BRIDGETOWN, Barbados – Addressing the State of the Sector Conference hosted by the Barbados Small Business Association, last week, president of the Caribbean Development Bank, Dr Warren Smith articulated that more investment and effort must be put into strengthening the enabling environment if the Micro, Small and Medium Enterprises (MSME) sector if it is to fulfill its potential and drive economic growth and social development in the Caribbean.
“MSMEs are the backbone of the private sector”, stated the bank president, noting MSMEs account for on average, “50 percent of GDP and create 45 percent of jobs in our region.”
The “full potential remains unrealised” said Dr Smith, as MSME’s export levels do not match their share of the private sector or contribution to employment. He outline several areas for governments, business support organisations and other stakeholders, including the bank, can focus their attention to “unleash this potential.”
According to Dr Smith, “much work remains to be done” to create a business-friendly environment for MSMEs to grow and develop and that the Caribbean had slid to 126 out of 190 in 2019 in the World Bank’s Doing Business rankings. As compared to 81 out of 181 countries in the 2009 survey.
“In many Caribbean countries, there is ample evidence of inadequate legislative and regulatory frameworks, weak public sector institutions for providing legal protection, and inefficient business support and training services”.
“In some Caribbean countries, for example, property registration continues to be time-consuming and expensive, because property rights are not adequately defined or protected. Bankruptcy laws are often excessively punitive, and severe penalties can confound the willingness to invest in new business ventures,” Dr Smith said.
He called on governments to speed up implementation of agreements reached under CARICOM’s Revised Treaty of Chaguaramas, noting that market access has not improved despite removing over 450 barriers to the free movement of goods, services, capital and labour in most CARICOM countries. He also highlighted that there is still no single jurisdiction to allow for the equal treatment of businesses across CARICOM.
Access to finance is another issue constraining MSMEs; while suggesting several mechanisms including credit bureaux; collateral registries, guarantee schemes and additional financing channels such as junior stock exchangest can be employed to improve this situation.
Dr Smith stressed that CDB remains committed to supporting the development of MSMEs in Barbados and the rest of our region.
“Importantly, we, at the CDB, are [in the midst of] preparing our strategic plan for the period 2020-2024; and the MSME sector is emerging as a critical area for strategic and focused attention in our region’s ongoing efforts to achieve sustainable and inclusive economic growth, and eliminate abject poverty and inequality.”
Since 2015, CDB has committed US$30 million and disbursed US$20 million to over 900 firms for private sector development, Dr Smith emphasised – and that the bank was determined to increase its involvement with MSMEs.
In this regard, the bank [had]embarked on some innovative approaches to attract additional financial flows for its MSME programme.
These approaches include the multi-donor Cultural and Creative Industries Innovation Fund (CIIF) which was launched in 2018 with start-up capital of U$2.6 million. CDB also plans to increase the use of guarantee schemes to reduce the risk spread in pricing loans to MSMEs.