Thu | Apr 19, 2018

Remittances Can Make or Break Small Businesses

Published:Tuesday | January 17, 2017 | 12:00 AM
Errol Frith of My Own Creation carries out alterations on a customer’s blazer at his shop in east Kingston.
Errol Frith and his wife, Carla, discuss the alterations to be made to a Jamaica Day dress.
Carla Frith is in deep concentration as she makes adjustments to a dress.

Traditionally, whenever Christmas and back to school roll around, most tailors experience an increase in their businesses, and so it is with east Kingston tailor Errol Frith, who operates My Own Creation.

"Big spending obligations result in tightly held purses to be prised open at Christmas, and before back to school in September," Frith explains.

And after two decades in the tailoring business, he notes that the biggest boost in his revenues is supported by the remittances flowing into his community during those periods.

"Many of my customers in this community receive remittances at Christmas, which they use to purchase new clothes downtown and bring them to me for alterations. We receive some four to five times the number of clothing for alterations over other periods.

"The back-to-school period also brings extra business, as school uniforms are often bought in larger sizes to accommodate the child's growth; however, we do the necessary alterations," he said. "This provides additional work for my two assistants, my wife and I."

My Own Creation is not unique in Passmore Town, or in the Jamaican retail sector, says economist Ralston Hyman. He pointed out that research from the Bank of Jamaica (BOJ) supports the view that remittance flows surge during the July to September back-to-school period, at Christmas, and also during other major holiday periods, such as Easter.

"These remittances are vital to the development and maintenance of small businesses in Jamaica," Hyman maintained. "Many of the businesses in underserved communities have customers who receive remittances on a monthly basis. These funds support the operation of food shops, tailors, hairdressers, furniture makers, and so on. And, it is from those transactions that many small businesses are able to remain open."

It is noted that overall, remittance flows to Jamaica are increasing, with figures indicating that at July 2016, Jamaican residents received more than US$1.186 billion in overseas remittances, which was US$32.5 million more than the same period in 2015. This represented some 16.6 per cent of the gross domestic product.




"Money sent from overseas help to start many small enterprises," Hyman said. "With the funds, entrepreneurs are able to start their own operations, and, in some instances, it represents additional capital to expand. In addition, remittances stimulate our economy because these businesses also employ people."

A 2010 study conducted by the BOJ revealed that approximately six per cent of remittances flowing into the country was used to invest in new businesses. The study also indicated that in whatever situations these funds are used, they continue to have a positive impact on our economy.

Conversely, it was evident that when remittances fell some 11 per cent in 2009, as a result of Jamaicans in the diaspora losing their jobs during the Great Recession in the USA, the local impact was direct.

"I recall that during that recession, some businesses closed because the remittances were not as frequent," Frith said. "It was rough on the residents and businesses in our community."

BOJ researcher Eliud Ramocan revealed that some 50 per cent of remittance recipients maintain that they depend on the funds for their economic survival.

Jacqueline Shaw-Nicholson, communication and client services manager at JN Small Business Loans, concurs about the relationship between remittance flows and the microfinance company's clients.

"Many of our clients benefit from remittances, both directly and indirectly," she explained. "In processing loans, many of our small business operators declare that they receive remittances as an ongoing source of support; and this factor is taken into consideration when underwriting some loans.

"We also have clients whose customers depend on remittances," she pointed out. "As a result, for many small businesses, remittance is an important lifeline."

"Remittance flows are a big help to people in my community," Frith stated, adding that "what benefits my community also helps me".