ICISA today published a new white paper titled, “Supporting the economic powerhouse: How Trade Credit Insurance supports SMEs, and how to build on this for growth and prosperity”.

Highlighting the central role Small and Medium-sized Enterprises (SMEs) play in the global economy today and the challenges they face, this paper describes the role that trade credit insurance (TCI) plays in supporting these businesses. Efforts by governments around the world to boost the SME segment have grown in importance in recent years. These businesses are seen as important not only as sources of innovation and growth, but also for their fundamental role in society. In this way, their success feeds directly into the success of countries, particularly in challenging economic times.

SMEs face a number of challenges to succeed. This includes their vulnerability to economic shocks, the large and growing financing gap they face, and the uncertain trade environment seen around the world today. ICISA’s white paper examines these issues and discusses the role that TCI plays in promoting resilience. TCI provides payment against the risk of non-payment of trade receivables by commercial trading partners. This can be a devastating problem for SMEs where the failure of a buyer to pay can create a domino effect through the economy. TCI provides a means to halt this and provide flexibility and certainty to SMEs to grow their businesses sustainably. SMEs also rely on TCI as a tool for improving their access to finance by improving their credit risk when approaching banks or other sources of finance.

In these ways, TCI can play an important role in the economic toolkit of governments and institutions around the world seeking to address many of the challenges economies face today. The paper discusses some of the difficulties insurers face when providing cover to the SME segment and proposes a number of paths forward to address these. ICISA also delivers a number of policy recommendations to further boost the uptake of TCI by SMEs, and enhance its role in meeting economic challenges. These include:

  • Enhancing understanding of TCI among regulators and policymakers.
  • Progressing adoption and acceptance of trade digitalisation.
  • Promoting improved financial risk management practices among SMEs.
  • Maintaining functional and effective insolvency legislation backed by transparent and efficient court-systems.
  • Creating and advancing systems of legal identifiers for companies.
  • Improving regulations currently applied to the use of TCI.

Click this link to read the full paper today.