PS Wants More Venture Capital to Support SME Sector

KINGSTON — Permanent Secretary in the Ministry of Industry, Investment and Commerce, Reginald Budhan has expressed the hope that venture capital financing will increase, in order to provide more backing to the Small and Medium Enterprise (SME) sector.

Mr. Budhan pointed out that whilst the Government has been seeing some successes in recent years, in terms of the opening up of the financial sector to allow small businesses easier access to financing, venture capital financing has proven to be a more difficult hurdle to tackle.

The Permanent Secretary was speaking at a seminar on SMEs and alternative financing methods,  hosted by the Department of Management Studies at the University of the West Indies (UWI), at its Mona campus, today April 5.

He said that with the trending down of interest rates, there is a greater level of optimism among businesses, as lower rates will allow the pursuing of projects which were not viable before, due to high interest rates.

“So, we are happy about that. But of course, that  by itself cannot solve the problem, because the collateral will be a problem for most of the small businesses, and so equity financing in terms of venture capital, obviously has potential,” he stated.

Mr. Budhan said that even with the “very good progress” made in recent times, in respect of the micro business sector, SMEs are still experiencing a serious challenge, with interest rates and lack of collateral being  “major hurdles for them”.

He noted that over the past 20 years, government has intervened by seeking to provide financial support to the sector, but this has never been quite adequate, with some programmes proving unsuccessful. However, the Permanent Secretary said in more recent years, new programmes have been introduced, such as the Junior Stock Exchange, which is “making some good strides.”

“We are now looking at legislation to deal with secure transactions – whereby banks will be able to now take movable collateral, in addition to the usual real estate,”  he added.

Mr. Budhan also pointed to the creation of new legislation to establish a credit bureau, an effort which has been some 10 years in the making, with resistance from some sectors.

The Permanent Secretary stressed that the SME sector is very critical to economic growth and employment. “In a way, we consider the Jamaican businesses as large SMEs, as our so-called large companies are really small companies in the scheme of things, when compared to large countries,” he said.

Meanwhile, Lecturer in Marketing and Chair of the forum, Dr. Derrick Deslandes said the critical growth sectors in more countries fall within the SME sector, but that there is some level of lack of appreciation for the needs of the sector.

“If you look at the various industries, you will recognise that we have pumped quite a bit of money into these sectors, and  we have not seen the commensurate increase in growth,” he said, noting that this demonstrates that financing is clearly not the only solution, and alternative means must be found.

“Any solution to the country’s development must be multi-pronged and multi-faceted, and must involve a serious look at MSMEs, which some researchers suggest tend to be more stable in terms of their own adjustments and ability to stay afloat, even in difficult times,” he argued.

For his part,  Head of the Department of Management Studies, Dr. Densil Williams emphasised the importance of alternative support measures for SMEs, citing the seminar’s importance.

He acknowledged that  based on all the research undertaken, the main challenge to SMEs is accessing financing, and the high cost of doing so. “We (the UWI) thought that it was very timely to find a way to try and overcome this number one problem. Moral suasion is not going to work, so what we decided to do is to look at other ways where the market can dictate where the interest rate and the collateralisation go,” Dr. Williams said.

Also addressing the forum  were: Former Director, Manchester Business School, and Leading European Venture capitalist, Professor Graham Hall, who spoke on: ‘Long-term winners: Do they Exist?’;  Principal of the UWI, Mona, Professor Gordon Shirley; Dean of the Faculty of Social Sciences, Professor Mark Figueroa; Executive Director of the Mona School of Business, Professor Evan Duggan; Chairman of National Growth, Aubyn Hill; and Managing Director of Bellindo Limited, Douglas Lindo.

By ALPHEA SAUNDERS, JIS Reporter