium of at least P1,000 a year or a product that requires a premium of less than P1 a day. This will all be worked out with AXA.
Cebuana has been engaged in micro insurance for the past 13 years providing protection to 8 million Filipinos. It has also settled P180 million in insurance claims.
The project also received a grant GIZ of Germany through its local office here.
Aside from the MicroDRI product, GIZ’s 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.
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, damage cost MSMEs a total of $4.4 billion, about 2.7 percent of that year’s GDP.
MSMEs have an economic value of 35.7 percent of which small industries make up 20.5 percent of all goods and services produced.
In spite of the huge contribution of the sector to the Philippine economy, there is a dearth of comprehensive insurance products that would protect the livelihood and interests of MSMEs. This leaves MSMEs vulnerable to threats and damage 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.
The recent GIZ-led study on “Global Initiative on Disaster Management” also 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.