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New project to offer affordable loans to micro, small enterprises

A section of the gathering of stakeholders at the Micro and Small Enterprise (MSE) project launch at the Guyana International Conference Centre (GINA photo)

A project targeting micro and small enterprise development was launched today, offering loans that require interest rates below six percent and a grant as high as GUY$300,000 to assist start-up for expansion of existing businesses.

The project entitled Micro and Small Enterprise (MSE) Development and Building Alternative Livelihood for Vulnerable Groups is a collaborative effort of the Government through the Ministry of Tourism Industry and Commerce and the Inter American Development Bank (IDB).

The areas targeted cut across 11 sectors with the majority conforming to priorities under Guyana’s revolutionary Low Carbon Development Strategy (LCDS). Among them are fruit and vegetable farming, processing, aquaculture, eco tourism, sustainable forestry and wood processing, business processing and outsourcing and bio-ethanol.

The Small Business Bureau (SBB) within the Ministry will be the agency executing the US$10M project. The funding was made possible through the Guyana/Norway forest carbon partnership agreement.

An initial tranche of US$5M will be released from the Guyana Redd Investment Fund (GRIF) during the first two years, and it is expected that an approximate 2,200 jobs will be sustained.

Loans can be accessed at the Guyana Bank for Trade and Industry (GBTI), Republic Bank and the Institute for Private Enterprise Development (IPED) through an interest subsidy and support for a portion of the collateral required.

President Donald Ramotar who attended Monday’s launch said the initiative is important to both small business enterprise development and aspects of Guyana’s economy where small entrepreneurs have made significant contributions.

As he compared large and small businesses, President Ramotar was of the view that the latter is in a more advantageous position.

“Being small gives you the possibility to be flexible and allows them to take decisions more quickly… they also have a much smaller overhead cost which allows them to provide goods and services to the customers at large, to big businesses and to government at cheaper costs,” President Ramotar said during his remarks at the Guyana International Conference Centre (GICC).

The Government has long recognised the pivotal role small and medium-sized enterprises play in grassroot economic opportunities, supporting income generating ventures, improving livelihoods, enhancing productivity and stimulating competitiveness.

It is on this basis that Government has added impetus to this sector through several initiatives, including easier access to credit, business advisory and marketing services and systems, and training.

Last year, the SBB commenced the development of a policy framework for small businesses and held several training workshops and seminars to improve the technical skills of small business owners.

With GBTI, Republic Bank and IPED offices firmly established across Guyana, optimism is high that most of the small entrepreneurs will be able to access loans under the newly launched project.

President Ramotar is however, hopeful that the interior regions would benefit the most, given the specific needs within these areas to grow economically and address special needs like poverty alleviation.

“I was in Karasabai a few weeks ago and met a farmer who was producing black pepper in that area. His problem is of course access to markets and infrastructure for him to get it there so I think the training is important.”

Business and technical training provided through established training institutions will be one of the main components of the MSE initiative. The focus areas will include a full range of business and finance management skills and technical training in various fields including aquaculture, cultivation through hydroponics.

The MSE project aims to address some of the main impediments to the development of micro and small enterprise, and the ability of vulnerable groups to build alternative livelihoods in Guyana. They include limited access to finance and limited technical business skills.

There was an acknowledgement by Chief Executive Officer (CEO) of the Guyana Bank for Trade and John Tracey that small entrepreneurs encounter numerous constraints, particularly access to credit but defended his bank’s policy regarding loans.

“It has been said that our financial institution has a negative attitude to lending… I presume this would come from the small business sector. If this is so, it may be a necessary protective measure, why? Because we in the banking sector… we know and measure risks much better than the individual borrower who sometimes come to us as the eternal optimist, positive that his business plan is bound to succeed,” Tracy explained.

But as Minister of Commerce and Industry, Irfan Ali shared his own experiences as a young aspiring entrepreneur who was seeking a loan, stakeholders in attendance saw the borrower’s side of the story.

He related occurrences as a teenager where he was denied access to a loan having a bicycle as his only mode of transportation and another period where he was given approval for the same request after proving that he was the owner of a motorcar.

“I qualified for the loan because there was a misconception and there was a culture in the environment that gave that loan that sought to make a differentiation whether falsely or rightfully,” Minister Ali said.

Access to finance is a challenge not limited to Guyana, but a worldwide issue, common in the Latin American and Caribbean Region Inter American Development Bank (IDB) Chief of Division, Capital Markets and Finance Juan Antonio Ketterer explained

He said that although the IDB has been working with countries on improving access to loans, the task has been endless although many countries have made much progress.

Ketterer reported that Guyana has been ranked 167 out of 183 economies in the IDB’s Access to Credit department, but said the news may not be all bad.

“This is not reason to be discouraged, but a reason to be engaged and motivated to improve.”

The Guyana Government has however been hailed for its work, through legislation and other initiatives, to strengthen the financial sector and provide the leeway for it to take risks without violating any prudential norms, Minister Singh said.

“I do urge the banks to actively seek out good lending opportunities including working with entrepreneurs where some nurturing and mentorship is required,” Minister Singh said.

The IDB is a main partner with the Government in the MSE project and maintains the philosophy that access to financing is one of the key pillars of improving the business climate and promoting the economic activities of small and medium enterprises in particular.

It is on this premise that the IDB has been actively involved in the financial sector locally for several years and has supported a Guyana Government policy to enhance policies and improve access to credit.

The focus areas included improvements in financial sector oversight and strengthening regulations to maintain financial sustainability.

The MSE project has made access to financing through an interest subsidy and support for a portion of the collateral required for loans at GBTI, Republic Bank and the Institute for Private Enterprise Development (IPED).

It adds to numerous collaborative initiatives between the Government and commercial banks that have made the task of accessing loans easy and more affordable. Among them is the Women of Worth (WOW) credit scheme for single parent headed households launched in 2010.