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Only 20% of MSMEs qualify for loans

Published:Thursday | January 15, 2015 | 11:02 PMMcPherse Thompson

Chief executive officer of the Jamaica Business Development Corporation (JBDC), Valerie Viera said that only about 20 per cent of Jamaica's micro, small and medium-sized enterprises (MSMEs) which apply for loans are so granted by the island's financial institutions.

That she attributed to the findings of JBDC research across all parishes over the last four months which show that approximately 85 per cent of MSMEs do not have a business plan, 50 per cent "don't have a clue" about developing a marketing plan and approximately70 per cent have never even thought about research and development.

"So is it any surprise that only about 20 per cent of the client group applies for or even is granted a loan from a financial institution," Viera told an Editors' Forum at The Gleaner's North Street, Kingston offices on Wednesday.

MSMEs have for years complained about limited access to financing.

However, while acknowledging that finance was an important and major issue for the sector, "I want to be a little radical and say it is not the first obstacle that my clients in the field are facing," she told a business roundtable on financing MSMEs at the Mona School of Business and Management inaugural conference at the Holiday Inn Sunspree Resort, Montego Bay last week.

"I want to first start to say we need to build the capacity of the MSMEs to really be in a position to negotiate for the financing," she added.

Viera said there was a misalignment between the various stakeholders about the requirements of MSMEs, noting that financial institutions require, for example, business plans and audited financial statements from those borrowers but they have not built the capacity to fulfill those requirements.

"Many of our financial institutions speak about ... products for the MSMEs. The truth is that it's the same people who access those funds over and over because it's the same people who qualify for interviews," Viera said.

Moreover, she said, "I often wonder what's the philosophy behind many of the products that the financial institutions are offering because most of them have no relationship to the needs of the client group. If I'm diabetic and you give me a beautiful cake you (are) not helping me. That's exactly what is happening and we need to revisit that."

Viera said that in referring to funding "I am not only talking about the banks, but all the systems that are in place to provide financial support."

She cited, for example, grant funding from the Caribbean Export Development Agency which require companies to advance the money and then they would be repaid. "Now from where you advance it I am not clear," Viera said, asking, "how do you help someone when you say advance the money when I came you because I did not have the money?"

The JBDC CEO said all of those grant and loan programmes need to be revisited. "I put it to you that at least 90 per cent of those are misaligned to the needs of the client group and we need to revisit that if we are going to be serious about helping people to move forward," she said.

"We talk about start-ups. In one institution start-up means they have been in business for two years. My English tells me a different kind of definition for start-up. How do you start a business if the help you get is when you are in business for two years?" she asked. "It doesn't make sense."

Viera said politicians and others need to stop seeing the MSME sector "as a sexy discussion" and plan the process that can facilitate "this renewal we (are) talking about in industry and in the small business sector because there is a mismatch between provision and need."

The MSME sector across the world is recognized and acknowledged as the backbone of any economy, she said.

"Our backbone is getting weaker and weaker. Even chik V (is) attacking it now and we (are) not coming up with a solution," Viera added.mcpherse.thompson@gleanerjm.com