Abstract

The purpose of this study was to establish the relationship between the effects of insurance companies and the growth of SMEs in Cameroon based on the following objectives; to examine major factors that affect the growth of SMEs; to assess the contribution of insurance companies to the growth of SMEs; to investigate the factors inhibiting the purchase of insurance cover by SME operators and to determine the strength of the relationship between insurance companies and growth of SMEs.

The research was descriptive in nature involving quantitative methods which were administered through questionnaires. The total sample comprised of 50 respondents of all the managers and employees of the SMEs. Simple random sampling was used whereby the researcher went to the SMEs and administered questionnaires to the sampled or selected employees.

Primary data was obtained from the library materials, textbooks, Zenith brochures, internet, and journals. Data analysis was carried out using SPSS and frequency distribution tables.

Findings revealed that innovation is strong empirical evidence for fast-growing SMEs, competition has a great effect on SMEs industry and credit remains a great challenge to the growth of SMEs. Besides that insurance companies mitigate risks and enhance loan acceptability by SMEs sector with banks.

However low income earned by SMEs, high premium cost and paperwork, and experience and beliefs inhibit the purchase of insurance cover by SMEs. Nevertheless, there is a strong positive relationship between insurance companies and the growth of SMEs at the Spearman Rank Correlation Coefficient.

It was concluded that improvement in business skills increases the performance of SMEs. However, insurance companies do not lower insurance rates and offer protection to SME’s income statements.

In addition, SMEs being small in size and their inability to fully understand the document limits them to get insurance cover. It was recommended that the management of Zenithe Buea need to build a great relationship with SMEs as their customers in order to develop and grow them in trust and also lower the premium rates to SMEs in order to improve on their performance.

Also, Zenithe needs to have a fresh look at the scope and spectrum of services provided to SMEs and has a better understanding of the scale of the enterprise sector.

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

The substantial growth of small and medium enterprises (SMEs) activity clearly marks SME as one of the most remarkable economic phenomena.  SME is a business that is privately owned and operated with a small number of employees and a relatively moderate volume of sales.

The definition of SMEs varies from country to country depending on the level of development and the strength of the economy. The lower limit for small scale enterprises is set at between five and ten workers and the upper limit is set at between fifty and one hundred workers.

The upper limit for medium-scale enterprises is set between one hundred and two hundred and fifty workers (Hallberg, 2000).

SMEs in Cameroon constitute a bulk of the country’s enterprises. In fact, law No 2010/010 of 13 April 2010 on the promotion of SMEs in Cameroon and other legal and institutional instruments paved the way for the sector with many such enterprises being created.

With other accompanying measures for a level playing ground created, the SMEs, according to statistics from the Ministry of SMEs, Social Economy and handi-craft (MINPMEESA), constitute 95 percent of Cameroon’s enterprises.

The sectors concerned are; transformation, agriculture and animal husbandry, general commerce, construction and public works and most recently Information and Communication technology (ICT).going by the research and analysis Centre on the Economic and Social Policies of Cameroon (CAMERCAP-PARC), 61,366 SMEs were created in Cameroon between 2010 and 2016, with 59,200 being local enterprises, and 2,166 foreign enterprises.

According to the 2016 annual statistics of the MINPMEESA, Cameroon SMEs are considered as the main engine for economic growth and contribute 36 percent to the Gross Domestic Product (GDP) of the country enterprises.

On the other hand, insurance is a contract by which one party undertakes in consideration of a payment called premium to secure the other against pecuniary loss by payment of a sum of money in the event of destruction or damage to property, fire, accidents, or death of a person.

Economy, investment, and finance reports (2010) define insurance as a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages.

An insurance contract is an agreement by which the insurer promises, from a premium or assessment, to make a payment to a policyholder or a third person if an event that is the object of risk occurs. SMEs often face a variety of problems related to their size. Frequent causes are bankruptcy, theft, fire, death, automobile accidents, and workers’ injuries.

1.2 Problem Statement

Despite the contribution of insurance companies to the growth of SMEs in economic development, failure, and slow growth still exists and the public doubts its management.

Research suggests that 80% of the businesses affected by a major incident close down within 18 months, and 90% of those who lose data close down within 2 years(cover sure, 2007).

This is due to the failure of small businesses to have adequate insurance cover and proper business continuity plans. It is on this premise that this study sort to evaluate the effect of insurance on the growth of SMEs in Cameroon.

1.3 Research Question

1. What are the factors affecting the purchase of insurance cover by SMEs?
2. What are the effects of insurance company’s contribution to the mitigation of risks of SMEs?
3. What are the factors affecting the growth of SMEs?

1.4 Objective Of The Study

The main objective of this study is the contribution of insurance companies to the growth of SMEs in Buea, Cameroon. The research objective is divided into the following:

1. To evaluate the extent to which insurance cover has an effect on SMEs in Buea, Cameroon.
2. To assess how insurance companies help to mitigate SME’s risks.
3. To examine the factors affecting the growth of SMEs.

1.5 Hypothesis Of The Study

H1: There is no significant factor that affects the purchase of insurance covers by SMEs in Buea.

H2: There are no significant effect of insurance companies contribution to the mitigation of risks of SMEs.

H3: there exists no factors affecting the growth of  SMEs