Zim/Africa needs to embrace trade credit

Zim/Africa needs to embrace trade credit insurance
Staff Writer
ZIMBABWE and Africa need to embrace trade credit insurance as it helps to close a number for gaps in the financial markets, providing and additional of security, Insurance24 reports.
Trade credit insurance is a type of business policy that protects a company’s accounts receivables against losses from unpaid commercial debt. If a customer fails to pay due to bankruptcy, insolvency, or other issues, the policy reimburses a percentage of the outstanding debt.
Speaking during a regional conference on Factoring and Receivables Finance and Credit Insurance in Southern Africa, Nedbank head of Business banking and corporate banker, Washington Murungu said it was important to have trade insurance because as companies need to manage risk.
He said trade insurance helped mitigate non-payments by the debtors due to insolvency, business rescue plan, liquidation default or even political risks.
“So we need trade insurance. There’s also increased financing capacity and financial institutions provide additional layers of security. Trade insurance provides an additional layer of security. Financial institutions are now able to provide more funding to their clients, thereby increasing their revenue,” he said.
Murungu said there was also need for business continuity and in the event that there is a default on the insolvency of the debtor trade insurance could help mitigate a major impact on debtor companies’ supplies.
“We also need to look at diversification, that means expecting companies to diversify their risk exposure across various portfolios, rather than just relying on one debtor “he said.