WASHINGTON, USA – A new report from the Inter-American Development Bank (IDB) and IDB Invest is recommending that Caribbean countries focus on overcoming obstacles to financial access and inclusion for businesses, because having more developed and inclusive financial systems could increase growth and reduce poverty and income inequality.
The report titled “Finance for Firms: Options for Improving Access and Inclusion” emphasises the important link between deeper and more accessible financial systems, and faster and more inclusive economic development. The publication compares financial systems of six Caribbean countries, The Bahamas, Barbados, Guyana, Jamaica, Suriname and Trinidad and Tobago, to others from across the world. It also assesses results of enterprise surveys in 2014 and 2020 to identify key financing challenges faced by firms, including small enterprises, and those that are owned or operated by women.
The report finds that firms across the Caribbean face outsized challenges, particularly when compared to global peers. It also finds that the COVID-19 crisis appears to have further constrained access to financing, that smaller firms seem to face more significant hurdles than larger ones, and that businesses owned and/or operated by women face more severe challenges than others. These challenges that companies encounter include high borrowing costs, burdensome collateral requirements, inadequate funding mechanisms, and complex application procedures.
In 2020, 76 per cent of firms in Suriname and 72 per cent of firms in Barbados reported that issues such as significant collateral requirements posed major or very severe obstacles to their performance and ability to do business, up from 22 and 35 per cent, respectively, in 2014.
“It is key for the public and private sector in Caribbean countries to collaborate so entrepreneurs can better finance their ambitions to grow their businesses,” said David Rosenblatt, regional economic advisor for the IDB’s Caribbean department. “This is important for strengthening the ongoing economic recovery, in the near-term, and improving growth prospects for the future.
The authors proposed several priorities, including ensuring macroeconomic stability and policy prudence, improving the availability of credit information, and promoting credit sector competition, among others.
Finance for Firms: Options for Improving Access and Inclusion is part of the IDB’s Caribbean Economics Quarterly series. In addition, it has country-specific sections for The Bahamas, Barbados, Guyana, Jamaica Suriname, and Trinidad and Tobago.
This report is in line with small and medium-sized enterprises (SMEs), gender and inclusion pillars of Vision 2025 – Reinvesting in the Americas, the IDB’s roadmap to economic recovery and inclusive growth in Latin America and the Caribbean.
