A collaborative effort between Scotia Bank and DFLSA Inc seeks to bring micro-fast loans to single mothers and potential entrepreneurs graduating from technical and vocational institutions.
Some details of this financing line were given during an Empretec Guyana seminar, ‘Venture Out – A forum for Women Entrepreneurs’ under a presentation labelled ‘Overcoming the Financing crunch: Financing Your Business Easily and Affordably,’ held on Tuesday last at the Hotel Tower.
General Manager of DFLSA Lindel Harlequin described micro-fast loans as targeting groups that would not qualify for regular loans because of impediments like limited experience, education, or lack of the right connections to make the business venture work.
In mid-2005, Scotia Bank decided to hand over the management of certain loans granted to single mothers and other groups termed as “high-risk” to be managed by DFLSA.
DFLSA is a licensed financial institution that began operations in Guyana in 2005 and it is involved in loan participation and other co-financing arrangements. It is also involved in small and medium-size enterprise management consultancy.
This collaboration has not yet been officially launched, the general manager said, but DFLSA which is located on Church Street is now poised to effectively manage this portfolio of loans under the name Funded Microfast Trust. A launch is expected some time next month.
“I think that this is an important bridge in bringing small business in mainstream financing,” the general manager said.
Some in the audience wanted to know why women, such as single mothers, were considered high risk. Harlequin responded that a business was considered a high risk for several reasons, including its size, if it was a seasonal investment or had unstable income.
Project Manager of the Linden Economic Advance-ment Programme (LEAP) Kathleen Whalen asked Harlequin and representatives from Republic Bank and Scotia Bank, if they could say what percentage of their loan portfolios were given to women. There was no ready response and she called for research into what was happening in terms of financing for women.
Acting Corporate Credit Manager of Republic Bank Guyana, Carla Roberts, said that interest rates were tied to the risk of a venture and loans with no security attracted higher interest rates. She told the women that “the business must have some viability” to ensure it was not just an idea. “You need to do your research to ensure it [the business] will work,” she urged. Republic Bank co-sponsored the forum.
Harlequin told the forum that beginning this week, DFLSA would be reaching out to institutions such as the Guyana School of Agriculture and the Guyana Government Technical Institute and other technical and vocational institutions like cosmetology schools to engage them on students whose goals are to become entrepreneurs. “Our aim is to have a contract with these agencies,” he explained, adding that it is a hand-holding relationship with the institution and the company.
These institutions, he opined, were, “throwing out a whole lot of qualified people,” and “everybody wants to work in an office.” He said that as partner institutions they would be able to recommend an individual wanting to get involved in business to DFLSA, but cautioned that this should be based on the relationship of the student with the school and on commitment to the potential business.
Under these micro-fast loans, although collateral will be accepted as a basis for a loan, loan guarantees will also be accepted from individuals having a close relationship with the applicant for the loan, since small loans are also character loans.
As is the case with small loans, television sets and other household appliances will be accepted as security.
Micro-fast loans will range from $50,000 to $200,000. There will also be a loan facility where several family members can seek up to $700,000 to work on a given project.
The interest rate ceiling for the micro-fast loans, Harlequin said, was “not yet determined,” but would be competitive with commercial rates. It was also noted that once feedback was received on the types of business ventures that persons are likely to be seeking the loans for, whether it be graduates from institutions or other individuals, this would also influence the interest rates.
Upcoming Empretec Guyana forums include a Business Camp from July 8-11 and a Capacity Building Project for agro-processors from September 1-30.
Empretec Guyana was launched in Guyana in 2003 under the government, the United Nations Development Programme and the Private Sector. The concept has been successful in over 27 countries in helping to develop small and medium-size enterprises through training and networking initiatives.
