Tue | Sep 26, 2017

Blossom O’Meally-Nelson | Stimulating private enterprise to provide MSME services

Published:Friday | August 14, 2015 | 8:00 AM
Minister of Investment Industry and Commerce Anthony Hylton (left) speaks with Brian Pengelley in this April 24, 2014, Gleaner photo. Hylton has appointed Pengelley as chairman of the merged boards of three MSME state agencies.
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The recently announced move by the Ministry of Industry, Investment and Commerce to consolidate the operations of its three main MSME service entities under the chairmanship of Brian Pengelley is interesting, to say the least.

The good news is that some thought is being given to how the Government can most efficiently provide services to the micro, small and medium-enterprise sector.

According to a report in The Sunday Gleaner, 'Pengelley to deliver restructuring plan for micro agencies' - the intention is to merge the operations of the three signature agencies, the Jamaica Business Development Corporation (JBDC), The Self Start Fund (SSF) and the Micro Investment Development Agency (MIDA).

I am assuming that the decision to merge these entities was made after the analysis of appropriate data relating to their performance over the years and their impact on the MSME sector.

I am also assuming that as Mr Pengelley approaches the difficult task ahead, he will be armed with appropriate information about the status of the MSME sector and microenterprises in particular, the best practices which have been identified, and the needs of the potential clientele have been defined.

The three entities involved have differing political histories and, over the years, they have developed their own distinctive cultures and, modes of operation.

To effect a merger, then, is no mean task. This new move on the part of the Government however, raises questions about its vision of the MSME sector and the role of the Government in providing services particularly financial services.

Is the Government taking a bird's-eye view of the total development of the MSME sector? One where it does not see itself as 'sole provider' but, rather, one which recognises the vital role of private-sector service providers, and understands that true development resides in empowering the non-government service providers to deliver long-term affordable, sustainable services.

As the Jamaican MSME sector matures and grows, there is no need for the Government to compete with the NGO and private sectors to provide business development services and loans.

Focus on growth

The ministry's plan, if it is to be sustainable and create real development instead of fostering more dependency, must have as its aim not only the growth of MSMEs but of their service providers, which are themselves MSMES.

A forward-thinking approach would be for the Government to get out of the business of providing business development services and retail loans for MSMEs and, instead, to focus on creating an enabling environment where private service providers can thrive.

Setting up structures to provide services that can well be provided by free enterprise does not make a government great; what makes it great is the ability to strategically place its resources to stimulate the growth of such services and then to ensure that the regulatory environment and quality standards are in place and effective.

There are a lot more important things for the Ministry of Industry, Investment and Commerce to do than provide loans and business development services to MSMEs when these can be effectively provided by non-governmental agencies and private enterprises.

There is the matter of the enactment of the MSME policy; this requires engagement with the key players in the sector, including the microfinance institutions.

This type of engagement is something that the ministry does not do well, despite the fact that we are supposed to be in a new age of openness and public-private collaboration.

There is urgent need for a loan guarantee fund, one that makes sense to both the borrowers and the micro-finance institutions. This fund should be operated by the Government through its development bank and should be used to incentivise the development of productive enterprises in growth sectors.

Business incubators of various types are excellent mechanisms to enable new businesses to overcome start-up hurdles and receive support in business development and the effective use of technology. Establishing business incubators through public-private partnerships would be a step in the right direction.

The focus on new growth areas and the development of clusters should be strengthened, with careful attention paid to ensuring that operators of these businesses have access to appropriate training and technologies that will create the critical mass for the take-off of these cluster companies.

In consideration of the cost of private-sector business development services to MSME operators, the Government could use money saved from dismantling public services to provide grants to individual MSMEs to access services.

The best approach, and one which would send a message of its intention to seriously support the development of the sector, is for the MIIC to establish a fully functional and integrated MSME department within the ministry with responsibility for the promotion, monitoring and evaluation of policy, coordinating the services offered by its agencies such as JAMPRO, strengthening the linkages with the Ministry of Finance in terms of regulations, promote research and development, stimulate bi-lateral programmes and linkages with private-sector MSME entities, carry out public education and offer service information services to entrepreneurs.

The development of the MSME sector in Jamaica and its financial services requires more than a 'stirring of the waters'. It requires a studied data-driven approach clearly calibrated to integrate all the inputs in production.

The time has come for meaningful dialogue to begin between the MIIC, MSME associations and microfinance institutions with a view to implementing a holistic strategy that will strengthen the sector and its service organisations.

Dr Blossom O'Meally-Nelson is chairman of Jamaica Association for Micro Financing

nelbloom@hotmail.com