June 2025 Edition

MITIGATING SMALL AND MEDIUM SCALE ENTERPRISES (SME) VULNERABILITY THROUGH THE INSTRUMENTALITY OF MICRO INSURANCE IN ASSET AND LIABILITY RISK MANAGEMENT

Ajijola, Lukman Abolaji and Saka, Toyin Shafau

Abstract

Small and Medium Scale Enterprises (SMEs) in Nigeria were vulnerable to various risks that impacted their operations, growth, and survival. Asset and liability risks, in particular, posed significant threats to SMEs, as they resulted in substantial financial losses, damage to reputation, and even business closure. Microinsurance was touted as a potential solution to mitigate these risks, but its effectiveness in the Nigerian context was not well understood. This study investigated the impact of microinsurance on mitigating asset and liability risks faced by SMEs in Lagos State. Specifically, it examined the effect of microinsurance on reducing the financial impact of asset risks (such as damage to property, equipment, and inventory) and liability risks (such as liability claims and business interruption). The study employed a quantitative research design, using a survey research design with questionnaire to collect data from a sample of 109 SMEs in Lagos State and analyzed using regression model. The study revealed that micro-insurance can significantly mitigates SME vulnerability through the instrumentality of asset and liability risk management. Arisen from the major findings of this study, the study recommended that insurance companies should design and offer microinsurance products by providing coverage for damage to property, equipment, and inventory, as well as offering risk management advice and support to help SMEs mitigate these risks, lastly, policymakers and insurance regulators in Lagos State, Nigeria should create an enabling environment that encourages the development and uptake of microinsurance products that address liability risks faced by SMEs..

Keywords

Asset Risks, Liability Risks, Microinsurance, Risk Management, Small and Medium Scale Enterprises (SMEs)

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