Insurance scheme to benefit small businesses

Nepal has introduced a novel insurance scheme designed to shield small businesses, particularly in the retail and service sectors, from disruptions that can impact their operations and income. This first-of-its-kind policy, effective from the new fiscal year in mid-July, targets businesses such as fruit shops, motorcycle workshops, tailoring services, and plumbing businesses.

The scheme provides crucial financial support by covering lost income if a business owner, for example, is injured or hospitalized and the shop must temporarily close. This aims to ensure a degree of income continuity for entrepreneurs who might otherwise face severe financial hardship due to unforeseen personal circumstances.

Nirmal Adhikari, director of the Nepal Insurance Authority, noted that insurance penetration among Nepal's micro, small, and medium enterprises (MSMEs) remains critically low. This new policy is seen as a vital first step toward addressing the sector's vulnerabilities. A recent report by the UNDP Nepal and the Nepal Insurance Authority highlighted that MSMEs, especially those in agriculture and tourism, are dangerously underinsured and highly susceptible to climate shocks, disease, pandemics, and income losses due to inadequate existing insurance products.

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It’s because of limited awareness, weak distribution channels and inadequate public understanding of insurance.