Changing the Mind-set of Small Business Practitioners

President of the Caribbean Development Bank, Dr. William Warren Smith giving the keynote speech at the conference
President of the Caribbean Development Bank, Dr. William Warren Smith giving the keynote speech at the conference

The Small Business Association of Barbados recently held its first State of the Sector conference during Small Business Week 2019. The conference delved into issues affecting the local Micro Small and Medium Enterprise (MSME) sector and possible solutions that would assist in positioning the sector for growth and sustainability.

The theme for the week was ‘Small Size, Big Thinking – Changing the Mind-set for Global Engagement’, which provided the focus for the discussions held at the conference. Topics included: ‘Opportunities for New Sunrise Industries’, ‘Whither Access to Finance- A Call to Action’, ‘Improving the Legislative Agenda for Growth’ and ‘Facilitating a Culture for Cluster Development.’ Other areas of discussion encompassed ‘Building High Performance Institutions’ and ‘Leveraging Market Access.’ 

The highlight of the conference, was the keynote address presented by president of the Caribbean Development Bank (CDB), Dr. William Warren Smith, who spoke directly on the current state of the MSME sector in Barbados and the Caribbean region.

Describing MSMEs as the backbone of the private sector and the key drivers of economic growth and social inclusion in Barbados, Dr. Smith asserted that making major investments in this sector would be the key to unlocking the long-term economic growth and development for Barbados and the region.  The CDB president lamented that there was insufficient research in the region on the MSME sector but referenced a 2016 survey commissioned by the Small Business Association which revealed that MSMEs comprised over 95% of formal enterprises in the country. Additionally, MSMEs accounted for 60.7% of private sector employment, 47.6% of total employment in the country and non-agriculture MSMEs contributed a total of 64.1% of national value added. 

However, though these statistics were notably impressive, Dr. Smith insisted that the sector’s full potential remained unrealised. He further stated that based on the sector’s contribution to the number of formal enterprises and employment opportunities, export levels for the sector, which fell at 38.8% in 2016, should be a lot greater. 

In order for this to occur, Dr. Smith stated that the issues preventing MSMEs from more efficiently, productively and competitively must be unravelled and solved. Several of these challenges include: a weak enabling environment, high energy and production costs, limited and poor product, service quality and standards and limited access to both loan and equity finance. To combat these issues, the CDB head implored government officials and policy makers to “remain committed to improving the business environment and scale up their efforts to create a policy and institutional framework that responds appropriately to the characteristics and special needs of MSMEs.” He also stated that in many Caribbean territories, this was not the case as there was ample evidence of “inadequate legislative and regulatory frameworks, weak public sector institutions for providing legal protection, and inefficient business support and training services”.

In addition to this, Dr. Smith charged governments with the task of preventing further delays with regards to the effective implementation of CARICOM’s Revised Treaty of Chaguaramas. In doing so, he highlighted the fact that despite the removal of over 450 legal and administrative barriers to the free movement of goods, services, capital and labour in most CARICOM territories, market access had still not improved. He also noted that there was still no single jurisdiction that would allow for the equal treatment of businesses within the CARICOM member states.

Another detrimental issue highlighted was the difficulty MSMEs faced in accessing finance. Dr. Smith opined that this was not as a result of funds being unavailable. In fact, he made it clear that even in countries where the financial systems reported high levels of liquidity, MSMEs still struggled to access financial resources at acceptable interest rates.

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(Stakeholders, sponsors and small business owners listening intently to the various presentations)

Furthermore, according to diagnostic studies conducted by the Inter-American Development Bank, only three to five percent of small business owners have access to adequate financing. The president attributed this to the fact that financial institutions were generally reluctant to lend to small business owners because they “lack adequate collateral, operate in unfavourable business environments and have limited access to affordable accounting, legal, auditing and other support services.” However, Dr. Smith stated that banking facilities should come together with government and the business community to redesign their products and offer special mechanisms for MSMEs to create an environment where they are willing to embrace uncertainty and take risks. He also suggested other financing mechanisms including credit bureaus, collateral registries, guarantee schemes and additional financing channels such as junior stock exchanges that could be employed to improve the current financial situation for MSMEs.

The regional leader further stated that the biggest inhibitor to accessing finance in his opinion was the failure of small businesses to adapt to good business practices such as sound record keeping. It is therefore necessary for entrepreneurs to change their mind-set and business culture to adopt such practices and think bigger. He emphasised this point by encouraging business owners to “visualise their company as having the DNA of an elephant – capable of growing in size, capacity and global reach.” Once this mind-set for success is effected alongside effective business planning, good financial management, continuous marketing and excellent customer service, local MSMEs will no doubt begin to leave a major impact on the world.