Home Letters Importance of SBB, need for it to evolve as an institution
The Small Business Bureau (SBB), having been established by the previous PPP/C Administration, has an important role to play in Guyana’s long-term economic development. The growth and development of small and medium sized enterprises (SMEs) is of paramount importance in developing economies like Guyana to not only contribute to growth in GDP, but also, the creation of employment, and improved livelihood of our people through the creation of wealth and prosperity, inter alia, sustainable development.
Access to financing is typically difficult for SMEs owing to a series of limitations with respect to the businesses themselves and by extension the management and owners of the said enterprises. In respect of the technical limitations of businesses – most SMEs lack crucial expertise in the industry within which they operate such as sound financial management practices and particularly cash flow management. These, therefore, inevitably disqualify such entities from accessing financing through the commercial banks. Moreover, this is even compounded in light of the underdeveloped nature of Guyana’s financial market as well.
The very nature of microfinancing and that of venture capital firms, which are the ideal institutions that are structurally designed to propel the growth, emergence and development of SMEs are largely non-existent in Guyana except for the Institute of Private Enterprise and Development (IPED). It is this kind of institutional framework, therefore, that I envisage the Small Business Bureau can bridge in the form of a hybrid of these two types of institutional frameworks in order to achieve its mandate with a very high level of success rate – that is, to function both as a microfinance institution and a venture capital firm.
It is against this background that I am of the strong view that the SBB can be overhauled structurally and repositioned. As it is currently, the SBB administers a revolving fund of US$5 million through a local commercial bank where that fund is used as partial security to incentivise the commercial bank(s) to lower the interest rates on loans extended to SMEs. Notwithstanding, this is not suffice given the limitations and lack of incentive by commercial banks to invest more technical resources to ensure the success of SMEs or more particularly new ventures.
It is this gap that the SBB needs to bridge and hereunder mentioned are some of my thoughts to strategically achieve these goals:
(i) The SBB needs to do more in terms of extending technical support to SMEs and applicants seeking to establish new business ventures in close working collaboration with the banks. In so doing, it needs to develop its training and development capacity to entrepreneurs in the area of business strategy and decision making, financial management and other key areas in management training. This should be in the form of a mandatory six weeks course and/or ongoing training and support;
(ii) The SBB needs to work with all the chambers and business support organisations across the length and breadth of the country to provide support, build capacity and offer its products and services to entrepreneurs throughout the country. A memorandum of understanding can be established with these organisations in this regard;
(iii) The SBB needs to obtain additional funding apart from the US$5 million revolving fund from the GRIFF funding mechanism to about US$20 million. Additional funding can be accessed through MSMEs funding programmes through the Caribbean Development Bank, Inter-American Development Bank and the World Bank;
(iv) A larger percentage of the funding can then be allocated towards grants so that more potential entrepreneurs can benefit from grants after having undergone the requisite mandatory training in business, financial management and entrepreneurship by the SBB;
(v) The SBB also needs to function as a venture capital firm wherein for new ventures where grants and/or loans are being extended, to have a strong technical team to manage these portfolios in conjunction with the banks and to provide ongoing technical managerial oversight to ensure a higher success rate of new ventures benefiting from the SBB’s pool of funding, for at least one year. After this period, all SMEs can continue to benefit from other technical support as they pursue successful growth strategies; and
(vi) Finally, for now, more financial institutions need to come on board to administer the SBB funding programme for SMEs to achieve greater access and expediency.
Editor, I am particularly elated to publish this piece because admittedly, I had the distinct privilege to have met with the Hon Minister of Tourism, Industry & Commerce and our discussion largely surrounded the SBB. Moreover, I have read recently with great interest the SBB is now working to widen its service across the regions by way of working with regional chambers.
I am extremely happy with the implementation of such an initiative especially against the COVID-19 pandemic and the economic and financial impact on small businesses; and, given the importance of an institution such as the SBB.
Further, I am of the strong view that the time has come where the SBB as an institution needs to evolve to play a larger development financing role in order to successfully achieve its mandate and contribute to achieving equitable economic development within the framework of a wider spectrum.