MIDA – Sustaining Small Business Development

The Micro Investment Development Agency (MIDA) continues to serve as a beacon of hope for persons operating small businesses, as the credit agency remains one of the rare institutions willing to provide funding to budding entrepreneurs who might lack the requisite collateral to secure loans from larger financial institutions.
Vivian Chin, Managing Director of the MIDA, tells JIS News that the agency, a wholly government-owned entity established in 1992, has disbursed about $1.3 billion over the course of its 12 year history to approximately 17,000 entrepreneurs, who might otherwise have been unable to get their business ventures up and running.
He explains that MIDA’s creation of a unique network of community-driven provident societies located in each of Jamaica’s 14 parishes, has allowed the agency to effectively disburse loans to small business owners.
Loans from MIDA, Mr. Chin says, can be approved on the basis of a prospective borrower simply using his refrigerator or stove as collateral or “by just a guarantor, provided the borrower saves a little money. so it’s the non traditional securities that MIDA has found itself building on.”
“Traditional lenders are not receptive to lending to micro entrepreneurs simply because they do not have the level of security that is required, therefore it falls on MIDA’s shoulders to try and source additional funds to meet this unique demand,” he says.
Year to date fiscal financial records reveal that the agency disbursed $160.4 million to micro entrepreneurs for the year ending March 31, 2003, and upped its loans to $211.8 million for the 2004 financial year, benefiting 1,984 persons.
Disbursement is expected to decrease for the 2004/05 fiscal year, with $107.4 million already paid out and another $50 million projected to be loaned for the remaining three months of the fiscal year.
Mr. Chin attributes the downturn to the scarcity of funds with which MIDA is often times faced. The company collected $170 million last year and of the total, “$20 million was used to cover the agency’s expenses and contribute to the corpus of the credit fund, while the other $150 million went back into the sectors through new loan disbursements.” Mr. Chin further notes that, “revenues were $24 million so a small amount flowed back into the corpus of the credit fund.”
He explains that MIDA is a self-sustaining agency whose primary funding is dependent on the collection of the money it disburses to its borrowers, but notes that presently, “the challenge was now for MIDA to try and have enough credit funds on board.”
Inasmuch as “MIDA’s revenues for its interest on loans cover its total expenses and contributes to the corpus of the credit fund,” Mr. Chin notes that, “the fund was not large enough to deal with the target group of self employed Jamaicans.” He estimates that the number of persons who operate their own businesses in Jamaica could be in the region of 350,000.
The micro enterprise loan agency, Mr. Chin says, disburses loans to the service, agricultural, and manufacturing sectors, with the service sector commanding the lion’s share of loans given to MIDA borrowers.
Of the of $211.8 million loaned for the year ending March 2004, loans to the service sector accounted for $167.6 million; $32.3 million for agriculture, with $11.9 million going towards manufacturing ventures.
Mr. Chin highlights the fact that the general service sector in Jamaica has been in a transitional period of growth and “this has been the trend for a number of years, [where] our economy in Jamaica is heading towards services as this was where persons get the more profitable ventures.”
Continuing, he explains that, “when I speak of service, you are looking at everyday activities out there .anything to do with food, bars, hairdressers and barbers, that kind of everyday activity that is easily entered into by someone who wants to go into a business.”
The MIDA Managing Director hastens to point out the agency was essentially a funding company, and not one which offered technical assistance. He says should prospective entrepreneurs want market information, management tools, or to refine their business concept, the Jamaica Business Development Centre (JBDC) was the appropriate company to consult, as it offered non-financial services to the micro entrepreneur.
Addressing the agency’s immediate goals for 2005, Mr. Chin informs JIS News, that MIDA has been “developing the lower rung of the sector where individuals cannot afford to establish a workshop or purchase tools so MIDA has implemented an entrepreneurial production centre in the Back Bush area off Mountain View Avenue.”
The production centre, he says, is a one-roof, one-stop facility that offers welding, sewing and manufacturing services. He says persons can visit the centre to rent time or tools to execute the work necessary to complete whatever they might be doing.
He explains the production centre catered to “persons [who] have jobs to complete, so they come in, hire the tools, time and space to produce and go out and sell.”
“A person might need to sew some uniforms, and not have access to a serger, so they come in to hire a couple of hours on the serger and then leaves; or someone might need to do some grill work or welding and comes in,” Mr. Chin says. While MIDA did not build the production centre, being that it was constructed through collaborative efforts made by the community, Tank Weld, and the United Nations Development Programme (UNDP), Mr. Chin says MIDA utilised its network to initiate dialogue with the community, the donor agency, and the private sector.
He notes, however, that MIDA was keen on gauging the success of the production centre in Back Bush, which has been in operation for only three months, as if it proved successful in terms of the support given by the community, it would warrant being replicated elsewhere.
The establishment of the production centre, he says, is meant to be an income generator, which will allow MIDA to boost its revenues, as the facility is sustained through the payment of user fees.