Zim can leverage on insurance and pensions to promote savings culture: Ngwerume

Zim can leverage on insurance and pensions to promote savings culture: Ngwerume

Nelson Gahadza

HARARE, Zimbabwe in its quest to promote economic growth through savings can leverage on the ability of the insurance and pensions sector mobilize savings which have other the years financed various key projects in the economy.

Currently, the Central Bank has a running  7% RBZ Savings Bond seek to encourage individuals, families, households, small and medium enterprises, schools, universities, public and private institutions, corporate, churches and investors in general, to start saving and to nurture a culture of saving and building national wealth.

At a Zimselector/IPEC mentoring programme for journalists Zimselector CEO Luke Ngwerume said insurance plays a key role towards savings, investments and infrastructure development.

“It is very important for a country to develop the ability to mobilize savings and that revolves around insurance and pensions,” he said, adding that economic recovery can not only be premised on debt and foreign direct investment.

He said, Zimbabwe’s insurance penetration is currently at its lowest 1.5%, a decline since its peak of 5.7% in 2004.

“We can infer that insurance density and insurance penetration are still relatively low in the sample countries except for South Africa. In overall, insurance demand promotes growth and we recommend that given the relatively low-insurance culture and penetration regression experienced in Zimbabwe, efforts and policies should be geared towards the awareness and education on the benefits of insurance demand,” he said.

      

According to Ngwerume, the rich actually do not require insurance, but rather the low income earners, thus this should be dy-mystified while insurance and pension companies develop products that are affordable throughout the socio-economic matrix.

Last year, regulator the Insurance and Pensions Commission (IPEC) availed the micro-insurance policy framework aimed at promoting introduction of insurance products that are affordable to the country’s lowest income earners.

According to Ngwerume, the small to medium enterprises (SME’s) are now the largest contributors to economic activity, thus companies should deliberately avail micro-insurance and pension products that caters for that economic constituency.

In 2016, an SMEs mall in Glenview area, Harare, which does furniture was gutted by fire and property worth close to a million was lost albeit with very few insured.

On other hand, Ngwerume said other than economic downturn the single biggest contributor to the change in people’s mindsets was towards insurance and pension savings is the crisis of 2006-8 whereby many people’s insurance and pensions were eroded resulting in confidence erosion and a new generation of Zimbabweans at home and abroad that either don’t trust insurance or don’t know enough about it.

“Against the backdrop of a shrinking economy this is not good news for a market that forms the backbone of the financial services sector of the economy. We believe that an increase in insurance penetration will have a direct and positive impact on economic growth,” he said.

The journalists mentoring programme, according to Ngwerume aims to raise the awareness and understanding and therefore the uptake of insurance, because its benefits to the individual and economy are indisputable.

He said insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent or uncertain loss.