Exploring the drivers of using microinsurance in managing business risks by MSMEs in Kenya

Wangalachi, Anne

Exploring the drivers of using microinsurance in managing business risks by MSMEs in Kenya

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

Graduate School of Business (GSB)

Faculty

Faculty of Commerce

Abstract

Micro, small and medium-scale enterprises (MSMEs) provide jobs and support economic growth. They are a lifeline to millions of individuals and families in Kenya. Protecting the resilience of these enterprises in Kenya and across Africa is a strategic imperative given their significance and their disproportionately heightened vulnerability to external socio-economic shocks from events such as the COVID-19 pandemic. This research explored the potential of insurance to enhance MSME resilience by protecting businesses and livelihoods against typical and emerging risks. Using a qualitative research design strategy with non-probability purposive sampling, data gathered through in-person interviews with MSME owners and employees provided insights into their perceptions, beliefs, and use of insurance, in particular microinsurance, for risk management. Findings indicated that most MSMEs were aware of and were using microinsurance to cover various aspects of their businesses. Some MSMEs had effectively relied on microinsurance to maintain their operations during the COVID-19 pandemic. They expressed their readiness to adopt a well-designed business interruption insurance product should this be available ahead of future pandemics. The study revealed key insurance product attributes that MSMEs value during times of risk including affordability, flexible premiums, timely claims payouts, and bundling with inventory, salary and income protection insurance. These insights are useful for insurers designing products to meet the specific needs of MSMEs in Kenya. The study also identified a research gap for future studies on the subject of supply-side drivers of MSME insurance in Kenya. Ultimately, building MSME resilience to shocks and sudden disruptions like the COVID-19 pandemic will require coordinated and concerted effort among insurers, regulators, policymakers, and multilateral development banks to design and promote context-specific MSME microinsurance products. At scale, these products will protect the livelihoods of MSME owners and employees and sustain the business operations of MSMEs for continued economic activity during future crises of similar magnitude to COVID-19.