Research Handbook on Small Business Social Responsibility
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Research Handbook on Small Business Social Responsibility

Global Perspectives

Edited by Laura J. Spence, Jedrzej G. Frynas, Judy N. Muthuri and Jyoti Navare

The vast majority of businesses globally are small. If business is to be socially responsible, we need to go beyond the westernised concept of 'Corporate Social Responsibility', to develop 'Small Business Social Responsibility'. This agenda-setting Research Handbook on Small Business Social Responsibility includes leading research from around the world, including developed and developing country contexts. It provides a foundation for the further development of small business social responsibility as a scholarly subject and crucially important practice and policy field.
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Chapter 10: Financial aggregation of risks for MSMEs in developing economies: a conceptual framework of financial aggregation and microinsurance effects

Jyoti Navare and Morrison Handley-Schachler


Business vulnerability is a function of the extent of risks faced and the ability of the business to adapt to adverse changes in circumstances. Financial aggregation arises out of the link between economic interactions at the micro level and their macro based risks. Microbusinesses in developing countries are often highly vulnerable to a range of risks including natural disasters, corruption, poor weather conditions and illness. This vulnerability creates a need for insurance but the ability to take out appropriate insurance is frequently limited by financial resources, availability of insurance policies and information on these policies, and financial education levels. On the supply side, microinsurers are faced with high marketing and administrative costs, and the microinsurance market is further distorted by information asymmetries, adverse selection and moral hazards. This limits interest in the microinsurance market from commercial providers, with microinsurance frequently being available through non-profit agents. This chapter investigates the relationship between vulnerability, risk appetite of microbusinesses and their propensity to insure. In building a conceptual framework, we explore the factors that impact financial aggregation and the uptake of microinsurance. We observe additionally that improved financial education and more effective information may help increase the extent and quality of microinsurance.

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