IN Zimbabwe's dynamic economic landscape, maintaining a healthy cash flow is paramount for business survival and growth. While offering credit terms can be a crucial strategy for securing sales, particularly with valued long-term clients, the benefits are intrinsically linked to robust credit control and efficient collection processes.
So, how can businesses navigate this reality, ensuring positive cash flow while bolstering the security of their accounts receivable? The seemingly straightforward solution of operating on a cash only basis, though eliminating credit risk, is often impractical and undesirable in today's competitive market.
The answer lies in a strategic financial tool specifically designed for this challenge: credit insurance. Originating in 19th-century Europe, credit insurance has evolved into a vital global instrument offered by specialised insurers who focus solely on this crucial area of risk mitigation.
The banking and financial sectors have increasingly recognised the significant advantages of a credit-insured debtors' book, particularly when extending loans or trade finance. A credit-insured receivables portfolio transforms into valuable collateral security, providing lenders with greater confidence. Simultaneously, the insured business gains peace of mind, knowing its accounts receivable are protected against customer default.
In Zimbabwe, this essential coverage has been available since 1965 with the establishment of Credsure Insurance Limited (Credsure). Founded by a consortium of leading commercial and merchant banks, as well as reinsurance and insurance companies, Credsure has been a steadfast partner for Zimbabwean businesses. Credsure’s comprehensive suite of offerings includes domestic and export credit insurance, bonds and guarantees, and general short-term insurance solutions. Domestic credit insurance provides crucial protection for businesses operating within Zimbabwe.
It safeguards sellers against non- payment stemming from events such as a customer's insolvency, liquidation, or similar legal proceedings that impede or delay payment. Furthermore, it covers instances where a buyer fails to meet their financial obligations within a defined period, typically four months from the original due date.
The standard indemnity offered is usually 80% of the outstanding amount, with premiums ranging from 0,30% to 0,75% of the total insured monthly balances.
This rate is influenced by the specific policy type, the nature of the goods being sold, and any applicable exclusions. For businesses venturing into international markets, export credit insurance offers an even broader shield against potential losses.
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In addition to covering insolvency and protracted default, it also indemnifies against losses arising from a buyer's refusal or inability to take delivery of goods. Crucially, it extends protection to a comprehensive range of political risks. These include losses caused by war in any form, political disruptions during transit (such as border closures or trade embargoes), and the non-transfer of payments from the buyer's country to Zimbabwe.
Recognising the diverse needs of exporters, Credsure offers various policy types, with indemnity typically reaching 90% of the insured debt. Premiums for export credit insurance range from 0,10% to 4,25% of the shipment value. Beyond financial protection, Credsure's service extends to valuable support mechanisms.
The premium includes assistance with the collection of overdue accounts, a significant contribution towards legal debt recovery costs, and continuous monitoring of buyers' creditworthiness. This proactive approach provides early warnings of any negative trends, empowering businesses to take preemptive action. Even after a debt has been indemnified, Credsure continues its recovery efforts, sharing any recovered funds with the insured party. In the realm of business security and insurance, the choice is clear.
For the most established and trusted partner in both export and domestic credit insurance, Zimbabwean businesses need to look no further than Credsure Insurance Limited. Secure your cash flow, mitigate risk, and empower your business growth with the peace of mind that comes from comprehensive credit insurance.
Get in touch with us today on +263 774 440 814.
