Trade credit insurance ‘key’ to SME growth: ICISA

The association also stated 6 recommendations for policymakers and regulators.

Trade Credit Insurance (TCI) is increasingly recognised as a critical tool for supporting small and medium-sized enterprises (SMEs) by protecting businesses from the risk of non-payment of trade receivables, said the International Credit Insurance & Surety Associaiton (ICISA) in its latest whitepaper. 

Companies of all sizes, from SMEs to multinationals, use TCI to secure both domestic and export transactions, primarily on short-term invoice periods typically under 90 days.

The insurance product, often purchased on a whole-turnover basis, not only safeguards companies against buyer insolvency but also covers political risks such as war, public contract frustration, or currency restrictions. 

By transferring the risk of default to a highly rated insurer, TCI enhances the credit profile of businesses, enabling better access to financing from banks and other institutions. 

To improve the reach and impact of TCI, the ICISA recommends that policymakers and regulators to enhance awareness of TCI, advance trade digitalisation, promote sound financial risk management practices amongstSMEs, maintain clear insolvency laws and court systems, develop legal identifier systems for companies, and improve regulatory frameworks for TCI.