By Analyst
The role of microfinancing in the creation and growth of small and micro-sized enterprises has long been the subject of discourse at the levels of both the public and private sectors. The discussions have tended to centre around concerns expressed by small and micro enterprises and by persons wishing to pursue such enterprises that the conditionalities set out by lending institutions for accessing investment capital serve as a barrier to the growth of the small and micro business sector.
The terminology aside, microfinancing is not a new concept. Here in Guyana and elsewhere small loan transactions for business start-ups and for expansion have long existed under various formal, semi-formal and sometimes informal arrangements, some of these involving family patronage. The local vending system, for example, is supported in some measure by remittances from relatives overseas with particular agreements or understandings attached to these arrangements.
It is with the formal lending agencies, however, that the discourse on microfinancing has been concerned and those lending institutions have sought to clarify their position on microfinancing by making the point that whatever the size and status of the business enterprise or proposed enterprise, loans can only be forthcoming in circumstances where the business entity or business plan is able to satisfy the lending agency of its capacity (or its potential) to repay those loans.
The same point has been made by both the Institute of Private Enterprise Development (IPED) and DFLSA, the local microfinancing facility of DFL of Trinidad and Tobago, that is, that qualification criteria for lending apply as much to small and micro enterprises as they do to large businesses. In fact, both entities have made the point in separate interviews with this newspaper that they are prepared to work with serious, forward-looking local businesses to help finance and guide their growth.
The difficulty, in large measure, appears to be with whether many small and micro businesses are, in their present condition, sustainable, and whether some of the business plans that are put before the lending agencies inspire any real confidence. The point has been made, for example, that many small and micro enterprises tend not to subject themselves to the same kind of discipline associated with more established businesses. Some lending agencies have also expressed concern over the limitations of some small business operators in terms of finance management, product promotion, market research and the various other conventional inputs in the orthodox running of a business. Here, the concern of the lending agencies is with credit risk.
During a recent interview with this newspaper IPED disclosed that it was disappointed in the level of interest shown by its existing clients in the various training programmes which it continues to offer to help develop a greater formal understanding of how to run a business; and while IPED did not say this it may well be that the indifference to training among some small business operators is a function of the fact that they are concerned mostly with the quick turnover hustle of the vending trade, for example, rather than with acquiring the know-how that would enable them to create a more sustainable business enterprise. This, of course, is not to say that there is no interest in growth and development among micro business operators. The fact is, however, that many such businesses, particularly in the vending trade, are geared to provide their owners and their families with a day-to-day existence, so to speak. In those circumstances formal training geared towards consolidation and growth is often nowhere near the top of the agenda.
Still, and purely on the basis of the available evidence, small and micro-sized enterprises – barber shops, beauty salons, snackettes, hire cars, grass-cutting services, poultry rearing, auto repair shops, among others – with aspirations towards growth and sustainability account for a sizeable share of the commercial sector. In an economy where salaried jobs have become both less attainable and less attractive, these ventures provide a livelihood for increasing numbers of people. There is, therefore, manifestly good reason to encourage the creation and growth of small and micro enterprises.
If the message that is being sent by the lending agencies is that investment funds are available for serious small and micro business ventures, that is ventures that are inherently sound and are led by persons and groups that are trained (or are serious about acquiring training) in at least the fundamentals of running a business, then the response ought to be to create a culture of training that goes beyond that which is currently available to clients of microfinancing agencies.
It is here that the Guyana Small Business Council – the current focus of which is decidedly unclear – can, perhaps, make its greatest impact. Basic courses in the management of small and micro businesses, decentralized for accessibility – and perhaps with some sort of qualification attached to it – can impact both the ability of participants to attract microfinancing since such training is likely to provide a greater measure of assurance to the lending agencies regarding the viability and potential profitability of the businesses to which they extend credit. Such courses can be introduced – or where they already exist – at the various tertiary institutions across the country since this will have the effect of helping to prepare school-leavers for self-employment.
Perhaps the greatest potential for this type of training lies in the agricultural and craft sectors which, some lending institutions contend, are, in many instances, potentially lucrative sources of earnings but often fail to measure up to conventional business standards. Both sectors have long demonstrated a capacity to hold their own on the export market but often fail to realize their potential through weakness in one or another area – mostly marketing.
