MITIGATING RISKS FOR AFRICA'S GROWTH BUSINESSES (SMEs)

SME RISKS SME RISKS The Context The Context REAL AND IMAGINARY REAL AND IMAGINARY IMAGINARY RISKS (RED)IMAGINARY RISKS (RED)

•High birth/death rate (Survival)

•Inadequate experience •Narrow market •Short-term goals (“lifestylistic”)

•Unclear growth/critical path •Dominant player •Weak or non-existent structures •Informationallyopaque •No succession planning REAL RISKS REAL RISKS •POLITICAL •COMMERCIAL/CREDIT POLITICAL RISK •Cancellation of Licences and Restrictions on Import and Export •Inconvertibility and Inability to Transfer •Imposition or Increase of Import or Export Taxes •Selective and Discriminatory Imposition or Increase of Import/Export Taxes, Levies or Duties •Expropriation •Government Interference with entities owing insured obligations •Seizure of Goods, Prevention of Sale, or Prevention of Export •Interference with the Carriage of Goods •War or Civil Disturbance •Embargo •Diversion Risk CREDIT RISK CREDIT RISK •Arises from –the insolvency of buyers in trade transactions or –Past due default on the part of customers POLITICAL RISK INSURANCE POLITICAL RISK INSURANCE 1.WHO OFFERS IT?

2.TERMS AND CONDITIONS 3.APPLICATION PROCESS 4.CLAIMS PROCESS MITIGATING CREDIT RISK MITIGATING CREDIT RISK ��CREDIT RISK INSURANCE 1.WHAT IT IS NOT 2.BASIC PRINCIPLES 3.WHO OFFERS IT 4.BENEFITS TO INSURED I. Catastrophic loss protection I.Safe sales expansion II.Credit decision support III.Borrowing enhancement 4.THE UNDERWRITER’S ROLE 1.Policy premium 2.Risk retention 3.Coverage limit 5.THE APPLICATION PROCESS MITIGATING THE RED RISKS MITIGATING THE RED RISKS (THE HIDDEN KEY TO SME GROWTH) (THE HIDDEN KEY TO SME GROWTH) To learn more about this author, visit African Development Bank's Website.

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