MSME culture shift - Changes in loan market force entrepreneurs to adopt prudent business practices
Gary Spaulding, Senior Gleaner Writer
Persons banking on loans to invest in commercial and productive enterprises are being forced to reform their approaches to prudent business practices, and bankers at a Gleaner's Editors' Forum yesterday said this was a necessary step in reforming the financial sector.
"There are a number of things that are happening individually, but when you put them together, are creating a different type of culture when it comes to lending and borrowing," said Patrick Hylton, group chief executive Officer of the National Commercial Bank (NCB.
These changes include the introduction of the credit bureau, a system of credit rating, and the Security Interest in Personal Property (SIPP) that is intended to allow persons to use personal property such as intellectual property as collateral for loans. Enacted earlier this year, the SIPP legislation stipulates that entrepreneurs seeking loans should be registered.
Minister of State in the Ministry of Tourism and Entertainment Damion Crawford said that the SIPP is geared towards increasing access to credit by facilitating the use of movable property as collateral.
Crawford suggested that an individual could use their ownership of copyright to obtain loans, a position harboured by the bankers.
"Soon people will start to understand how important it is to have good credit ... . I have seen the impact that it has had in other societies," added Hylton.
He also referred to initiatives being pursued by the Development Bank of Jamaica (DBJ) and the work being done by various associations, including financial institutions, in terms of engaging with the various associations.
"This will facilitate understanding of their needs and what it is that goes into the equation. So what you find happening is that more and more people are starting to see the importance of having good credit and a history of having good track records," said Hylton.
He added that many people are beginning to make the effort but expected momentum to increase. "When people start to see that it makes a difference, I think you will see more people coming on board," he predicted.
Endorsing Hylton's sentiments, Milverton Reynolds, managing director of the DBJ, suggested that access to credit by members of the micro, small and medium enterprise was not the primary concern of small entrepreneurs.
"The difficulty that they had was their ability to get access to that credit," Reynolds asserted. "What is really hampering them is that they need capacity building, such as help with providing accounts and a good business plan."
Reynolds was supported by Donovan Wignall, president of the Micro, Small and Medium Enterprise Alliance, who earlier expressed the need for streamlining of the small entrepreneurs in order to facilitate success.