Risk Mitigation for MSMEs through Affordable Insurance, the need of the hour to strengthen MSME Sector for Self-Reliant India

No.PR-231 August 28, 2020 New Delhi Risk Mitigation for MSMEs through Affordable Insurance, the need of the hour to strengthen MSME Sector for Self-Reliant India There is a need to think for affordable credit insurance for which insurance regulatory bodies are making guidelines to cater to the needs of MSME sector, said Mr. Anand Sherkhane, Additional Development Commissioner, Ministry of MSME, Government of India, in the webinar organized by PHD Chamber of Commerce and Industry on Debtors and Industry Protection through Insurance - Need of MSME Sector. Mr. Anand Sherkhane mentioned that there is a growing need to educate and inform MSMEs about the benefits of having an insurance cover. He discussed about various initiatives undertaken by the Government for the Atma Nirbhar Bharat including subordinated debt and Fund of Fund (FoF) scheme. He stated that the Government has worked on clearing delayed payments that has given some ignition to the reviving MSME sector. He informed that they are working diligently on it and uploading all the outstanding bills and almost 90% of the payments have been cleared. Mr. Rishabh Jain, Manager SIDBI on deputation to credit monitoring cell, investment promotion, and finance division, the office of development commissioner, Ministry of MSME, Government of India, discussed about the need for awareness about Insurance to the MSMEs that helps in mitigating any risks in the future. In this regard, he suggested that this needs to be done through an awareness campaign. Mr. Pradeep Multani, Vice President, PHD Chamber of Commerce and Industry, mentioned that the risk is inherent in everyone’s lives, but MSMEs are especially vulnerable to risks that threaten the dream venture that they have worked so hard to build. Naturally, with the stakes being so high, insurance is a prudent way to limit liabilities in the event of damage to assets, property and business. For MSMEs, it could be the key to survival. He opined that it is crucial for them to understand the importance of Risk Assessment, need for covering the risks, buying of Insurance to protect their assets, liability, amid any risk which may arise due to various reasons/calamities. Mr. V. Rajaraman, EVP, Head of Institutional Business, IFFCO TOKIO General Insurance co. Ltd. mentioned that credit insurance plays a vital role in bad debts. He opined that the MSMEs are the most affected during Covid-19. He stated that in a trade credit insurance, they do not cover asset of the MSMEs, however, the delinquency and short term receivables get covered under MSMEs. The risks involve loss of outstanding debts, the bad payment practices, high cost of labour. The core economic situation adds up to the problem of MSMEs, he further added. He talked about the corporate strategy which should primarily be to start exports, enter new markets, and desire to delegate credit management to concentrate on core business activity. Mr. S. K. Sethi, Founder & CEO, Insurance Foundation of India, in his presentation talked about the risks faced by MSMEs in India, the controllable and non- controllable risk involved and cited relevant examples. He suggested that in a scenario such as shortage of working capital, no payments from the customers affecting business cycles, one should have a policy of the credit limit. He opined that payment due date should be mentioned in the invoice and one should go for proper GST invoice. He recommended that one should have regular payments follow up in order to uplift the industry. Mr. Shailesh Kumar, Co-founder and Insurance Expert, Insurance Samadhan, in his presentation discussed about the challenges faced by MSMEs in the insurance sector that includes asset valuation and insurance; lack of experience in specialized claim documentation; accountability of claim management and others. He also talked about the trade credit insurance for MSMEs, its benefits, and its working mechanism. Mr. Animesh Sinha, Managing Partner, Animesh Sinha & Partners, gave good legal perspective about the details /procedure of companies going in for Insolvency and bankruptcy proceedings or liquidation. He stated that the takeover of the company may show that company will be running but the act is that MSME would have taken a big hit by not getting the dues from that company as Banks are standing first in the line to take the money. MSMEs are facing lot of issues like recovery of money, it is important that there must be some push for separate category for MSME as creditors. Insurance plays a vital and a stronger role in uplifting the industry. MSMEs should not rely on banks only but should also adopt a macroeconomic review and understand the policies. Mr. H.P. Kumar, Head MSME Centre, PHD Chamber, while giving an industry perspective, deliberated about the need for insurance cover for the MSME sector. MSMEs are deprived of insurance at the same time they are not aware of the benefits of having insurance. He recommended that the Government should give special schemes for giving insurance and there is a need to focus on educating and informing MSMEs about the benefits of having insurance. Mr. Vinod Jain, Chair, BFSI Committee, PHD Chamber, while moderating the webinar, gave an overview of the importance of MSMEs and insurance sector for the development of the country and mentioned that they need to be provided with customized and affordable policies in the banking and insurance sector. The session aimed at understanding the credit and industry protection insurance for MSMEs and the kind of products being offered by the insurance sector and its features and process that can benefit the MSME sector. Mr. Ram Kumar Co- Chair, Banking, Financial Services & Insurance Committee, PHD Chamber, delivered a formal vote of thanks to all the delegates and participants and assured that PHD Chamber of Commerce and Industry will stand in full cooperation with MSMEs and will take up their issues and recommendations. The session witnessed a powerful attendance of more than 200 industry experts from the various industry segments. The webinar was supported by IFFCO Tokio General Insurance Co. Ltd; Insurance Samadhan; Insurance Foundation of India and RIA Insurance Brokers Pvt Ltd. The Webinar was attended by many industry stalwarts pan-India. Ends Media Division PHD Chamber of Commerce and Industry