KINGSTON — The Development Bank of Jamaica (DBJ) will partner with private sector interests to establish a venture capital fund, targeting viable businesses.
Prime Minister, the Hon. Bruce Golding, made the announcement yesterday during his presentation in the 2011/2012 Budget Debate in the House of Representatives.
He said the programme will be implemented during this financial year and will benefit businesses in need of capital, capacity building, improved governance structures, and are committed to listing on the Junior Stock Exchange (JSE) within two to four years.
According to the Prime Minister, the idea of venture capital has been mooted for a long time but has never had the benefit of a serious, sustained effort.
He said that the Government formed a team, headed by Group Chief Executive Officer, GraceKennedy Limited, Don Wehby, to explore ways in which it could give life to the idea. The team has since met and has tabled a report with a number of recommendations, including the establishment of a regulatory mechanism to create a proper framework for venture capital financing.
“What is envisaged is not a single venture capital company that would hold equity in businesses (but) the creation of a framework with appropriate fiscal incentives that would facilitate the establishment of several venture capital funds operated by different entities, mobilising resources from institutional, corporate and individual investors,” the Prime Minister pointed out.
The fund will be managed by a private sector general partner, which will ensure that proper due diligence and monitoring is carried out. Businesses that require start-up capital or funds to expand will offer shares in return for the capital invested.
Mr. Golding said the venture will offer several advantages, including enabling businesses to secure capital without being burdened by debt. In addition, through its shareholding and directorship, the venture capital fund will bring added capability in overseeing the affairs of the business; and offer valuable linkages with other businesses in which it also has investments.
The Prime Minister told the House that the government will not be providing these venture capital funds although it has not ruled out putting up some of the seed capital to get it started.
“Now that interest on government paper is no longer as lucrative as it used to be, it is an ideal time to create this new option for investors,” he said.
By ATHALIAH REYNOLDS, JIS Reporter