Only 50% loan applications for small businesses approved by banks

Despite having less than half per cent delinquency in loan payments by small businesses, Chief Executive Officer of the Small Business Bureau, Dr Lowell Porter lamented that a significant amount of loan applications are rejected.
“Small Business Bureau does not lend any money, we do not have a lending programme so all loans are done by the banks and there’re only two commercial banks in Guyana that support the programme; and those banks are the ones who have the final decisions on who gets the loan and how much they get”, he added.
Further, he added that the bureau prepares the clients and ensures that they meet with the banks. “But the rejection rate, however, is also very high [with] only about 50 per cent of our loans are approved [by the banks]. So here again is something for us – all of us to start thinking… Why does that happen, why aren’t [the banks] more interested in lending money to businesses so that that rejection rate can go down?” Dr Porter asked during a press conference on Tuesday at the Bureau’s Head office.
The two commercial banks currently on board the Bureau’s programme are Republic Bank Limited (RBL) and the Guyana Bank for Trade and Industry (GBTI).
According to the CEO, they had approached the other banks to join the programme but have been unsuccessful thus far.
“Some banks said they’re not interested in working with clients who are less than two years old… Some of them said straight out ‘we’re not interested in working with Government’. These are private institutions so they have to report to their shareholders. They want to make a profit and if they don’t feel this is a good fit, they don’t take it and that’s their prerogative,” asserted the Bureau’s CEO.
Nevertheless, Dr Porter said that the Bureau will continue to work with its clients to ensure that they maintain the half per cent delinquency rate on loans.
“We screen our clients, we try to make sure they have everything in line, and we continue that relationship with them. I believe that is important because we know when they’re gonna fall short and they even tell us and we try to see ways we can work around it so that we can keep them in the paying mode. We want them to service their loans, we want them to be successful,” the CEO posited.
Currently, the Small Business Bureau has approximately $1 billion in loans that have been approved for clients since 2014 that it is standing in as guarantor for. In fact, it was disclosed that for 2018, the Bureau stood as guarantor for a total of 66 loans – an increase from its initial target of 55.
However, he noted that the total of dispersed loans was set at 75 but only 68 have been completed thus far. This, he explained, can be attributed to the banks’ discretion in approving the loans, which is not guaranteed even if they do their part in preparing the clients.
Nevertheless, in reflecting on the Bureau’s performance over the past year, the CEO posited that the surplus trend continued in other areas including grants offered. According to Dr Porter, SBB dispersed 165 grants as of October 31, exceeding its target of 127.
It was further outlined that the training target this year was 770 but 916 were recorded; similarly, jobs created and sustained by the Bureau was set at 275 but surpassed it, and instead created 345. The awareness campaign also showed a similar performance, benefiting some 2,747 persons when its target was 2,500.
On the other hand, outlining that most businesses tend to fail within first two years of establishment, the Bureau’s CEO posited that a survey carried out this year of its database, which has over 10,000 clients, showed that those businesses which started within the past five years and benefited from programmes offered by SBB – whether training or financial – amounted to about 78 per cent of clients that are still in business. This, he stated is a record number.
To this end, Dr Porter assured that the SBB will continue to offer programmes to benefit its clients moving forward in 2019 and also come up with new initiatives to not only sustain and expand small businesses but also encourage new ventures. One such programme he mentioned is a pilot project launched in schools to foster entrepreneurs. According to the SBB CEO, the project has been successful thus far.