Barbadians are generally law-abiding citizens – they stay in line longs at the bank, they generally don’t go through red lights, and they pay their fair share of taxes.

Anyone who worked throughout the Caribbean can easily make the contrast. When it comes to paying taxes, Bajans may not like the quantum or the reasons but will comply with the requirement to pay. Usually, they will demonstrate their dislike to the governing administration via their vote every five years.

It is against the desire to be compliant that many are voicing their disapproval of the level of ambiguity evidence in the new tax prepayment regime and the lack of congruence in the various policy briefs disseminated by the authorities.

The Global Minimum Tax Rate

The change in Barbados tax system came on the heels of the introduction of the Global Minimum Tax (GMT), coordinated by the Organisation for Economic Cooperation and Development. This new global system was intended to represent a significant milestone in global cooperation regarding the taxation of multinational enterprises (MNEs). The new framework ensured that MNEs with revenues exceeding EUR 750 million are subject to a 15% minimum effective tax rate, no matter where they operate. Introduced through the Global Anti-Base Erosion (GloBE) Rules, the GMT is a key element of the second pillar in the ‘two-pillar solution.’ The two-pillar solution, which was endorsed by over 135 countries in October 2021 OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), addresses the tax difficulties created by globalisation and digitalisation of the economy. Following this, around 55 jurisdictions took steps toward implementation, with the rules set to take effect in 2024.

In 2023, Barbados initiated a significant overall of its tax system in order to comply with these global tax standards. As part of the reforms, the standard corporate tax rate moved from 5.5% to 9% effective January 1, 2023. However, certain sectors fell outside the scope for this new corporate rate including insurance companies, international shipping, multinational enterprises and small businesses. For the small business, a reduced tax rate of 5.5% was introduced pursuant to Barbados Income Tax Act, which also took effect January 1. 2024.

The confusion for taxpayers came in the definition of small business and who could benefit from the 5.5% tax rate. Whereas the entire small business community rejoices at the decision of government to carve out a system of preferences for small companies, the ambiguity became glaring as analysis was done on the information provided by the government.

The first policy note in January 2025 stated that the 5.5% rate was applicable to small businesses that have a gross income of $2,000,000 or less, AND are registered as an Approved Small Business under the Small Business Development Act, Cap. 318C.

It was evident this definition would disqualify thousands of small companies, and the well-intentioned policy would fail before it got off the ground. Through continued lobbying and dialogue, a new policy framework was announced on February 3, 2025, designed to correct this categorisation.  

The second policy note indicated that the tax rate is only applicable to those small businesses that satisfy the criteria found below:

• The company has gross income of $2,000,000 or less;
• The company has paid-up capital of $1,000,000 or less;
• The company has no more than 25 employees;
• At least 75% of the shares of the company are beneficially owned by a resident of Barbados; and
• Where the company is a member of a group, all members of the group must meet the criteria (1) through to (4) OR
• An approved small business under the Small Business Development Act, Cap. 318C

This definition is different to the one found under the Small Business Development Act which is generally used to define what a small business is.

Exclusions to the tax rate:

There were notable exclusions of firms that would not qualify for the new tax rate. These include:

• Companies not considered small businesses
• Companies/Societies that hold Foreign Currency Permits
• Companies that have been granted tax concessions or exemptions under any other enactment including a company operating under the Tourism Development Act, Cap. 341.
• Companies whose primary purpose is holding shares in other companies or holding real estate.

If the second policy note was intended to correct the confusion, it failed leaving stakeholders none the wiser.

There have been two mayor stakeholder sessions discussing this new tax policy within the last month – the Institute of Chartered Accountants of Barbados (ICAB) Annual Tax Update and the monthly webinars hosted by the Small Business Association of Barbados. During both sessions, attended by hundreds of business owners and professionals, the outcome was the same – participants were of the view that the authorities did not put the systems in place for this new policy regime.

Jason King, a member of ICAB’s Tax Committee, opined that while Barbados faces the urgent need to overhaul its tax system to remain competitive in the global economy, the country’s “outdated approaches, slow refunds, and unclear regulations discouraged investment and hinder long-term financial planning.

The unclear regulation is clearly the Achilles heel in this framework.

During the SBA webinar it became evident that the differences in the two policy notes were based on two different pieces of legislation - the Income Tax Act and the Small Business Development Act. Definitions and clarifications differed. Cognisant of this, the authorities needed to have done a better job of ensuring congruence in the processes, policies and procedures before communicating with stakeholders. Business owners are not recalcitrant of their obligations, they simply need clear and unambiguous guidelines to follow.

The dust has settled following the end of the 48^th regular meeting of the CARICOM Heads of Government and the questions remain about the next steps for the CARICOM Single Market & Economy. Were any resolutions made relative to advancing the regime of the single market and/or the single economy? Caribbean people and more so Caribbean businesses are no wiser after the regional meeting.  

The CSME is a region-wide initiative created by CARICOM aimed at fostering deeper economic integration within the Caribbean. It was envisioned as a way to address economic challenges such as limited market size, fragmented trade systems, and limited access to capital. The goal of the CSME is to create a single economic space where goods, services, capital and people can move freely among participating countries, thereby facilitating economic growth, development, and greater global competitiveness.

Given that the region is a group of small economies involved in a variety of trade agreements and negotiations at bilateral, multilateral and hemispheric levels, making a unified regional platform such as the CSME was essential.

Beyond the spill-offs that the Government accrue from increased economic activity, the chief beneficiary for a well-functioning single market and economy is the private sector and more so small business owners, who through the CSME regime, have the right to establish businesses across member states.

Entrepreneurs in small businesses face several significant limitations and challenges, which include:

• A policy environment that lacks sufficient focus
• Difficulty accessing credit and capital markets
• Low productivity and quality levels
• Limited resources for research and development
• Inadequate business information
• Poor transport, communication, and ICT infrastructure
• A need to access new technologies
• A lack of opportunities to build upon the existing entrepreneurial culture
• Challenges related to the CSME

In response to these issues, Article 53 of the Revised Treaty of Chaguaramas, titled “Micro and Small Economic Enterprise Development,” outlines the obligations of the relevant Councils within the Community. These responsibilities include:

• Promoting the competitiveness of SMEs
• Supporting the creation of agencies, such as entrepreneurial centres
• Addressing the need for access to training and education in areas like entrepreneurial skills and business management
• Encouraging financial institutions to offer appropriate and innovative financing options
• Fostering innovation within the small enterprise sector.

Antigua & Barbuda’s top diplomat Sir Roland Sanders recently opined that the failure to advance the CSME is not due to the efforts of public servants, but rather political leaders who prioritise national interests over regional unity. The lack of enforcement of commitments from the Revised Treaty of Chaguaramas has left the promise of regional integration unfulfilled. This failure extends beyond trade, with the deterioration of CARICOM’s foreign policy coordination, leaving member states vulnerable to external influence. The vision of CARICOM's founding leaders, such as Sir Shridath Ramphal and P.J. Patterson, understood that deeper economic cooperation and collective bargaining were essential for safeguarding sovereignty and prosperity. Their vision should guide the region, especially as small states face challenges requiring a united front.

The Ambassador proffered that to address these issues, urgent reforms are needed. These include reinvigorating the CARICOM Development Fund with mandatory contributions from larger states, eliminating non-tariff barriers, ensuring enforceable labour mobility, and strengthening foreign policy coordination. The integration movement must not be abandoned, as CARICOM remains crucial for preventing global marginalisation. The way forward is a stronger, more effective CARICOM that delivers on its foundational promises of fairness, equity, and shared prosperity for all member states, large and small. As Dr. Ralph Gonsalves has said, the region must build a stronger CARICOM to address the growing global challenges.

In a time of global instability, shrinking access to finance and the escalating effects on climate change, CARICOM should be stronger, and more robust. However, the deep-rooted trade disadvantages of smaller states have undermined regional solidarity. Despite efforts to build a true CSME, the necessary legal, structural, and compensatory mechanisms remain underdeveloped or unimplemented. Trinidad and Tobago has been the primary beneficiary of the CSME, while smaller states, particularly in the OECS, have been most affected.

The intervention by the Hon. Reuben T. Meade, Premier of Montserrat, at the opening of the 48th CARICOM Heads of Government meeting in Barbados is very telling. One of the key issues affecting the CSME’s realisation is the lack of consistent political will across member states. While CARICOM leaders have agreed on the importance of regional integration, national interests often take precedence over regional objectives.

In highlighting several key issues facing CARICOM and its member states the Premier emphasised the delays in implementing decisions made years ago, including the use of CARICOM Nationals' driver's licenses for travel and driving across member states, which have not been fully implemented. He also criticised the inefficiencies in airport procedures and high taxes that make free movement within the region more difficult. Meade stressed the need for greater digital transformation and resilience strategies to improve integration.

Meade called for a review of CARICOM's institutions to assess their relevance and efficiency, suggesting that some institutions may no longer be effective and should be restructured or removed. He urged leaders to focus on making decisions that directly benefit the people of the Caribbean, ensuring that CARICOM remains a relevant and effective organisation as it moves into its next 50 years.

As Caribbean citizens continue to ponder the next steps for the CSME, the question of its relevance in the future must be assessed.  In the words of Meade, if this institution is not effective it must be restructured and/or removal. Businesses need structures and systems that work.

Not enough micro, small and medium enterprises are using technology and digital solutions in their operations.

Admittedly, the COVID-19 period was a disruptor that caused rapid migration by some; however, the extent of the adoption is not as widespread as needed to make MSMEs more competitive.

Digital adoption refers to the process of integrating new digital tools and systems to enhance work processes and meet organisational goals. This involves using technologies such as software, hardware and online platforms to optimise operations, improve communication, drive and foster innovation. However, digital adoption is not just about using technology, it requires users to become familiar with digital products, understand their capabilities, and integrate them effectively into their workflows.

Recent research done by the Cave Hill School of Business, University of the West Indies, shows moderate information and communications technology use among local firms, with e-commerce in its early stages. The research showed that about 41% of businesses had some kind of online sales. However, these sales only accounted for 6% - 33% of total revenue. While mobile use was widespread at 99%, social media use was 53% and use of websites was 56%; an 85% increase over 2023. The report also indicated that 57% of businesses utilised digital media for marketing on platforms such as Google Ads, Facebook or Instagram, with a median of 35% of the advertising budget being allocated to these platforms.

The survey revealed moderate levels of digitalisation among firms. However, as investments in MSMEs’ digital development increases, there is significant potential for growth.

The COVID-19 pandemic brought about a wave of unexpected and disruptive changes to daily life for individuals and businesses. Measures implemented to stop the spread of the virus lead to deserted stores, schools and office buildings. There was an obvious decline in face-to-face interactions, in most cases, these interactions moved to digital platforms. While some MSMEs were able to pivot by adopting digital marketing, e-commerce, and payment systems, others faced difficulties.

A study by the Center for Financial Inclusion (CFI), noted that while MSMEs increasingly used low-stakes digital tools like social media and digital communication during the pandemic, high-stakes digital tools such as online payment platforms were less commonly adopted, especially among women entrepreneurs. Despite these challenges, those MSMEs that embraced digital tools experienced tangible benefits, including reduced fraud (through mobile money systems) and improved customer engagement.

Low Stakes

Low Stakes digital tools are cost-effective and require minimal resource commitment. This makes them accessible for businesses with limited budgets or those simply exploring their digital options.  Examples include tools to communicate with customers like WhatsApp or tools to market the business through social media such as Facebook or Instagram.

High Stakes

High stakes adoption involves more significant investments and often requires formal business registration and financial commitment, typically a higher level of complexity. Examples include delivery platforms, setting up e-commerce or operating an online store. 

The CFI report highlighted several challenges faced by MSMEs in digital adoption, including:

1. Financial Constraints

Many MSMEs struggle to make significant investments in digital technology due to high upfront costs. Limited capital often results in low prioritisation of digital transformation.

2. Digital Literacy

Many business owners and employees lack the necessary skills and knowledge to fully utilise digital tools. This gap in digital literacy can delay adoption and reduce the effectiveness of digital investments.

3. Infrastructure Issues

In regions with limited internet access or unreliable electricity, adopting digital tools can be a daunting challenge.

4. Cultural Resistance

Organisational culture can be a major barrier. Employees may resist change, and the lack of a supportive culture can lead to slow or failed adoption efforts.

5. Inconsistent Use of High-Stakes Tools

While many MSMEs have adopted basic digital tools, the usage of more complex systems, such as digital payment platforms and e-commerce solutions, remains inconsistent. Many small firms return to traditional methods of doing business due to perceived risks or lack of understanding.

A cost effective and efficient e-commerce framework has been a challenge for some time due to the inability of commercial banks to put this regime in place.

For MSMEs, digital adoption is crucial for staying competitive in an increasingly digital world. According to walkme.com the following steps are important in the digital adoption process.

1. Strategy

A clear strategy ensures digital tools align with business goals, helping employees understand how digital transformation will impact their work.

2. Culture

Successful digital adoption requires a cultural shift where employees feel supported and are motivated to embrace new technology.

3. Behaviour

New technologies often demand changes in workplace behavior. Regular training and support are essential to ensure smooth adoption.

4. Process

Efficient integration of digital tools requires a streamlined process from management to execution, ensuring optimal results.

5. Skills

Team member skills must be upgraded to handle new technologies. With proper training, business owners can become more adept at using digital tools, reducing the learning curve.

6. Software

Intuitive and powerful software is central to digital transformation, allowing MSMEs to improve work efficiency and achieve better results.

A well-structured digital adoption strategy leads to several benefits, including enhanced customer satisfaction, streamlined workflows and increased productivity, and positive returns on technology investments. It goes without saying that more must be done to sensitise business owners to these benefits and to facilitate access to resources and training to enable greater uptick of small businesses in the adoption of digital solutions.

The new year has begun, and the resolutions have started. At both the individual and enterprise levels, resolutions are being made to become healthier, wealthier and even smarter.

Following on the heels of the columns presented last year, focus in this space will continue on the business environment in 2025 with the hope that major advancements will accrue for the benefit of the local small business sector. The most recent review of the Barbados economy by the Central Bank suggests continuous growth at the macro level, which must translate to the lived reality at the micro level as well.

Unlike Patrice Roberts of calypso fame in Trinidad & Tobago, it is not our intention to ‘drink water and mind our business’ but more so, focus more acutely and aggressively on the issues affecting the sector with a view to conclusive change. Consequently, this column has been aptly rebranded Minding Your Business.

We commence with reference to an exploratory survey conducted amongst 25 micro and small firms at the start of the year. The focus was to gather views from business owners on their experiences in 2024 and prospects for the new year. The general perception was one of increased cost of operations in 2024 and heightened compliance issues. Accordingly, the pleas of those in the sector is for some reprieve in the cost of business namely fuel, utilities, VAT, and shipping costs. Some solutions proffered include improving access to finance, reducing regulatory burden and exploring ways to minimise the cost of raw materials and shipping. 

To better assess the economic picture for the new year and to plan advocacy and programmatic responses, the Small Business Association of Barbados hosted a webinar in January with economist Jeremy Stephen to give business owners some insights into what the new year portends for the sector.

There were some key takeaways including the positive trends for the local economy based on prior year’s performance. These include:

• Sustained economic growth surpassing global averages.
• Improved fiscal position with a notable surplus.
• Declining unemployment rates indicate a strengthening labour market.

Major challenges to the economy were highlighted such as

• Vulnerability to external shocks, especially in tourism and agriculture.
• Need for diversification to reduce over-reliance in sectors like tourism.

The former head of the Barbados Economic Society underscored that while notable improvement was seen in the macroeconomic fundamentals, there was a need to consider the 2025 outlook for small businesses. He opined that the trickle-down economic theory “if you take care of the big, the small will survive”, did not work. The micro economic fundamentals needed to be addressed so households and businesses could share the economic prosperity.

The session underscored major challenges confronting small firms including:

• Access to Finance

The current banking landscape and overall financial market remained restrictive, with stringent lending criteria and a complex process for small business loans.

• Regulatory Burden

Small businesses often struggle with navigating the complex regulatory environment in Barbados. Businesses are faced with the additional cost of compliance to operate and the burden of accessing some government services. 

• Digital Adoption

The Caribbean's small business sector lags in terms of digital adoption. A key challenge is the gap in technology, skills and infrastructure. Many small firms lack the resources to invest in digital tools, and without this capacity, run the risk of becoming uncompetitive. In particular, the rise of generative AI and quantum technology poses a threat to businesses that are slow to adapt.

• Market Access

Access to global and local markets is key to growth for the small business sector. As such firms must seek to improve their access to relevant information about market opportunities and develop the capacity to maximse on market share, domestically or through internationalisation.

These four areas represent the key opportunities for growth within the sector in the ensuing year. Through improvement in the regulatory environment and strategic programming to address capacity building and expansion, the business landscape can be transformed.

Opportunities for Small Business

Notwithstanding the challenges identified, there remain several opportunities for growth and innovation, particularly in response to technological advancements and changing market trends. Some of these included:

• E-commerce Expansion

The rise in e-commerce offers a major opportunity for small businesses to expand their reach beyond local markets. The global shift towards online retail and digital transactions presents an avenue for small businesses to access international markets.

• Sustainable Business Practices

As global environmental concerns grow, businesses that prioritise sustainability may gain competitive advantages. This is particularly important in a region where climate change directly affects sectors like agriculture, and businesses that develop eco-friendly practices may resonate with consumers and investors.

• Niche Market Development

Small businesses have the flexibility to develop niche products and services. In a rapidly changing world, catering to specific consumer needs can lead to sustainable business models, as long as these businesses identify and adapt to trends early.

With the rebound of the local economy from the COVID-19 pandemic and the recorded consistent economic growth over several quarters, it can be safe to project that households and businesses ought to benefit from this growth. These matters will be top of mind in the ensuing months as we seek to represent the SME sector in this space. The interventionist and enabling role of Government is needed now more than ever. The uncertainty in the global supply chains, the frailty of the regional integration project and Barbados’ small open economy that will create a highly competitive business climate, necessities policies and programmes to protect local sectors and livelihoods.

The Christmas season is the favourite time of the year for many. Beyond the cooler temperatures in the region and the caring community spirit that prevails, the season is one of the most lucrative for businesses. It’s the period when economic activity is at its highest and firms – large and small – depend on this increase in commerce to grow their revenue stream, and cover expenditure into the first quarter of the new year.

Due to the economic benefits for business, consumers have an innate responsibility to determine who they patronise and what they purchase. This responsible should not be taken lightly, as many small business owners, depend on the revenue at this time to take care of their families, support communities through additional staffing and overall ensure their business can turn over for another fiscal period.

Because of these factors, Business Basics is making a clarion call this week for consumers to support small businesses this season.

As has been noted through research and analysis of economic and social development, small businesses are the ‘backbone’ of communities, playing a vital role in shaping the character and culture of neighborhoods. They provide unique products and services that reflect the creativity and innovation of local entrepreneurs, offer employment opportunities that support families and individuals and contribute to the success of important community initiatives and charitable causes. Supporting small businesses goes beyond simply making a purchase – it’s a meaningful and essential part of maintaining a healthy, resilient and diverse economy. By choosing to support small firms, investment in the long-term well-being of communities is secured, ensuring that these vital organisations can continue to grow, adapt and thrive.

Some of the quantifiable benefits include:

1. Job creation

Small businesses play a crucial role in driving job creation and providing employment opportunities within the economy. They help increase overall employment and reduce unemployment rates, as they are more likely to hire locally, often offering jobs to persons within their immediate communities.

2. Boost to Local Economy

Shopping at small firms not only supports emerging entrepreneurs but it also boosts the local economy.

3. Entrepreneurship and Innovation

Within an economy, aspiring entrepreneurs and small business owners have the opportunity to test their ideas and introduce innovations to the market. This helps to cultivate an environment that promotes the entrepreneurial spirit and creates a continuous cycle of innovation, which in turn drives economic growth.

4. Community identity

As opined by Rapid Finance, the diversity of personalities found in local businesses mirrors the essence of their community, creating a distinct identity for that area. This individuality is important, as it draws tourists, offering them a unique reason to visit and spend money in that particular location.

5. Environmental Sustainability

Small businesses offer both environmental and economic benefits. As large national chains outsource many of their products, which involve extensive transportation, that can have a significant environmental impact.  However, small businesses normally source their products locally, which promotes sustainability and helps to reduce the environmental impact associated with long-distance transportation.

According to Forbes.com, for small business owners, every purchase, transaction, and positive review carries weight. Local owners deeply value each customer as their livelihood depends on keeping the customer satisfied. These firms often hire employees who have expert knowledge of their products or the specifics of their industry, providing a more personalised and knowledgeable experience unlike larger chains.

So, what are some areas consumers may wish to consider to support a small firm? Redfork Marketing offers several ideas that are not exhaustive but can serve as a start to the discerning customer.

1. Gift Cards

Buying gift cards from small businesses not only shows support for the business but also inspires others to support the business. It provides the business with instant financial assistance while also promoting customer loyalty.

2. Positive reviews

When leaving reviews on business sites or any other platforms, it is important that you include specific details such as the quality of the product or service as well as the level of customer service experienced. This gives other potential customers valuable insights and helps them make informed decisions about supporting local businesses.

3. Sharing on social media

Another effective way is by posting about the business on social media platforms. By highlighting your favourite local business on social media, this can help spread the word to friends, family, and followers.

4. Attend Local Businesses’ Events

Participating in these events not only shows support for the business, but also provides a chance to learn more about its products or services and engage with other local residents.

5. Shop Local

Whenever possible shop at small businesses in your area. This helps ensure that the money spent stays within the local community.

6. Tip Generously

When dining at a small, locally owned restaurant or café, think about leaving a larger tip as a way to show appreciation for the hard work and dedication of the staff. Employees may rely on tips as an important part of their income. By offering a generous tip, you not only recognise the excellent service received, but also help ease the financial pressures the businesses face.

7. Collaboration

Businesses have many opportunities to collaborate and support each other, helping to grow their customer base and increase visibility. They can cross-promote products or services on social media, partner on joint projects or events, and offer shared discounts or referral programmes.  

Recent discussions on the call-in programmes, social media posts, and complaints to Business Support Organisations, reveal that consumers – individuals and businesses alike – are unhappy about the manner in which some banks are applying the new AML/KYC reforms.  

The hoops to go through to open an account have been described as exhaustive by many, with overseas companies opting at times to set up business in other jurisdictions. New start-ups, young people having their first job, those from the Diaspora, etc., have all recounted the stories of excessive regulations and requirements to set up an account. It has been so ridiculous that in one instance a start-up was asked to provide financial statements to open the account – imagine a start-up with no historical data and in need of an account to help create a record of financial activity. A clear case of the cart before the horse.

The most recent humbug is the retrospective due diligence regime.

Appreciatively, the country wishes to maintain compliance with international rules fearing the proverbial blacklisting that can occur. Backlisting, which appears to be only applicable to small open economies in circumstances where these countries’ contribution to global trade and global governance is minuscule, to the point of not being quantifiable.

The demand for AML/KYC compliance has ushered in a regime of onerous regulations and requirements that threaten the otherwise longsuffering and tolerant nature of the Barbadian spirit. The most recent development has been the blocking of customers from accessing their funds due to the accusation of being uncompliant.

Some banks have simply gone too far! While it is appreciated that updates are needed to personal and company records to satisfy anti-money laundering and know your customers’ rules, the steps being adopted by some are draconian, to put it mildly. In the normal course of commercial activity, customers are being met with the embarrassing reality that they cannot access their funds to pay vendors. They are being informed their accounts were blocked. What compounds the madness is the kind of information being given in some situations. Some customers were told:

• There was no need to update the data if there was no material change to the previous records
• Only persons with US accounts need to update their records
• Information can only be updated by physically visiting the bank.

This latter point defies doing business in a digital environment. There are ways to complete these transactions in a secure and convenient manner using technology.

There are even examples of people visiting branches to update their information but still unable to access their account from another branch of the same institution.

It is understandable that the changes in retrospective due diligence requirements in Barbados are influenced by international and regional efforts to enhance compliance with AML and Combating the Financing of Terrorism (CFT) standards. It is recognised that the country has implemented these updates primarily to address the findings of mutual evaluations conducted by the Caribbean Financial Action Task Force (CFATF). These evaluations assess the effectiveness of AML/CFT frameworks and identify areas requiring stronger enforcement, particularly in response to global standards set by the Financial Action Task Force (FATF).

Some argue that since Barbados was not compliant with the FATF standards, i.e. it was put on the grey list, the FATF produced a mutual evaluation report in 2018 to provide Barbados with the relevant measures to be AML/CFT compliant – the country’s’ response was the creation of the AML/CFT Guidelines 2021. The main contention in this article is the way some banks are applying the rules. The experience of ordinary Barbadians in having their accounts blocked in questionable circumstances cannot be fair application of the guidelines.

Even the OECD in a recent note on Regulatory Developments concerning Due Diligence for Businesses opined that there are areas of the AML/CFT compliance regime that can negatively impact small firms. These include:

1. Resource Constraints

Small businesses lack the resources, both human and physical, to manage complex due diligence processes. Time spent on compliance activities could detract from focusing on growth and customer service, particularly where personnel typically wear multiple hats.

2. Increased Costs

The need to comply with retrospective checks may lead to additional costs for small businesses. For some firms this might be a financial strain​.

3. Legal and Regulatory Uncertainty

Even though they may be aware, micro, small, and medium enterprises often struggle to interpret complex legal frameworks. As a result, may need to hire personnel to assist with understanding and complying with the rules.

4. Supply Chain Pressures

Small businesses often have limited influence over the larger entities within their supply chains, which complicates the implementation of due diligence measures. The challenge is further amplified when supply chains span multiple countries, as navigating varying frameworks becomes increasingly complex.

It is not advocated that small firms and individuals should not be compliant. The process being employed by some needs to be reviewed and better regulated. In support of the OECD guidelines two obvious solutions can be adopted immediately:

1. Scaling Guidelines

As MSMEs vary in size, a way to combat the negative impact of the rules is to ‘tailor reporting obligations’ based on the size of the firm.

2. Extended transition time

The Central Bank should appreciate the difficulties that small firms face when complying with the guidelines and provide MSMEs with additional time to gather the relevant documentation/information before penalties are applied.