Jamaicans are naturally entrepreneurial
The following are excerpts from a speech by Joseph M. Matalon, chairman of the Development Bank of Jamaica (DBJ), at last Tuesday's Venture Capital Conference at The Jamaica Pegasus hotel, New Kingston.
- We host these conferences as a means of knowledge sharing with, and sensitisation of our stakeholders and the wider public on the venture capital industry, and to allow them to network, exchange ideas and share best practices with local and international experts on the multiplicity of issues which impact the development of the industry.
- The DBJ's mandate is to facilitate economic growth and development and, to this end, the bank has committed this year alone some $5.8 billion to the provision of (primarily) loan financing to companies of all sizes through our Approved Financial Institutions (AFI) and Microfinance Institutions.
- In addition to our lending activities, and in order to promote greater access to credit by local SMEs, we have introduced a number of new products. And I would like here to provide examples of just two such products that have been particularly impactful:
- First, a partial guarantee scheme known as the Credit Enhancement Facility (or CEF) which offers guarantees up to 50 per cent of loan value generally and up to 80 per cent for small loans. Since its inception the CEF has issued guarantees amounting to $727 million, which have facilitated loans of $1.5 million to SMEs which would otherwise have been denied access because of a shortfall in required collateral.
Second, we also provide, through our AFIs, vouchers under our 'Voucher for Technical Assistance' or VTA programme. Vouchers issued by AFIs under the programme provide grant funding to recipients of up to 70 per cent of the cost of the services of business development organisations engaged to improve their technical and management capacity and so better qualify them for loans.
Since its inception with a pilot in May 2014, the DBJ has issued 285 vouchers to a value of $57.4 million. This is a programme we plan to scale further in 2016-17.
- In spite of these offerings, however, we recognise that there continues to be a persistent market gap when it comes to SME finance, and in particular to equity financing.
- The DBJ believes that the availability of Smart Capital, which comes with a dynamic and sustainable venture capital industry, must be part of any solution which seeks to address the problem of a lack of access to long-term, patient financing that is required by high potential businesses and innovative start-ups.
- Small and medium-sized businesses play a major role in most economies, with formal SMEs accounting for up to 45 per cent of total employment and up to 33 per cent of the GDP of emerging economies. We also believe that Jamaicans are inherently entrepreneurial and that mobilisation of that entrepreneurial talent must be at the centre of the Jamaica Venture Capital Programme.
Indeed, in an increasingly conducive Jamaican business environment, sustained higher economic growth rates can become a reality if our SMEs, and the entrepreneurs that found and run them, are facilitated and encouraged to increase their production of goods and services and are able to sustain that growth over the medium to longer term.
- The activities of venture capitalists, angel investors, incubators and accelerators, government agencies, universities and business advisers, collectively operating within the venture capital ecosystem, adopting a targeted approach to investing capital in high-potential businesses and improving their governance, management capabilities and operational efficiency, will create a larger cohort of businesses contributing to growth.
- A multifaceted approach has, therefore, been adopted by the DBJ in the implementation of the Jamaica Venture Capital Programme, and the involvement of our private sector stakeholders is critical.
- It has been one of our objectives that the leadership of the industry be assumed by the private sector, and we are certainly pleased at the increasing number of institutional and corporate investors, pension funds, angel investors and incubators and advisers now operating in the local environment. This augurs well for more and more sophisticated, entrepreneurial activity, which finally will be the true driver of continued growth in the industry.
- We anticipate that at least four new funds will be established over the next three years, and that more than 2,000 stakeholders will benefit from the training and capacity-building activities of the programme.