President of the Guyana Manufacturing & Services Association (GMSA) Clinton Williams has weighed in on the intensely debated issue of the posture of the commercial banking sector towards lending to the small business sector, essentially contending that the issue of the banks’ posture had to be seen from both perspectives.
Both small business aspirants and owners of fledgling businesses seeking funding for expansion have complained over what some see as the stigmatisation of persons seeking to engage the banks on loans mostly for startup businesses. What has, in recent years been a muted but growing lobby to have banks shift what is regarded as their conservative lending policy, has gravitated to a call in some quarters for local business support bodies to pronounce on the matter.
Last week, in response to a question from the Stabroek Business, Williams said that the concerns by understandably disappointed small business owners and aspirants should not be allowed to overlook the considerations that underpin the lending decisions of the commercial banks. “The question of lending is linked to collaterisation and the asset base of the potential borrower. Those would be factors which the Central Bank would take account of when they visit the banks to audit them,” Williams said.
While acknowledging that challenges associated with a limited access to capital could be “a source of considerable frustration for small business aspirants,” Williams insisted that “commercial banks need to be protected since there is always the risk of them being targeted as poor managers of people’s resources if they do so recklessly.”
When asked about such initiatives as had been taken by local Business Support Organizations to address the problem, Williams told this newspaper that the route taken was “to go to central government and inform them that there is need for a mechanism where the banks are given some kind of facility or incentive to allow them to lend to businesses for manufacturing.” Asserting that there had been “some success” in this regard, Williams said that one of the issues under discussion at the level of the GMSA was, in fact, access to finance for small businesses. “I would say that, going forward, we are going to have to play a more proactive role in seeking to lobby for more financing for small businesses within the context of what the banks can do within the framework of their regulatory requirements.”
Continually mounting demand for funding to start new small businesses or consolidate existing ones has placed what borrowers from the Small Business Bureau (SBB) refer to as, an unbearable strain on a fragile organisation. A limited number of clients have been able to benefit from commercial bank loans that have been supported by collaterisation provided by the SBB, whilst grants, which are limited mostly to $300,000, are generally considered to be inadequate even for modest small business pursuits.
During his interview with the Stabroek Business, Williams disclosed that while the GMSA had previously been a member of the SBB’s Small Business Council, this was no longer the case “within recent times.” Noting that a GMSA representative was “conspicuously absent” from the new set of Directors, Williams said that the GMSA now had a concern that it was no longer part of the Council. “We have not raised the matter with them because they were only reconstituted recently. Whereas in the past we have been asked to name a nominee, [we] were not requested to do so this time around. We intend to raise it as a concern This, of course, is not to say that we should not try to get the commercial banks to be a little bit more responsive in terms of the kind of collateral that they are looking for. People are complaining about the onerous interest rates being imposed by the lending institutions and we intend to engage on the matter.”
Meanwhile, GMSA Executive Board Member and Chairman of its Forestry & Wood Products Sector, Rafeek Khan, told Stabroek Business during the exchange that “some of the sub-sectors in manufacturing, especially forestry, are viewed as high risk in terms of bad credit.
“As a country we need to rebrand and to re-brand and to come back with our reliability and our standards, not just domestically but regionally. Over the last two to three decades we have had grants and we have had soft loans but many businesses have failed notwithstanding. Banks, including the Caribbean Development Bank (CDB) look upon Guyana as a slow payer. The first thing we need to do is to re-brand and to come back with our standards and our reliability in order to fix our credibility problems. As a country we need to re-position our minds in terms of creditworthiness. Whether we be small, medium-sized or large operators, we need to reposition our minds in terms of creditworthiness. We need to make an intentional effort at re-branding,” Khan said.
