One of the local institutions in which the Stabroek Business continues to pay a fair degree of interest is the Institute of Private Enterprise Development. (IPED) The reason? Apart from the fact that IPED’s approach to lending renders the institution accessible to even the tiniest of micro-business ventures – like street vending, for example – it also seeks to support its clients by providing the kind of entrepreneurial coaching that can help them grow into bigger, better-run ventures.
Last week, as part of an extended interview with the Institute’s Finance Controller Ramesh Persaud we raised the issue of what is widely believed to be the difficulties facing small businesses in securing access to investment capital given the difficulties associated with satisfying the borrowing requirements set by commercial banks. While Persaud acknowledged that there were indeed considerable barriers to commercial lending for small business ventures he sought to clear up another important point about borrowing and lending for business ventures.
First, he made it clear that he did not believe that the problem of access to lending was necessarily the main difficulty facing the small business sector. He pointed out that any business initiative – large or small – had to satisfy some basic criteria and that numbered among those criteria were the lender’s assessment of both the soundness of the project as well as the ability of the potential borrower to make the project work. In other words – and contrary to a fairly widespread belief – the soundness of a project is only one of the criteria used in the evaluation of loan applications; and these criteria, Persaud said, were applicable whether the businesses were small or large or whether loans were being sought from IPED or from a commercial bank. “While we do not have the kind of collateral requirements of commercial banks we do not simply lend money to anyone who comes through our doors,” Persaud said.
And while there are those who will argue – with much justification – that there are severe limits to lending opportunities for small business development and that remedying this deficiency could significantly lower the level of unemployment and its attendant problems, we do believe that Mr. Persaud has a point.
His point becomes a good deal clearer when he states that he believes that too many business ventures – and here he includes both small and large ventures – proceed on the basis of a lack of entrepreneurial know-how which, in many cases, doom them to failure from the start. In the case of small businesses Mr Persaud’s knowledge is drawn from IPED’s experience with his own clients which suggests that many – perhaps as many as half of them – are indifferent to the support coaching and training that the Institute provides. His argument here is that many small ventures are unable to make a distinction between business – which, in the Guyana context invariably means a repetitive process of buying and selling and entrepreneurship – which has to do with the application of particular skills and techniques including product development, branding and marketing – to ensure continual growth and expansion.
The point becomes more significant when it is expanded beyond the small business sector to the private sector as a whole where, Mr. Persaud says – for the very reasons provided in his small business example – that “there are really few very good entrepreneurs in Guyana.”
His concern in this regard has to do with a number of issues which we believe are critical to the growth of the private sector and by extension to the Guyana economy. He makes the point that the benefits to be derived from the CARICOM Single Market, for example, can only really be realized if the local manufacturing sector raises its game to the point where, through product quality and effective marketing, what it produces can command market space across the region.
No less interesting, we believe, is his point about the nature of the agricultural sector – outside of rice and sugar – where, he points out, the traditional approach of farmers, that is, simply planting, reaping and ,moving their produce from the farm gate to the local market has not, over the years, taken sufficient account of the potential gains to be derived from organizing for export. And while he acknowledges the efforts of the New GMC in seeking to support the creation of export market linkages for the agricultural sector, Persaud is emphatic that if the sector is to respond effectively to the thrust of The Jagdeo Initiative – that is, to have Guyana play a greater role in feeding the region – we are going to have to uproot the age-old and strictly limited agricultural perspective – again outside of sugar and rice – of simply planting, reaping and selling produce on the local market and seek to replace it with the infusion of a modern approach that embraces the application of entrepreneurial techniques and approaches including much higher levels of capital infusion that can only come from major local and external investment initiatives. It is as much a mental transformation as it is a complete change in entrepreneurial outlook.
