Micro Small and Medium Enterprise Development

© Caribbean Development Bank, 2016
ISBN: 978-976-95695-1-5
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted in any form or by any means, electric or mechani-
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publisher.
Published by: Caribbean Development Bank
The views expressed in this book, as well as any errors of commission, or omission,
are the sole responsibility of the authors, and do not necessarily reflect the opinion
of the Caribbean Development Bank.
CARIBBEAN
DEVELOPMENT
BANK
PURPOSE
“The purpose of the Bank shall be to contribute to the harmonious economic growth
and development of the member countries of the Caribbean (hereinafter called
the Region) and to promote economic cooperation and integration among them,
having special and urgent regard to the less developed members of the Region”.
Article 1 - Agreement establishing the Caribbean Development Bank
MISSION STATEMENT
CDB’s Mission is to be the leading catalyst in the reduction of poverty through the
inclusive and sustainable development of our BMCs’ by mobilising development
resources in an efficient, responsive and collaborative manner with accountability,
integrity and excellence.
1 | Micro, Small & Medium Enterprise Development in the Caribbean: Towards A New Frontier
Contents
4
List of Figures and Tables
6
Foreword
7
Acknowledgements
8
Acronyms
13
Executive Summary
17
Introduction
Background 13 Approach 17
Synopsis of the Study 13 Definition and Data Challenges 17
Main Findings 13
Recommendations 14
Micro, Small & Medium Enterprise Development in the Caribbean: Towards A New Frontier - | 2
Contents
19
1. Regional MSME Sector Profile
32
2. MSME Access to Finance
1.1 Global Economic Trends 2.1 SME Access to Finance

and Effects on Caribbean Globally 33
Countries 21 2.2 Life Cycle System 37
1.2 MSMEs and Macro Economic 2.3 MSME Access to
Development 23 Finance in the Caribbean 42
1.3 The Regional MSME Sector 26 2.4 Financing Challenges Facing
1.4 Review of MSME Sector the MSME sector 50
Challenges 28 2.5 Financial Literacy of SMEs 55
1.5 The Competitiveness 2.6 Regional Collaboration to
Challenge 30 Improve Financing Options 61
1.6 Optimal Development Path
for the Regional MSME Sector 31
63
3. Regional Policy and
80
4. Adequacy of the Institutional
Regulatory Frameworks Support Framework
3.1 Gap Analysis of the Adequacy 4.1 Public Sector Institutional

of the Enabling Framework 65 Framework 81
3.2 Review of Regional Best 4.2 Recommendations 86
Practice Policy and Regulatory 4.3 Institutional Capacity
Frameworks 67 - Private Sector Business
3.3 Further Enhancing MSME Support Organisations 87
Frameworks in the Caribbean 74 4.4 Examples of Private Sector
BSOs 88
4.5 Recommendations 91
Contents
95
5. Nurturing Innovation in the
108
6. Synthesis of Major Findings
MSME Sector and Recommendations
5.1 What is Innovation? 96 6.1 Overview 121

5.2 Best Practices in MSME 6.2 Optional Development Paths
Innovation 98 for the MSME Sector 121
5.3 The MSME Innovation 6.3 Findings and
Landscape in the Caribbean 100 Recommendations 121
5.4 Missing Links in the Approach
to MSME Innovation 110
116
Appendix
1. Bibliography 117
2. a. Template - Information
Requests Interview Questions 120
b. Financial Information
Request 123
3. List of Persons Consulted/
Interviewed 125
4. Analysis of SME Access to
Finance in Eight BMCs 130
5. Country & Donor Definitions
of MSMES by Parameters 142
Dollars ($) throughout refer to United States dollars (USD) unless otherwise specified.
List of figures & tables
Figures
Figure 1.1: Average Real GDP Growth, 2007-2014 9
Figure 1.2: Total Public Debt, 2011 10
Figure 1.3: MSME Density 12
Figure 1.4: MSME Density by Region 13
Figure 1.5: MSME Growth Rates Regionally 13
Figure 1.6: MSME Growth by Income Groups 13
Figure 1.7: Six Most Commonly Cited Obstacles by Firms in 98 Countries 14
Figure 1.8: Indicators Used Among International, Regional and Local Sources 15
Figure 1.9: Pyramid Distribution of Private Sector Businesses 16
Figure 1.10: 2016 Ease of Doing Business Rankings: BMCs vs. Top Five Countries 19
Figure 2.1: Ratio of Domestic Credit to GDP Globally 21
Figure 2.2: Formal SMEs in GDP 22
Figure 2.3: Informal SMEs in GDP 22
Figure 2.4: Finance Coverage over SME Life Cycle 25
Figure 2.5: Interest Rates in Eight BMCs, 1974 - 2014 35
Figure 2.6: Value of Collateral as a Percentage of Loan Values 36
Figure 2.7: Loan Analysis Procedures Used by Banks and % of Bank Usage 45
Figure 5.1: Guidelines for Adopting Innovative Processes at Organisational Level 85
Figure 5.2: Methodology Used to Establish Rankings on the GII 86
Figure 5.3: Technological Readiness 91
Figure 5.4: Caribbean Firm Capacity for Innovation in Six Countries 98

List of figures & tables
Tables
Table 2.1: Policy Measures to Improve SME Access to Credit in OECD Countries 23
Table 2.2: MSME Life Cycle Financing in Eight Caribbean Countries 28
Table 2.3: Micro Entrepreneur Profiles from a Survey of 656 Enterprises in Four Countries 30
Table 2.4: Institutions’ Usage by Borrowers and Savers 32
Table 2.5: Estimates of the Market for Micro Credit Loans 32
Table 2.6: Average GDP Growth and Average L&A Growth in Eight BMCs 33
Table 2.7: Gaps in Policy Measures to Improve MSME Access to Credit – OECD vs. BMCs 38
Table 3.1: The Policy, Legislative and Regulatory Framework for MSMEs and Supporting
Lead Institutions in Eight CDB Borrowing Member Countries 53
Table 3.2: Policy and Regulatory Framework - Belize 58
Table 3.3 Strategic Initiatives - Belize 59
Table 3.4 Jamaica MSME Policy Objectives and Strategic Actions 61
Table 4.1: Eight CDB BMCs – MSME Enabling Policy and Institutions Matrix 72
Table 5.1: Ranking of Selective Caribbean Countries on World Innovation Index, 2015 87
Table 5.2: Comparative Innovation and Technology Status for Guyana 94
Table 5.3: Options for Framework for Service Innovation Policies 103
Table 5.4: Five Examples of Service Innovation Policies 105

foreword
The Micro, Small and Medium Enterprises (MSME) Towards this end, the thematic study on MSMEs
sector is a substantial contributor to economic and in the Caribbean adds significant value to the
social development in the Caribbean, accounting body of research on the sector; and will expand
for more than 50% of regional enterprises, and knowledge and understanding of MSMEs in our
over 50% of Gross Domestic Product. Despite these Region. The study tables a number of innovations,
significant contributions, MSMEs face a number including the adoption of a more holistic three-
of major constraints, including inadequate access tiered approach to sector development based
to financial resources for investment and working on its successful implementation in Singapore,
capital; gaps in training in business skills; high Korea, Western Europe, and Costa Rica over the
cost of infrastructure services; inadequate physical past two decades. These proposals, I hope, will
infrastructure support (for example, warehousing, open the door for healthy debates among policy-
factory and commercial space, industrial parks, makers, academics, and students and provide
etc.); low levels of technology usage to improve the platform for the long-term transformation and
productivity and; and lack of competitiveness. sustainable development of the MSME sector.
Given the important role of the sector, the major

challenge facing policy-makers today is to ensure
that MSMEs receive adequate support needed
to enhance competitiveness; maximise growth Wm Warren Smith, Ph.D
potential; and generate employment while President
contributing to gender equality, and poverty Caribbean Development Bank
reduction.
ACKNOWLEDGEMENTS
This publication was commissioned by the Alana Goodman and Linda Cordeaux provided
Economics Department of the Caribbean the legal services required of the project; Andria
Development Bank (CDB) and prepared by two Murrell provided Administrative support while Klao
consultants, Michael Julien and Melvin Edwards. Bell-Lewis and Laelia Ajodhia-Nicholson oversaw
CDB acknowledges with gratitude the work done the design and finish of the publication.
by the consultants and all those in the selected
countries, that were the focus of the study, who It is our hope that policymakers and other
assisted in any way in making its completion stakeholders will find much value in this study in
possible. charting the development of the regional MSME
sector.
An internal team comprising Dr. Patrick Kendall,
Dr. Justin Ram, Ian Durant, Lisa Harding, Dr. Kari
Grenade and Jason Cotton, was responsible for Dr. Justin Ram
the technical supervision of the process. The team Director, Economics Department
acknowledges with deep appreciation the useful Caribbean Development Bank
comments and insights offered by many CDB staff.
Acronyms
ABIA Antigua and Barbuda Investment Agency
ACCA Association of Chartered Certified Accountants
ADB Asian Development Bank
ADE Agency for the Development of Enterprises
AFI Approved Financial Institution
BDS Business Development Services
BELTRAIDE Belize Trade, Investment and Development Agency
BEST Belize Enterprise for Sustainable Technology
BMC Borrowing Member Country
BNTF Basic Needs Trust Fund
BSA Business Support Agency
BSE Barbados Stock Exchange
BSO Business Support Organisation
B2B Business to Business
BUSOS Business Support Services, Suriname
CAIC Caribbean Association of Industry and Commerce
CAIPO Companies and Intellectual Property Office
CARDI The Caribbean Agricultural Research and Development Institute
CARIB-CAP Caribbean Micro Finance Capacity Building Project
CARIRI The Caribbean Industrial Research Institute
CCI Culture and Creative Industries
CCMF Caribbean Centre for Money and Finance
CDB Caribbean Development Bank
CDF Caribbean Development Fund
CENPROMYPE Centre for the Promotion of Micro and Small Enterprises
COSTAATT The College of Science, Technology and Applied Arts of Trinidad and Tobago
CPEC Caribbean Programme for Economic Competitiveness

Acronyms
DFC Development Finance Corporation
ECA Export Credit Agency
ECCB Eastern Caribbean Central Bank
ECCU Eastern Caribbean Currency Union
ECGS Enhanced Credit Guarantee Scheme
ECSE Eastern Caribbean Securities Exchange
EDU Enterprise Development Unit
EIB European Investment Bank
ERMFP Enterprise Risk Management and Financing Programme
EXIM Bank Export Import Bank
FAO Food and Agriculture Organisation of the United Nations
FG Forward Guidance
FIT Foundation for International Training (Toronto)
GARDC Gilbert’s Agriculture and Rural Development Centre
GCI Global Competitiveness Index
GDP Gross Domestic Product
GIZ German Foundation for International Development
GOB Government of Barbados
GNI Gross National Income
GOTT Government of Trinidad and Tobago
IADB Inter-American Development Bank
ICT Information and Communications Technology
IFC International Finance Corporation
IFRS International Financial Reporting Standards
IICA Inter-American Institute for Cooperation on Agriculture
ILO International Labour Organisation
IMA The Institute of Marine Affairs

Acronyms
IMF International Monetary Fund
IPO Initial Public Offering
ISMEA Israel Small and Medium Enterprises Authority
JAMPRO Jamaica Promotions Corporation
JBDC Jamaica Business Development Corporation
JDB Jamaica Development Bank
JEA Jamaica Exporters’ Association
JNSBLA Jamaica National Small Business Loan Association
JSE Jamaica Stock Exchange
KAB Know About Business
KKF Chamber of Commerce and Industry, Suriname
KIBS Knowledge-Intensive Business Services
KPI Key Performance Indicator
LAC Latin America and the Caribbean
MGI McKinsey Global Institute
MFIs Microfinance Institutions
MIDA Micro Enterprise Development Agency
MIIC Ministry of Industry, Investment and Commerce
MoE Ministry of Education
MORI Mona Office for Research and Innovation
MSE Micro and Small Enterprise
MSME Micro, Small and Medium Enterprise
MSTEM Ministry of Science, Technology, Energy and Mining
MSTTE Ministry of Science, Technology and Tertiary Education
MGS Mutual Guarantee Schemes
NCB-J National Commercial Bank Jamaica
NCST National Commission on Science and Technology

Acronyms
NCC National Competitiveness Committee
NCDs Non-communicable Diseases
NDR Negative Deposit Rates
NDP National Development Plan
NEDCO National Enterprise Development Corporation
NGO Non-Governmental Organisations
NIF/CF/SME National Insurance Fund Credit Facility for SMEs
NIHERST National Institute of Higher Education, Research, Science and Technology
NIS National Insurance Scheme
NIS National Innovation System
NPL Non-performing Loan
NPRF National Pension Reserve Fund
NTMA National Treasury Management Agency
OECD Organisation for Economic Co-operation and Development
OGDS OECS Growth and Development Strategy
PADF Pan American Development Foundation
P2P Peer-to-Peer
PSAR Private Sector Assessment Report
PPP Public-Private Partnership
PPP Purchasing Power Parity
PVO Private Voluntary Organisation
QE Quantitative Easing
ROCIP Registry of Companies and Intellectual Property
ROSCA Rotating Savings and Credit Association
SBAJ Small Business Association of Jamaica
SBDC Small Business Development Corporation
SEDU Small Enterprise Development Unit

Acronyms
SFD Sector Framework Document
SGSRE School of Graduate Studies, Research and Entrepreneurship
SIYB Start and Improve Your Business
SLISBA St. Lucia Industrial and Small Business Association
SMEs Small and Medium Enterprises
SRC Science Research Council
TEPA Trade and Exports Agency
TOC Table of Contents
TRLF Trade Receivables Liquidity Facility
TTBS Trinidad and Tobago Bureau of Standards
TTSE Trinidad and Tobago Stock Exchange
TVET Technical and Vocational Education and Training
TOR Terms of Reference
UFXInt Unsterilised FX Intervention
UK United Kingdom
USA United States of America
USD United States Dollar
USAID United States Agency for International Development
UTech University of Technology
UTT The University of Trinidad and Tobago
UWI University of the West Indies
WEF World Economic Forum
WEO World Economic Outlook
WIPO World Intellectual Property Organisation
ZIRP Zero-interest-rate Policy

EXECUTIVE
SUMMARY
Background Tobago, St. Lucia and Suriname); and 2) to highlight

critical MSME development challenges and
propose a structured approach to addressing those
The Micro, Small and Medium Enterprise sector
challenges. The study adopts a holistic approach
(MSME) accounts for the majority of private
which is detailed in the three tier approach to sector
enterprises in the Caribbean, and contributes
development presented in Chapter 1. The study
more than 50% to Gross Domestic Product and
also advocates, where possible, joint Caribbean
employment. The sector also contributes significantly
approaches to MSME sector development.
to female employment, poverty reduction and social
stability. Nevertheless it remains a sector that is
largely under-supported. Main Findings
Synopsis of the Weaknesses in the Regional Life Cycle
System of Financing
Study
The study points to significant weaknesses in the
The purpose of the thematic study on Micro, Small regional Life Cycle System (LCS) of financing which
and Medium Enterprises in the Caribbean is two- has nurtured MSME growth in member countries
fold: 1) to assess the status of the MSME sector of the Organisation for Economic Co-operation
based on a review of the sector in eight borrowing and Development. While Jamaica and Trinidad
member countries (BMCs) of the Caribbean and Tobago are further advanced in terms of the
Development Bank (CDB): (Antigua and Barbuda, development of the LCS, the system is significantly
Barbados, Belize, Guyana, Jamaica, Trinidad and weak in most of the other BMCs.
Substantial Gaps in the Policy and 1.2 Adoption of a standard definition and
Regulatory Frameworks classification for MSMEs across the
Caribbean;
The Study points to substantial gaps in the policy
and regulatory frameworks. Many countries have 1.3 Extension of the information gathered by
outdated policies. In some cases, policies have not business registries from MSMEs;
been reviewed in more than ten years. In addition,
there are often important policy gaps, including 1.4 Engagement in more in-depth MSME
voluntary rather than compulsory registration of research and development;
enterprises; lack of fiscal incentives for MSMEs; no
time bound development plans and targets for the 1.5 Analysis of expenditure by MSMEs, and
sector; and lack of key progress indicators. Product contribution to employment and exports;
quality enforcement is often weak or non-existent.
1.6 Definition of a new policy direction;
Weak Technical Support
1.7 Exploration of avenues to strengthen
The provision of technical support to MSMEs, Business Service Organisations’ (BSO)
whether by public or private sector institutions, is delivery capacity;
generally weak and inadequate. In part, this is due
1.8 Increased focus on innovation and
to weaknesses in the institutions themselves because
enhanced productivity (First Floor Issues),
of the lack of financial and human resources. As a
especially in the services sector and those
result, the extent of the outreach by these institutions
subsectors with good export prospects, such
is often very limited, with services provided to a
as creative industries, offshore education,
very small percentage of MSMEs.
and health tourism.
Weaknesses in Regional Innovation
Chapter 2: Improving MSME Access to
Systems
Finance
Regional innovation systems are often in the
2.1 Develop training programmes aimed at
embryonic stage of development and characterised
improving the financial management
by a scattering of independent research institutions.
capacity of MSMEs;
With significant budgetary and human resource
limitations, there is limited scope for support to
2.2. Expand the range of financial products
MSMEs to help them to become competitive and
available to MSMEs;
to grow through productivity enhancing innovation.
2.3 Introduce tax reforms that allow formal
Recommendations MSMEs to retain a larger share of their
profits and cash flows;
Below is a synopsis of the main recommendations
2.4 Increase the adoption of tax reforms that
generated by the study.
shift the burden of taxation away from direct
Chapter 1: Optimal Development Path for taxes to indirect taxes;
the MSME sector.
2.5 Introduce labour reforms that allow MSMEs
1.1 Adoption of the three-tier approach to to be more flexible in terms of hiring and
MSME development; firing labour;
2.6 Create stronger tax incentives to encourage a strengthened and more sustainable,
alternative forms of investment financing for productive and competitive MSME sector.
MSMEs;
3.2 Pursue the establishment of a business-
2.7 Improve the enabling environment for friendly environment as a top priority;
access to credit;
3.3 Focus on private sector funding of
2.8 Overcome the limitations of domestic innovation initiatives;
markets by: a) promoting and fiscally
favouring export growth of MSMEs; 3.4 Improve worker productivity;
and b) increasing the use of ICT
“information access” mechanisms to 3.5 Increase Information and Communication
facilitate greater business intelligence with Technology (ICT) usage by MSMEs;
respect to external markets;
3.6 Grow entrepreneurship culture through
2.9 Introduce regulatory reforms that would education reform;
allow Accredited Financial Institutions
(AFIs) and Microfinance Institutions (MFIs) 3.7 Improve trade facilitation;
to take deposits, and offer an expanded
range of financial products to their MSME 3.8 Develop a model MSME policy as a guide
clients; for the Region; and
2.10 Increase the inclusiveness of credit unions 3.9 Articulate an MSME development strategy.
in terms of affording them access to SME
financial programmes as development Chapter 4: Strengthening Institutional
finance institutions (DFI) recipients - Support Frameworks
including funding, credit guarantees and
technical assistance in risk management; 4.1 Promote technical cooperation among
Caribbean Registries;
2.11 Put in place legislation that would
encourage the adoption of Mobile Banking 4.2 Disseminate information with respect to
solutions; policy, legislative and regulatory
frameworks within the Region;
2.12 Examine the feasibility of establishing
Mutual Guarantee Schemes in the larger 4.3 Improve private, public sector collaboration
Caribbean countries; and and enhance institutional strengthening for
capacity development:
2.13 Create incentives to encourage the informal
sector to formalise their businesses. 4.4 The creation/establishment of a
public-private partnership network should be
Chapter 3: Regional Policy and explored between selected microfinance
Regulatory Frameworks institutions, Business Development Agencies
(BDAs) and Business Service Organisations
3.1 Refocus the regulatory and policy (BSOs) to facilitate a larger flow of
frameworks towards increased efficiency domestic resources into MSME growth and
and effectiveness in facilitating expansion of expansion; and
4.5 Develop online training programmes for 5.3 Operational frameworks for supporting
MSME development. innovation should articulate clearer support
for MSME investment in the export sectors
Chapter 5: Nurturing Innovation in the that offer strong opportunities for innovation;
MSME sector and
5.1 Countries committed to innovation should 5.4. A roadmap to support the development of
complete the establishment of national an innovation eco-system should be
innovation systems (NISs); developed.
5.2 The Caribbean should re-think its innovation

orientations from an R&D manufacturing
industry focus to one that is primarily driven
by or linked to services;
INTRODUCTION Definition and Data

Challenges
1. MSME sector definition and size: One of
Approach the most elusive challenges in assessing MSME
development is the categorising of this business
The approach consisted of the following key actions: group into uniformly acknowledged “size”
categories.
1. Development of two questionnaires – one for
interviews with the MSME stakeholders in In addition to the fact that some countries are
the CDB member countries and the other for at different stages of development and therefore
gathering statistical data from specialty financial maintain independent classifications of the
institutions serving MSMEs. These instruments, sector, much of the research that has preceded
attached as Appendices 2a and 2b, were: this study – mostly by the World Bank, the
International Development Bank (IDB) and
a. pilot tested and refined into a standardized the International Labour Organization (ILO) –
set of questions for use as the uniform has used different criteria to those informally
Interview Guide for in-country visits; adopted by some BMCs in their local research
b. used to gather specific product information or classification metrics.
and performance statistics from selected
financial institutions serving MSMEs in six 2. Multi-dimensional data limitations:
countries; and Overall, enterprise data is not classified in
c. contributed to improved data gathering national statistics in terms of business size.
and report-writing efficiency; Information is usually available on a sector basis
e.g. manufacturing or services.
2. Development of a list of key institutions and
persons to interview in each of the eight BMCs.
But, apart from inferences that can be made
from national business registration office data,
Interviewed were Ministers and Permanent
there is limited access to actual MSME data,
Secretaries responsible for Trade, Industry
besides the data generated via special surveys
and Commerce as well as senior personnel
or selective one-off studies.
in other Ministries and in the Development
Banks, Departments of Statistics and Company
Also, there is limited up-to-date information
Registries in all eight countries.
on the relative scale of support provided via
technical assistance programmes although
Executives in business support organisations,
snapshots can be obtained on a periodic basis.
financial institutions, as well as national, regional
Similarly, export data is not stratified according
and international development agencies, were
to business size, and the contribution of SMEs to
also interviewed. The list of persons interviewed
economic development is not well documented
from 96 organisations is presented at Appendix
across the Bank’s borrowing member countries
3.
(BMCs).
In some countries there is selective data on Interviews with knowledgeable stakeholders

gender and largely anecdotal, evidence-based and several studies confirm that MSMEs,
information on levels or types of innovation, as like remittances, constitute a major source of
variously defined. Business viability information escape from indigence and abject poverty for
is lacking, especially data on the failure rates thousands of citizens. However, the challenge
of business at the lower end of the MSME with monitoring MSME impacts on poverty
spectrum. lies in the absence of data combined with
the deliberate reluctance of the informal and
Because of these limitations, there was reliance micro enterprise sectors to provide economic
on business registration information and information on their activities.
selective banking and technical assistance
delivery data as provided by the institutions
interviewed. That information was reinforced
with the findings generated by international
donor agency studies on the Caribbean MSME
sector.
3. MSME Development and Poverty:

Notwithstanding, the growth of the MSME
sector in the Region, high poverty levels have
persisted throughout the Caribbean – and
unemployment has been elevated to levels
exceeding 10 - 20% of the workforce in
recent years, Trinidad and Tobago being the
exception at 3.2% according to its Central
Bank’s yearend 2015 results.
CHAPTER 1
regional
msme sector profile
CHAPTER 1:
financial crisis have had pronounced effects on
the Region’s MSMEs. It is estimated that MSMEs
REGIONAL MSME constitute between 70% and 85% of the number

of enterprises, contribute between 60% and 70%
SECTOR PROFILE of GDP and account for approximately 50% of
employment in the Caribbean. Notwithstanding
the absence of firm data, indications are that the
MSME sector is a significant contributor to income
generation and poverty reduction1.
1.1 Global 1.1.1 Anaemic Economic Performance

Economic Figure 1.1 (below) provides a snapshot of the
Trends & Effects prolonged impact of the Global Financial Crisis
on Caribbean on the Caribbean’s GDP growth between 2007

and 2014. Notably, the tourism-based economies
countries in this study (Antigua and Barbuda, Barbados,
Jamaica and St. Lucia) grew, on average, by
Global economic trends have always influenced less than one-tenth of 1% annually. In contrast,
the direction and pace of economic and the resource-based economies (Belize, Guyana,
social development in Caribbean countries. In Trinidad and Tobago, and Suriname) grew, on
particular, the consequences of the 2008 global average, by more than 2% annually2.
Figure 1.1: Average Real GDP Growth (2007–2014)
1
The International Labour Organisation (ILO), Small Enterprise Development in the Caribbean, 2000, p.3-5. According to
ILO, MSMEs account for over 90% of enterprises globally. (ILO, MSMEs and the Global Economic Crisis, 2009, p.10.)
2
The exception is that Trinidad and Tobago grew, on average, by 0.8% annually.
Moreover, with the exception of Trinidad and Tobago By March 2016, Suriname was about to embark
and Suriname, the other six countries reviewed in on an IMF programme for financial support, as
this study are all burdened with high Debt to GDP a result of the combined fallout from the global
ratios as depicted in Figure 1.2 (below). Of the decline in oil prices, a lacklustre international
13 countries listed, only Trinidad and Tobago and market for its minerals exports (i.e. gold, bauxite),
Suriname had debt to GDP ratios less than 50%. and weak fiscal management. The net effect of
Consequently, six of the eight countries that are part these structural realignment programmes has been
of this study have had to implement home-grown or reduced purchasing power of both businesses and
IMF-supervised structural adjustment programmes, consumers in most of these economies – a factor that
partly because of the anaemic growth of the global has adversely affected the viability and survival of
economy since 2008. MSMEs.
Figure 1.2: Total Public Debt (2011)
Source: Suriname Central Bank Presentation “The Economy in Suriname 2011-2012,” May 2012 and IMF
Report No.12/281, May 2012
1.1.2 The New Normal? foreign direct investments. Some BMCs noted an
upturn in commercial and residential building, as
In its 2014 Annual Report, the CDB stated that, well. Increased activity in the construction industry
“preliminary estimates indicate that the economic was also stimulated by public sector capital
recovery in the Region continued in 2014, with 16 investment in several BMCs. In some cases, this
of CDB’s 19 BMCs reporting growth during the year, was boosted by unanticipated reconstruction work
driven mainly by tourism and construction services. following weather-related challenges and/or pre-
With continued increases in income in major election spending. Conversely, further declines in
source markets, improved airlift capacity, a shift international commodity prices in 2014 adversely
in cruise itineraries from the Mediterranean to the affected mining and quarrying output among
Caribbean and intensified marketing by BMCs, the the main regional producers of gold, bauxite
resurgence in regional tourism gained momentum, and petroleum; the latter were also constrained
and most destinations recorded increased visitor by supply-side issues. Outturns in respect of
arrivals. There was similar improvement in the manufacturing and agriculture were mixed”.
construction sector, driven mainly by tourism-related
Going forward, the economic headwinds may be Should economic growth in the global economy
more formidable than anticipated. For example, continue to be skittish, this will have renewed
Barbados, which experienced very strong tourism negative knock-on effects on the Caribbean – and
performance in 2014–2015, saw its GDP grow on the prospects and fortunes of the region’s MSME
by less than 1% in 2015. Likewise, Jamaica sector.
experienced GDP growth of only 0.5% over the
same period despite a relatively robust tourism
season. The International Monetary Fund’s 1.2 MSMEs and
World Economic Outlook (WEO) of January
2016 entitled “Subdued Demand/Diminished Macroeconomic
Prospects”, suggests that the robustness of future Development
global economic growth continues to be uncertain.
1.2.1 Size and Growth of the Global
Three key transitions continue to influence the global MSME Sector
outlook: 1) the gradual slowdown and rebalancing
of economic activity in China away from investment The International Finance Corporation (IFC) and
and manufacturing toward consumption and the McKinsey Global Institute (MGI) estimated that
services; 2) lower prices for energy and other there are 420 to 510 million MSMEs worldwide,
commodities; and 3) the prospect of a gradual of which 9% are formal SMEs (typically registered
tightening in monetary policy in the United States businesses with 5-250 employees ) and 80-95%
in the context of a resilient U.S. recovery, even as are in emerging markets3. A 2010 study of 132
several other major advanced economy central countries carried out by the IFC, entitled “Micro,
banks continue to ease monetary policy. Small, and Medium Enterprises Around the World:
How Many Are There, and What Affects the
Overall growth in China is evolving broadly Count?”, highlights the following characteristics of
as envisaged, but with a faster-than-expected the sector in those countries:
slowdown in imports and exports, in part reflecting 1. There are 125 million formal MSMEs in this set
weaker investment and manufacturing activity. of economies, including 89 million in emerging
These developments, together with market concerns markets;
about the future performance of the Chinese 2. Formal MSMEs are more common in high-
economy, are having spillovers to other economies income economies, but in low and middle-
through trade channels and weaker commodity income economies, MSME density (number of
prices, as well as through diminishing confidence MSMEs per 1000 persons) is rising at a faster
and increasing volatility in financial markets. The pace;
IMF’s relatively cautious expectations are already 3. There is significant variance in the countries’
being echoed in the United States, where stock definitions of MSMEs. Around a third of the
markets in early 2016 began to display signs of countries covered define MSMEs as having up
volatility with small but progressive contractions in to 250 employees;
the major indices – reflecting US concerns that the 4. Formal MSMEs employ more than one-third of
global economy may be again weakening. the world’s labour force, but the percentage
drops significantly with income level;
3
MSMEs included in the IFC-McKinsey database do not include farmers or sole proprietorships.
5. MSMEs are more likely than large firms to According to the IFC report, on average, there
identify access to finance as their biggest are 31 MSMEs per 1,000 people, across the
obstacle; economies covered. The countries with the highest
6. In economies with a higher percentage of firms formal MSME density are as follows: Brunei
with no formal credit, MSME density is lower; Darussalam (122 per 1,000 people), Indonesia
7. A larger informal sector is associated with (100), Paraguay (95), the Czech Republic (85),
lower formal MSME density; and Ecuador (84). Overall, economies with higher
8. Measures of barriers to firm entry and exit, income per capita tend to have more formal
such as the minimum capital requirement and MSMEs per 1,000 people.
the recovery rate in case of bankruptcy, are
also associated with lower formal MSME However, on a regional basis, Latin America
density. has the second highest level of MSME density in
the world although the Caribbean region has a
Figure 1.3 (below) provides a visual summary of relatively low level of MSME density (see Figure
MSME density in 116 developed and developing 1.4 below).
countries in major economic zones across the
globe.
Figure 1.3: MSME Density
Source: IFC, “Micro, Small and Medium Enterprises Around the World: How Many Are
There, and What Affects the Count?,” 2010.
Figure 1.4: MSME Density by Region
Source: IFC, “Micro, Small and Medium Enterprises Around the World: How Many Are There, and What Affects the Count?,” 2010.
Figure 1.5 Growth Rates Regionally Figure 1.6 MSME Growth Rates by Income Groups
Source: IFC, “Micro, Small and Medium Enterprises Around the World: How Many Are There, and What Affects the Count?,” 2010.
1.2.2 MSME Challenges Access to electricity is a significant constraint overall

and affects small, medium, and large enterprises
When presented with a list of 15 possible obstacles, alike. However, more small and micro businesses
electricity and access to finance were the two most list access to finance as their biggest obstacle than
cited by businesses in developing countries (See do medium enterprises. Fewer large firms see it as
Figure 1.7). It is important to emphasise that firms their biggest obstacle.
of different sizes rank obstacles differently.
Figure 1.7: Six Most Commonly Cited Obstacles by Firms in 98 Countries
Source: IFC, Micro, Small and Medium Enterprises Around the World: How Many Are There, and What Affects the Count?, 2010
1.3 The Regional (PVOs) have been supporting SME development

with a varied menu of grants and concessional
MSME Sector loans administered in-country in the form of special
credit lines and loan guarantees, firm-level business
Regional governments and development development training, business plans development,
organisations have been formally engaged in small counselling and on-site technical assistance, and
business development since 1983. These early fiscal incentives such as tax holidays for early-stage
efforts gained traction after major donors such as companies. This section highlights some of the
United States Agency for International Development major trends noted in the regional performance
(USAID), Canadian International Development of the MSME sector and efforts made to improve
Agency (CIDA) and German Foundation for performance, with emphasis on the eight BMCs.
International Development (GIZ) initiated multi- However, it is necessary to begin this discussion
country enterprise development programmes in with a regional definition of MSMEs.
partnership with executing agencies (for example,
the Pan American Development Foundation 1.3.1 Regional definition and
(PADF), Foundation for International Training (FIT) classification of MSMEs
and the CDB), culminating in the declaration by the
CARICOM Heads of 1988 as “The Year of Small Examination of numerous international publications
Business”. revealed that over 60 classifications for small and
medium-sized enterprises are in use worldwide.
During the past three decades, national governments, Definitions of what constitutes an MSME vary quite
multilateral and bilateral development institutions, widely from country to country and even within a
NGOs and Private Volunteer Organisations single country.
Much depends on the character of the respective umbrella definition; yet others refer to micro and
host country and the peculiarities of its own small enterprises as MSEs.
corporate sector, from which a relative measure
of an MSME is made, sometimes on a rather In most cases, the definitions provided
arbitrary basis. Some countries distinguish pertain to formally registered businesses,
between a micro and a small enterprise, while and exclude small-scale, informal family
others subsume microenterprises under their SME enterprises.
Figure 1.8: Indicators Used Among International, Regional and Local Sources
Source: USAID, 2007
In Figure 1.8 above, USAID illustrates 6 indicators 2. Employment: Defining an MSME by the
applied by various agencies in 2007 to classify number of employees provides key data on
MSMEs. The number of employees was the the scale of its operations. This does not mean,
indicator most cited. In Appendix 5 there are 35 however, that the larger an enterprise the more
definitions and categorisations identified in 23 employees it will have.
Caribbean territories and 9 used by nine multilateral 3. Turnover: In general, the volume of turnover
development organisations. This illustrates the of a business is a more appropriate measure of
extensive diversity, divergence and conflicts in the its relative size than the number of employees
definitions and classifications attributed to MSMEs or the value of assets. In Caribbean MSMEs,
among Caribbean jurisdictions and international where profits, assets deployed and employees
agencies serving the region. are often blurred by tax considerations, it is
argued that annual sales constitute the single
Following are the three (3) measurements most best measurement of business size. The pattern
consistently used in selecting MSME beneficiaries and rates of turnover also reflect functional
in the Caribbean region: and behavioural attributes. Only the most
superficial of business services would not
1. Assets: MSMEs rarely have a precise require an understanding of an entity’s sales in
estimate of the value of their fixed assets, order to be effective.
and generally minimize them in environments
where substantial asset taxes are imposed. Mindful of the mediocre experience over the past
Some government agencies evaluate fixed 30 years with implementing development and
assets and land, while others use only fixed credit programmes and with gathering empirical
assets, thereby complicating cross-country data for policy-related research, it was concluded
comparisons. that saving and creating sustainable jobs constitutes
the single most important result desired from future
investments by donors and governments in MSME 1.4.1 Sector size

development. Therefore, for data collection
and comparability across the CARICOM A major continuing problem is poor coordination
Single Market and Economy (CSME), between the Registries of Companies and
employment was accepted as the most Intellectual Property (ROCIP); the Social Security/
workable basis for a uniform definition National Insurance Boards; and the Departments
and classification of MSMEs. At issue is of Statistics in collecting, generating, analysing
whether this information is systematically collected and disseminating reliable data on MSMEs.
by governments. Empirical data gathered from these State agencies
suggest that as at December 2015, some 200,000
After considerable discussion with stakeholders registered and at least 550,000 informal MSMEs
across the Region, the following simplified MSME were operating in the eight countries studied, and
typology was recommended for regional adoption: that a region-wide surge in business formation
occurred during the triennium ending 2015.
• Micro: 1-5 employees;
• Small: 6-15 employees; This surge seems to have been occasioned by:
• Medium: 16-50 employees. • the quest for self-employment opportunities
among unemployed youths and women;
• anticipation of securing petty and other short-
1.4 Review of MSME term government contracts; and
Sector Challenges • growing interest among employed persons to
earn a second income.
Figure 1.9: Pyramid Distribution of Private Sector Businesses
1.4.2 MSME Sector Informality and with minimal support from the formal
Challenge sector. Yet, this sector continues to create and
expand employment opportunities; develop
Much has been written on the inherent entrepreneurship skills; utilise local materials; and
and imposed challenges facing small enhance market opportunities. It is the desire for
businesses; very little has been published economic survival and upward social mobility that
on the successes they have achieved, fuels the largely unmet demands from the MSME
sector throughout the Region, for information, Nor does it give equity or parity in the provisions
financing and business development assistance. for indigenous business when compared to the
Whereas this is by far the largest and fastest concessions awarded to foreign-owned businesses.
growing component of the Private Sector - from Only Trinidad and Tobago [Enterprise Development
Belize in Central America through the archipelago Policy, September 2014], Belize [Act - Cap 282,
to Guyana and Suriname in South America - it is 2000], Antigua and Barbuda [Small Business Act
disparate, fragmented and disorganised; known for No. 24 of 2007] and Guyana [No. 2 of 2004],
deficiencies in the quality, consistency and range of among the eight BMCs, have sought to legislate
its products and services; and for weaknesses in fiscal, monetary and developmental benefits
packaging, costing and pricing, technology usage, specifically for this sector during the past ten years.
and management/worker know-how. Micro and
small entrepreneurs (MSEs) display high levels Clearly MSME Entrepreneurial development is
of individualism; clustering while encouraged, is not a major regional policy focus. Registration is
still at a nascent stage. Additionally, unlike larger voluntary, militating against credible data capture
businesses, they do not have a common, unified and effective sectoral planning by assigned
voice in any of the BMCs. agencies; successful outreach by supporting state
agencies; and growth and sustainability of the
Their sheer numbers make it difficult for service membership-based BSOs. Furthermore, in the
provider organisations to cope with the demands current policy and regulatory vacuum, very few
for assistance. Registered or not, they remain alternative directions or developmental initiatives
largely underserved and “informal”, hence have been identified or adopted by the established
generally perceived as not part of the private sector private sector to improve competitiveness among
by the established business community. MSMEs, in spite of the avowed recognition by
some corporate leaders, of the significance of
1.4.3 Policy response MSMEs as vital service providers and consumers
of their goods and services.
While the importance of MSMEs has been lauded
in official speeches, in budget presentations and in 1.4.4 Institutional Infrastructure
political party manifestos, a clear and comprehensive
policy statement on the Government’s working Despite the deficiencies noted above, the activities
agenda for the development, modernisation, of central government ministries and departments,
expansion or regulation of this sector was found in state boards and public sector corporations
only three of the eight countries visited. The Ministers impact, to a varying albeit not significant degree,
of Trade, Industry and Commerce in Antigua and growth in the MSME sector. In each of the 8 BMCs,
Barbuda, Barbados and St. Lucia indicated that no the government and various international donor
policy was in place to guide government’s agenda agencies have provided some resources for MSME
for and interface with the MSME sector. Only Belize, development, with contrasting and varying levels
Jamaica and Trinidad and Tobago had Cabinet- of enthusiasm and support from the established
approved MSME policies in place. The Barbados private sector in the countries under review. The
Minister indicated that a Draft Small Business Policy allocation of resources to improve productivity in
had been developed to “an advanced state of MSMEs through state and non-state intermediaries
readiness for imminent Cabinet discussion”. Because over the past 2 decades has reached less than 10%
of its inadequacies, the regional policy framework of MSMEs. Additionally, governments have forged
generally does not contribute significantly to the partnerships with private BSOs, development banks
fostering of a culture of competitiveness and growth and commercial banks in support of MSMEs.
among MSMEs.
However, overlapping mandates, competition The commercial banking sector, dominated by

for government financing and donor resources overseas banks, regards MSMEs as high risk; does
continue to characterise both state agencies and not finance start-up enterprises (that is, enterprises
the private BSOs responsible for MSME business up to 3 years in operation); and typically requires
development. In Barbados, fifteen BSOs were the payment of high interest rates and more than
identified as unable to become self-sustaining or 100% encashable security for loans.
independent without persistent government and
donor funding. Additionally, with few exceptions,
the BSOs are fiercely individualistic and resist 1.5 The
efforts at closer synergies through consolidation.
Therefore, the reach, sufficiency and quality of their
Competitiveness
business development services remain limited, and Challenge
their capacity to become effective advocates for
the MSME sector is compromised by their financial 1.5.1 Global Competitiveness Rankings
dependence on the political directorate. As a
result, no recognised national forum is in place that The Global Competitiveness Report produced by the
provides an opportunity for MSMEs to exercise World Economic Forum is the most comprehensive
leadership and to participate meaningfully in the assessment of national competitiveness worldwide.
national decision-making process, even though It assesses the competitiveness of 144 economies,
they constitute the largest component of the private providing insights into the drivers of their productivity
sector. and prosperity. For 2014-2015, Barbados ranked
55th (down from 47), Jamaica 86th (up from 94),
Moreover, the “one stop shop” promise of 1988 Trinidad and Tobago 89th (compared to 92);
- The Year of Small Business remains undelivered. Suriname and Guyana trail at 110 and 117,
Unfriendly procedures, archaic forms and respectively. Typical drawbacks affecting the
processes, nuisance fees, multiple stops, long delays performance of these Caribbean countries include:
for routine decisions, and insensitive customer care
render the average citizen’s experience with public 1. Tax rates;
sector offices a costly waste of productive time. 2. Weak infrastructure;
The failure by successive governments to remove 3. Bureaucratic red tape;
these bureaucratic bottlenecks in the public service 4. An inadequately educated workforce;
continues to frustrate the ease of pursuing business 5. Inadequate access to finance;
opportunities, and force smaller enterprises to 6. Weak capacity for innovation; and
operate informally and sub-optimally. 7. Corruption.
The institutional framework for effective planning, Interestingly, economies that rank well on the 2016
implementation, co-ordination and evaluation of “Ease of Doing Business Report” published by
activities in the MSME sector is therefore in need of the World Bank, also score well on the “Global
bold but purposive modernisation and strengthening. Competitiveness Index”, as illustrated by Figure
1.8 above. Making sound choices for building
1.4.5 Inadequate access to financial economic competitiveness of MSMEs is critical to
resources economic growth, employment generation and
poverty reduction.
An underdeveloped financial services industry,
dominated by commercial banks, restricts the
overall scope for MSMEs to grow and expand.
Figure 1.10: 2016 Ease of Doing Business Rankings: BMCs vs Top 5 Countries
Based on the foregoing analysis, it is clear that enhancements among MSMEs, will strengthen
the CDB’s BMCs face significant challenges in competitiveness, job creation and GDP growth.
improving the competitive position of the business
community and raising the standard and quality of b) Second Floor: strengthen the efficiency
life of their citizens. and effectiveness of organisations and
other intermediary structures providing
developmental and other services to the sector.
1.6 Optimal c) Third Floor: formulate enabling policies,

Development Path legislation and strategies thereby improving
the business friendly environment for MSMEs.
for the Regional
MSME sector While not adhering strictly to the order of priorities
listed above, the study adheres substantially to the
structure of the approach proposed above. Chapter
1.6.1 Three-Tiered Approach** 2 focuses on the issue of access to financing, a
Second Floor issue and one considered a primary
Based on the foregoing analysis, it is recommended, issue among regional MSMEs.
for reasons of adequacy and comprehensiveness,
that regional MSME development strategies adopt Chapter 3 focuses on the quality of the policy
the three-tier approach effectively implemented in and regulatory framework (Third Floor), while
Singapore, Korea, Western Europe, Costa Rica Chapter 4 discusses strengthening the efficiency
and other successful countries during the past two and effectiveness of organisations providing
decades: developmental and other resources to the sector
(Second Floor). Chapter 5 discusses the issue of
a) First Floor: support at the first floor, focusing innovation and productivity enhancement (First
on productivity and product quality Floor).
** Variant of the approach presented in Review of the International Best Practice in SME State Support. http://www.unece.org/fileadmin/
DAM/ceci/icp/Review/Studies/2.pdf
CHAPTER 2:
msme access to
finance
CHAPTER 2:
MSME ACCESS TO The private sector’s access to finance, measured as
a proportion of GDP, is often used as an indicator
FINANCE of financial sector efficiency4.
Figure 2.1 shows that the ratio of private sector

domestic credit to GDP globally has been
2.1 SME Access to increasing in all country income levels, but it is still
very low in developing countries when compared
Finance Globally with high-income countries.
Figure 2.1: Ratio of Domestic Credit to GDP Globally
Source: World Bank Group
Much of the divergence between developing and The contribution of SMEs to employment and GDP in
developed countries, in terms of access to finance developing countries seems comparatively modest,
can be attributed to the contributions of formal and but estimates suggest that the informal sector,
informal MSMEs to GDP in developed vs. developing which consists essentially of very small businesses,
countries. SMEs contribute a sizable share to formal accounts on average for 48% of the total labour
GDP — 49% on average in high-income countries force and 37% of GDP in developing countries. The
and 29% on average in low-income countries corresponding percentages for developed countries
(Figure 2.2 below). are much lower, at 25% of the total labour force and
16% of the GDP (Figure 2.3).
4
In this chapter, SMEs are businesses with less than 250 employees: with “micro” being less than 10 employees, “small” being 10–49
employees, “medium being 50–249 employees and “large” more than 250 employees.
Figure 2.2: Formal SMEs in GDP Figure 2.3: Informal SMEs in GDP
Source: IFC, Scaling Up SME Access to Financial Services in the Developing World, October 2010
Arguably, one of the differences in the relative • 18 of the 19 countries also offer export finance
contribution to GDP by the formal sector lies in the support to the private sector;
differences in access to credit. The reasons include • 14 of the 19 are engaged in direct lending
SME life cycle investment accommodation by the with private sector support; and
financial system. Stronger financial management, • 13 of the 19 provide direct loans to SMEs.
less information asymmetry, higher levels of banking
and financial sector competitiveness, stronger The information is significant for two reasons:
adherence to operating and product standards, first, it is often mistakenly assumed that many of
and better supply chain management all lead to these schemes are interventionist and therefore
more predictable operational cash flows. reminiscent of older and now “broken” models of
economic development; second, it is also assumed
But a primary reason often overlooked in developing that developed countries do not intervene in credit
countries is that government policy to support SME markets as deliberately as these options suggest.
access to credit is much more comprehensive and However, globally some instruments are more
more deliberate in developed markets. extensively used than others. In 2003, there were
more than 2,250 guarantee schemes in over
Table 2.1 (below) shows the degree of 100 countries. Moreover, credit guarantees can
comprehensiveness of credit coverage adopted by amount to a significant portion of national GDP as
19 Organisation for Economic Co-operation and is the case in Italy and Portugal. But it is in Asia that
Development (OECD) governments with respect to the volume of outstanding guarantees amount to
policies to: 1) improve bank credit intermediation the highest share of GDP: 3.6% in Chinese Taipei,
via direct interaction with commercial lenders; 2) 6.2% in Korea and 7.3% in Japan.
improve bank credit intermediation via central
banks; and 3) promote alternative sources of credit It should be noted that not all of the instruments in
by governments. Table 2.1 have equal or substantial impact on SME
access to credit. But collectively, they have been
As the table shows: noticeably effective in alleviating SME financing
• Germany and Spain have activated 9 of 11 constraints, especially in severe credit contraction
possible options; periods as experienced when the global financial
• All 19 countries have loan guarantee schemes; crisis occurred in 2008.
Table 2.1: Policy Measures to Improve SME Access to Credit in OECD Countries
Source: Central Bank of Ireland, Policy Measures to Improve SME Access to Credit: A Survey, 2015
Some of the financing mechanisms being used in familiar. Borrowers using the scheme must pay
OECD countries are illustrated in the following a 2% premium above the interest rate to the
examples: Department of Jobs, Enterprise and Innovation.
The scheme can cover a maximum of EUR150
1. Credit Guarantee Schemes. The Irish million (mn) annually over a three-year horizon.
SME Credit Guarantee Scheme (CGS) offers
a government guarantee on 75% of losses Japan has one of the strongest CGS systems
incurred by lenders. The guarantees are limited globally. The first Japanese Credit Guarantee
to SMEs in specifically targeted categories. It Corporation (CGC) was founded in 1937 in
is intended to address market failure affecting Tokyo by the local government, commercial and
commercially viable businesses in two specific industrial associations, and financial institutions.
situations – namely, where businesses have By 2008, there were 52 CGSs, distributed in
insufficient collateral, and where businesses the 47 prefectures and 5 metropolitan cities
operate in sectors with which the banks are not across the country.
The size threshold of eligibility to guarantees authorities, banks, chambers of commerce and
varies by industry. In manufacturing, SMEs other relevant entities. Typically, guarantees by
are eligible for guarantees if they have less MGSs in Spain cover 100% of the bank loan.
than 300 employees, whereas for the retail
sector the size upper threshold is set at 50. An 3. Direct Government lending of Public-
additional criterion for eligibility exists. This Private Funds. In Ireland, combined public-
relates to the maximum capitalisation allowed private funding for the SME sector has been
for the SME of 1 mn yen (EUR 9,410) per in existence since 2013 through three funds
employee. More than one third of Japanese – one which provides credit and two that
SMEs are supported by CGCs. provide equity. These funds were conceived
by the National Treasury Management Agency
2. Mutual Guarantee Schemes (MGS). (NTMA) with the National Pension Reserve
These schemes are essentially private Fund (NPRF) acting as cornerstone investor: 1)
sector owned and managed versions of the the SME equity fund of EUR 300–350 mn of
predecessor (public sector) ones. Italian mutual which EUR 125 mn is provided by the NPRF; 2)
guarantee schemes (Confidi) are among the the SME credit fund of EUR 450 mn into which
most important schemes in Europe. the NPRF has injected EUR 200 mn; and 3) the
SME turnaround fund of EUR 100 mn of which
Almost 1 million Italian SMEs are members of EUR 50 mn comes from the NPRF which invests
a MGS. Guarantees granted by Italian MGSs close to the point of insolvency – with potential
account for 41% of all guarantees issued by for successful restructuring5.
European CGSs and 1.4% of Italian GDP.
The coverage ratio typically amounts to 50% 4. Export Credit. The composition and emphasis
of the loan volume. The first Italian mutual placed on various components of export credit
guarantee scheme was created spontaneously varies from country to country. The EXIM Bank
by entrepreneurs in the late 1950s to increase of the United States favours extending export
their bargaining power vis-a-vis banks and credit insurance to SMEs (USD 3.2 billion
to improve their access to finance. Despite and 83 per cent of authorizations to SMEs in
numerous reorganisations and mergers over 2012) over loan guarantees (USD 2.1 billion)
the last 50 years, Confidi have maintained their and direct loans (USD800 mn). In contrast,
mutuality character, i.e., entrepreneurs are both in 2012-13, UK Export Finance supported
members and shareholders of the institutions and exports and investments overseas through
are often heavily involved in their management. loan guarantees to banks with an aggregate
The mutuality character is codified into law as at value of GBP 2.2 billion versus GBP 1.6
least 20% of the MGS’ capital endowment must billion in credit insurance. Meanwhile, KfW
come from affiliated firms. In contrast, Spanish IPEX bank in Germany, in cooperation with a
Mutual Guarantee Societies are a special type private financial institution, Northstar Europe
of limited liability society that has two types of S.A., favours direct lending to SMEs of EUR
shareholders: ‘participatory members’, who 500,000−EUR 5 mn, tied to deliveries and
subscribe some shares against the guarantee granted to the exporter. In all these cases, the
service (about 86,000 SMEs in 2011) and Export Credit Agency (ECA) charges interest
‘protective members’, who include local on a loan or a commission on intermediation6.
5
It is not known whether the NPRF is insured | 6
Central Bank of Ireland, “Policy Measures to Improve SME Access to Credit: A survey,”
2015.
5. Peer to Peer (P2P) lending. The matching Overall, each of these mechanisms has associated
of retail investors with borrowers on internet- risks, which need to be carefully managed to assure
based platforms, i.e., P2P lending, is a nascent their integrity and sustainability over time. For this
but growing channel of non-bank funding for reason, it would be prudent for those Caribbean
SMEs. P2P grew in prominence in the middle countries that lack such schemes to first identify best
of the past decade in the United States. practice principles before embarking on similar
policies and/or specialty financing programmes in
The dominant market participants are Lending the Region.
Club and Prosper, which have lent USD 2
billion and USD 550 mn respectively since
their inception. Both focus mainly on unsecured
2.2 Life Cycle System
consumer lending. Platforms in the UK such It is axiomatic that the life cycle system of financing
as Funding Circle and Zopa have lent GBP MSMEs “from cradle to large-scale growth” is more
135 mn and GBP 355 mn respectively, with efficiently and effectively aligned in developed
the former focusing on SMEs and the latter on countries than in developing countries. The
consumer lending. However, these markets primary reasons are that: 1) the OECD financial
are extremely small when viewed relative to sector operates at high levels of integration
SME lending markets of USD 606 billion and and competitiveness; 2) the system is supported
GBP 170 billion respectively. by appropriate enabling legislation; and 3)
government policies are more strongly supportive
In smaller markets like Ireland, the P2P lending of the sector’s development, and therefore more
market remains minuscule, with Linked Finance sensitive to eliminating financing bottlenecks that
being the only platform, and currently having may occur from time to time. Figure 2.4 provides a
facilitated only EUR 400,000 in funding to visual overview of the life cycle system of financing
SMEs as of June 2013. for SMEs as they evolve from nascent businesses to
small, medium-sized and larger entities.
Figure 2.4: Finance Coverage over SME Life Cycle
Source: IFC, Scaling Up SME Access to Financial Services in the Developing World, October 2010
The financing life cycle for SMEs often begins In other cases, some large firms choose not to “go
with a combination of micro-finance and personal public”, and remain closely held, highly profitable
funding provided by the entrepreneur from savings private concerns. Also, because of the nature of
or resources obtained from family and/or friends. the business, some firms seek out loan guarantees,
As the business expands, the SME obtains modest export credit and trade financing at much earlier
levels of new financing to support growth – usually stages in the operational life cycles.
through personal loans obtained from a bank, credit
union or SME loan facility. As the SME matures Other companies (e.g., Apple, Facebook, Google,
into a well-established medium-sized firm, further and Uber) leapfrog the incremental SME life cycle
growth is increasingly funded by medium-term bank system, and have adopted accelerated strategies
loans and by specialised financing instruments such aimed at securing substantial amounts of equity to
as loan guarantee schemes; factoring (discounting help establish and ensure rapid dominance of their
of receivables); lease financing; and export credit. industry sectors.
If the SME evolves into a large business, it may 2.2.1 How supportive is the financial
opt to meet the regulatory requirements for issuing life cycle system of Caribbean
an Initial Public Offering (IPO) on a publicly traded MSMEs?
capital market and/or raise additional investment
capital via venture capital (equity investment) Table 2.2 (below) presents the regional availability
mechanisms. As the large firm grows, stock market of the various financial instruments and mechanisms
investments replace almost all debt previously identified in Figure 4, Financial Coverage in the
incurred. Thereafter, the firm could opt to offer SME Life Cycle. The table provides a snapshot of the
independently traded credit instruments such as most significant mechanisms in the finance market
bonds – moving away almost entirely from the in each of the eight countries. The consolidated
banking system and essentially becoming its own findings from this analysis are as follows:
“self-financier”.
1. Integration of the SME financial life cycle
As this process evolves, innovation, governance, is greatest in Jamaica and Trinidad and
transparency and company performance become Tobago. But even in these countries, life cycle
the driving forces behind the firm’s sustainability coverage is still not as complete as it could
as a business. But increasingly, the firm’s value is be – especially for SMEs that would want to
also exposed to external vulnerabilities such as transition from medium to larger businesses.
variations in national and global economic growth, This is because access to factoring, lease
commodity shocks, political instability in strategic financing, credit guarantees, mutual
regions of the world, and swings in general investor guarantee funds, and equity financing and
confidence. capital markets is variable. For instance,
lease financing is available in Trinidad and
The preceding life cycle processes do not always Tobago on a (firm-by-firm) selective basis but
apply to all firms on a linear basis. In some not prevalent in Jamaica. However, generally,
instances, risky and unconventional product ideas larger companies have better access to
are funded with highly specialised private equity financing – from commercial banks and via
funds or venture capital at nascent stages of an equity financing on the two respective stock
SME’s development. In some sectors, young firms exchanges in both countries.
are launched with government research grants,
especially in the USA and in Israel.
2. The logic of the stock exchange is that bank Also, there are 23 companies listed on
depositors would have an alternative vehicle Jamaica’s Junior Stock Exchange.
for their savings, and that growing businesses
would be able to access funds at costs that The Trinidad and Tobago Stock Exchange
are lower than bank lending rates. However, (TTSE) has 45 equities and 32 bonds listed,
in the Caribbean, stock market development and is the largest exchange in the Region.
and growth is mixed. The Barbados Stock The market capitalisation of the exchange is
Exchange (BSE) is the third largest stock more than USD 17 billion. The total value of
exchange in the Caribbean and its market the TTSE has been growing in recent years.
capitalisation is around USD 2.75 billion. Also, a junior stock exchange for SMEs was
Only twenty companies are listed on the recently launched by TTSE, but there are no
market, and many are only traded a few listings or market capitalisation as yet. In
times a year. For example, shares in The Guyana, there are 4 firms that trade, but only
West Indian Biscuit Company Limited have one (Trinidad and Tobago Cement Limited)
not traded since August 2014. There are also is actively traded. Also, only 12 companies
many days when no trading takes place. The are listed on the Eastern Caribbean Securities
securities listed on the BSE are a composite Exchange (ECSE).
of government bonds, corporate debentures
and shares in businesses that mainly operate Overall growth has been mixed. In 2015, the
in the consumer goods and financial services JSE grew by 97.4% (against the backdrop of
industry. Jamaica’s improved economic climate in 2015
which boosted investor confidence); the BSE
A few of those firms are cross-listed on other by 10.5%; and the TTSE by 1%7. Overall,
regional and international exchanges. Sagicor there is a clear need for regional (capital)
Financial Corporation, which trades on the market integration to achieve greater depth
London Stock Exchange, and Trinidad and and greater dynamism in these markets. For
Tobago Cement Limited, which trades on the instance, to date, only the Trinidad and Tobago
Trinidad and Tobago Stock Exchange (TTSE), and Jamaica markets are being strengthened to
are examples of such companies. In Jamaica, facilitate SME growth via introduction of junior
more than 45 companies that operate in the stock exchanges and the size of some markets
finance, communications, manufacturing, (e.g. the OECS and Guyana) is too small to
retail, real estate and tourism industries are expect stronger activity over time8.
listed on the Jamaica Stock Exchange (JSE),
making it one of the Caribbean’s largest, most Life cycle options are deficient in the smaller
liquid and sector-diverse stock exchanges. countries where key aspects of an evolutionary
Shares on the JSE trade for only three and financial system are still missing. For instance,
half hours each day. The JSE, which dates there are no factoring, lease financing, credit
back to 1968, has played a critical role in the guarantee, venture capital, or vibrant capital
development and growth of Jamaica’s private markets in the OECS market.
sector. To date, the market capitalisation of
the JSE is just over USD 3.3 billion.
7
Source: Sagicor Mutual Funds, Investment Commentary, December 2015. | 8 Jamaica had already introduced a Junior Stock Exchange,
and Access Financial Services Ltd. is registered on that exchange. But the number of registered companies is less than 25 and the exchange’s
buoyancy is mainly a factor of the tax-free status afforded to companies that trade on the exchange.
Barbados does benefit from donor-funded Also, Jamaica has updated its insolvency laws
mezzanine financing instruments managed by and is actively working on improving both its
the Central Bank of Barbados (CBB), but uptake Doing Business Rankings and its rankings on
and overall impact are modest at best. the Global Competitiveness Index (GCI) via a
National Competitiveness Council (NCC).
3. However, all eight countries provide support
to the MSME sector. Jamaica’s is perhaps 4. Feedback from institutions in countries where
more inclusive and comprehensive than the credit bureaus exist suggests that it is too
others. In Jamaica, the MSME “assistance” early to determine the degree to which that
portfolio includes: the Development Bank of mechanism is influencing MSME access to
Jamaica (DBJ), with direct lending to SMEs finance. All of the credit unions and commercial
and wholesale lending to Approved Financial banks interviewed confirm that credit histories
Institutions (AFIs), including Micro Finance are helping to alert lending institutions to
Institutions (MFIs); specialty call-for-proposal the financial discipline and integrity of loan
projects such as Start Up Jamaica and Ignite; applicants. This improves the risk analysis of
angel investor funds; direct incubator and lenders, but bureau information is not the only
support services offered by the Jamaica assessment criterion that is used to approve/
Business Development Cooperation (JBDC); reject projects.
the Micro Enterprise Development Agency
(MIDA); the National Insurance Fund Credit 5. In addition to the inconsistency in country
Facility for SMEs (NIF/CF/SME); and loans to provision of life cycle financing options, some
SMEs by the Jamaica National Small Business countries lack supportive legislation to facilitate
Loans Company (JNSBLC). Only three of the the offering of a broader range of financial
eight countries have Credit Bureaus (Guyana, services to borrowers. For instance, in some
Jamaica and Trinidad and Tobago) and only countries, (for example, Jamaica), mobile
one (Jamaica) has an electronic registry for banking could be constrained by the absence
moveable collateral. of requisite laws and regulations.
Table 2.2: MSME Life Cycle Financing in Eight Caribbean Countries
COUNTRY Specialty Banks offering ST Trade Lease Equity Finance Capital Markets Comments
Micro & SME Loans Finance Finance
Financiers
ANTIGUA Fast Cash, NDF, 7 banks: ACB, RBC, Done by Not available Not available Not available but Incomplete SME life
Community First & Scotiabank, CUB, banks for there is an OECS cycle finance system.
St. John’s CUs. ECAB, CIBC, RBTT, selected Eastern Caribbean MFIs less than 10%
Development Bank RBC. No credit clients. ECCB Securities Exchange; of market. Banks very
bureau or deposit offers ECGS 12 companies liquid.
Insurance
CUs: Publ- 5 banks: Scotiabank, Provided Provided by Available for BIDC BSE is small market Incomplete integration
BARBADOS
Workers, COB, CIBC First selectively some banks under the BIF. Also (20 firms) with of SME life cycle
BWU; Fund Caribbean, Republic, by banks. e.g. Republic from BGFL. infrequent trading. system. Deposit
Access, Enterprise RBC, Bank of Central Bank Finance and Insurance in place for
Growth Fund Ltd Butterfield. No credit offers ECGS. Trust (RFTC) banks only.
(EGFL) bureau.
BELIZE B.E.S.T. + 14 CUs: 6 banks: Belize Done by Not available Not available Not available. Utility Incomplete SME life
Most dominant: Bank, Belize Bank Int; banks for companies are the cycle finance. MFI
St. John’s, La Scotiabank; Atlantic medium to only listable entities. funds reach less than
Immaculada LICU) Bank. Heritage, FCB. large clients 10% of market. Banks
St. Xavier, Toledo “Credit Masters” only very liquid.
Teachers CU, Holy Credit bureau DFC in
Redeemer CU Central/North Belize
Table 2.2: MSME Life Cycle Financing in Eight Caribbean Countries cont’d.
COUNTRY Specialty Banks offering ST Trade Lease Equity Finance Capital Markets Comments
Micro & SME Loans Finance Finance
Financiers
Available from Not readily 5 VC funds JSE has 45 listed Relatively integrated
JAMAICA JNSBLC 6 banks: Scotiabank,
DBJ. Selective available launched by DBJ. companies. Junior system but specialty
JBDC NCB, Citibank, FCIB,
factoring. Angel investor Exchange has 23 funds reach less than
Access Financial First Global, RBC.
EX-IM Bank funds listed companies and 10% of SME market.
Services Ltd., 33 JCCULL credit
Small Business offers tax incentives for Depositor Insurance in
Ignite, Start Up union members
Discount SMEs to grow place for all CUs.
MIDA, DBJ 2 Credit Bureaus.
33 Credit Unions Collateral Registry Facility
GUYANA SBB: small loan 6 banks: GBTI, Available from Not available Not available GASCI has 13 listings Low integration and
guarantee fund Baroda, Scotiabank, commercial on the exchange but incomplete SME life
+ grants. SBDFT Republic, Citizens, banks but no with only one active cycle finance system.
microloans Demerara; 2 with export finance company (TCL) Average loan rates at
Credit Unions SME units. 28 CUs. 15% approximately.
1 Credit
TRINIDAD & NEDCO, 6 banks: Scotiabank, Available from Limited VC industry TTSE has about 45 Integrated system
FUNDAID, 10+ First Citizens, banks. availability at existed prior to listed companies and with strong export
TOBAGO Credit Unions e.g. Republic, RBC Royal, EXIM Bank some banks. 2008 but VC is a market cap of $17 orientation. But MFI
Eastern, COPOS, Baroda, IBL Bank leads Export almost non-existent billion – highest in funds reach less than
Neal & Massy, Financing. in Trinidad and the region. Junior 10% of the MSME
TATECO, Venture. DFC. 1 Credit Bureau Tobago today. exchange for SMEs market. Depositor
serves banks, FIs, designed but not yet Insurance in place for
MFIs. fully operational all banks and (private)
for some CUs.
ST. LUCIA Development 5 banks: Scotiabank, Available from Not available Not available Not available but Low integration and
RBC, FNB, Bank of banks, Laborie there is an OECS incomplete SME life
Bank. Fast Cash. cycle finance system.
St. Lucia, FCIB. No CU and CU Eastern Caribbean
Laborie, Choiseul MFI funds reach less
credit bureau or League. Securities Exchange;
& Mon Repos than 10% of market.
deposit Insurance in 12 companies listed.
CUs, Banks very liquid.
AXCEL Finance. place
Suriname National 9 Banks: De Trade Some financial Not available The SSE is sporadic: Life cycle MSME
SURINAME
Development Bank Surinaamsche Guarantees leasing formally but may open for trading finance system not
(NOB) with 1) Bank (DSB), RBC, for SMEs via available from be available twice a month it uses well integrated.
Credit Guarantee Hakrinbank, DSB funded commercial privately due to a manual trading Selective specialty
Fund to local Surinaamse under the banks – but dominance of system. Although only financing offered
banks, 2) Micro Volkscredietbank, Trade Finance on a selective natural resource 10 companies are by some players in
Credit Fund and 3) Landbouwbank, Facilitation basis. industries (e.g. listed, total market the banking system.
Agricultural Credit Surinaamse Programme gold mining) cap has growth from However, access to
Fund. Postspaarbank, Agreement Also available SRD$145 million to finance is better than
5 micro finance Finabank, (TTFP) between from private SRD$1.29 billion otherwise thought.
lending institutions Surichange Bank and DSB and firms for between 2003 and
including Stichting Cooperatieve Spaar- IADB. equipment 2011. The SSE
Seva Micro en Kredietbank leasing. functions without a
Finance Institute; Godo G.A., Securities Exchange
SuriTrust, De 28 savings and Act.
Schakel Credit credit unions.
Union, GODO Draft legislation
Cooperative prepared in 2012
Bank, Trust Bank. by Central Bank to
Apex funds from establish a Credit
Micro Kredieten Bureau but not
Programme. established by end
Credit available of 2015
from Hire
Purchase retailers:
Combemarkt,
Savers Paradise,
and Ebro
NOTES:
This is a life cycle table showing the evolutionary availability MFI/AFI lending accounts for less than 10% of total loans,
of finance as SMEs grow. Column 1 refers to the provision of/ advances and overdrafts made in most countries, because the
access to micro finance and SME credit - both of which are MFIs a) are specialised lending organisations, b) do not have
provided by specialty institutions such as micro finance entities a deposit base, and c) are therefore dependent on reflows and
and others. Column 2 “ST” means, “Short Term”. externally-sourced funding to lend to borrowers.
2.3 MSME Access As an indicator of the scale of MSME lending

operations, as of 30th April 2014, the Caribbean
to Finance in the Micro Finance Alliance (CMFA) had 24
Caribbean participating lending institutions as members in

nine Caribbean countries including: Barbados,
Belize, Dominica, Grenada, Guyana, Jamaica, St.
MSME access to finance in the Caribbean can
Lucia, Suriname and Trinidad and Tobago. The
be split into two categories: 1) access to finance
combined CMFA member portfolio indicated that
for micro enterprises, and 2) access to finance for
there were 447,352 active clients and that the gross
SMEs.
loan portfolio was USD 295 mn with an estimated
27,000 clients. The active gross microcredit loan
2.3.1 Micro Entrepreneur Access to
portfolio as at the end of April 2014 was USD 26.4
Finance
mn. However, it is important to note that two credit
institutions – JN Small Business Loan Company in
While commercial banks and credit unions offer
Jamaica with 14,000 loans annually, and IPED in
personal loans to individuals, in recent years micro
Guyana with 4,500 loans annually, accounted
finance institutions (MFIs) have been targeting and
for 18,500 or 68% of the total Caribbean loan
channelling specialised micro loans to this sector
portfolio.
throughout the Caribbean. Nonetheless, it was
difficult to determine the degree of loan coverage
A May 2014 IDB Multilateral Investment Fund (MIF)
of the micro enterprise sector on a national basis.
study, by EA Consultants Inc., of four of the eight
One reason is that there is no central source of
countries researched i.e. Belize, Guyana, Jamaica
information on the sector nationally or regionally
and Suriname, revealed the following profile of the
and none of the countries interviewed could
sector:
provide empirical data on the size of the sector.
Table 2.3: Micro Entrepreneur Profiles from a Survey of 656 Enterprises in Four Countries
Source: IDB/MIF, “Building Up Business: Micro Enterprise Demand for Credit in the Caribbean,” May 2014
The report revealed new facts about the micro 4. Information asymmetries. Many micro
finance market in the Caribbean region9: entrepreneurs were unfamiliar with microcredit
1. Savings orientation. Nearly all micro products or providers, or did not even know
entrepreneurs surveyed saved. Business needs what microcredit was. Others held mistaken
were the most common reason for saving. A beliefs and generalisations about products and
majority saved in formal accounts, while Rotating providers that prevented them from seeking
Savings and Credit Associations (ROSCAs), accurate information. There is therefore a need
i.e. sou sou or “throwing hands”, were used to to explain and promote micro finance more
varying degrees in each country. Saving and clearly to the micro entrepreneur community.
borrowing are not mutually exclusive and most
borrowers also saved. This strong savings culture 5. Supply-side constraints. While micro
may actually create less incentive for seeking entrepreneurs’ preferences and perceptions are
loans for business investment. The practice important factors in uptake, major supply-side
contrasts strongly with many Latin American constraints also hinder outreach. The cost per
countries, where low-income members of the loan is high – often at interest rates that exceed
population typically save at low rates (and 25% per annum compared with bank loans at
mostly informally) and often borrow instead to 12% - 17% per annum. Also, populations are
finance their needs. dispersed, and some institutions are unwilling
to risk capital on expansion and outreach.
2. Preference for low-cost, flexible But generally, MFI collateral requirements are
financing in every country. Low costs lower than commercial banks’ levels and are
and flexibility were respondents’ top priorities often limited to re-saleable or marketable assets
for financing. They want low interest and fees, owned by the borrower.
repayment schedules that match their cash
flows, and some lenience for late payments. The institutional usage by borrowers and savers of
Respondents’ borrowing and saving methods the 656 entrepreneurs surveyed by EA Consultants
reflected these preferences. Perceptions about was even more revealing (see Table 2.4 below).
which providers matched these preferences Firstly, commercial banks−not Micro Finance
varied, though informal financing methods Institutions (MFIs)−were the dominant lenders to
usually ranked higher than formal institutions on micro entrepreneurs. Secondly, banks are the
important dimensions. main savings mechanisms for that group. Thirdly,
micro entrepreneurs are much more innovative in
3. Risk aversion. Many micro entrepreneurs accessing finance than would have been thought.
were cautious or pessimistic about business They not only access funds from banks and MFIs
prospects, and have experienced slow sales since but from friends, suppliers, use of credit cards and
the global economic crisis of 2008, particularly from ROSCA schemes. Fourthly, most MFIs are not
in Jamaica. Even where economic growth has offering savings products although: 1) the JN Small
been more buoyant, micro entrepreneurs were Business Loans Company encourages its borrowers
cautious, perhaps due to their lack of enterprise to open savings accounts with its parent company,
skills. This attitude bolstered reliance on savings Jamaica National Building Society (JNBS); and 2)
and discouraged borrowing for fear of difficulty the credit union system which is non-collateralised,
with repayment, even among respondents who requires borrowers to be savers before they can be
could benefit from a micro loan. eligible for small (personal) loans10.
9
IDB/MIF “Building Up Business: Micro Enterprise Demand for Credit in the Caribbean,” May 2014 | 10
Credit Unions use the savings
and investment accounts of depositors as collateral for loans.
Finally, the proportion of borrowers who are also These savings are almost always used as collateral
savers in the banking system is extraordinarily high for working capital or term loans by the banks.
(63%).
Table 2.4: Institution’s Usage by Borrowers and Savers
Source: IDB/MIF, “Building Up Business: Micro Enterprise Demand for Credit in the Caribbean,” May 2014
These findings suggest that the MFIs are falling be allowed by the central banks (that regulate the
short of addressing market challenges in significant overall financial system) to offer savings products to
ways: most MFIs offer singular products when their borrowers. The inference that market coverage
opportunities exist for multiple product offerings (e.g. by MFIs is less than ideal is substantiated by the data
saving accounts, debit cards, special ROSCA-type in Table 2.5 (below). The EA Consultants estimated
saving products, online services, etc.). Therefore, total market size for micro loans in the four countries
one policy recommendation is that MFIs should surveyed is as follows:
Table 2.5: Estimates of the Market for Micro Credit Loans
IDB/MIF, “Building Up Business: Micro Enterprise Demand for Credit in the Caribbean,” May 2014
If the total amount of loans provided by the 24 MFI That data include loans to foreign investors and loans
members of the Caribbean Micro Finance Alliance to larger businesses in each country. Also, while
(CMFA) is 27,000, this is approximately 17.9% to credit union lending is growing, on average, at a
29.5% of the total market size of 91,518−150,676 rate of at least 10% a year (in the Eastern Caribbean)
persons in Belize, Guyana, Jamaica and Suriname, those metrics are not reflected in Central Bank data.
i.e., of those persons actually needing a loan11. Nonetheless the L&A data provide a reasonable
Therefore, if the number of potential borrowers in indicator of loan trends to SMEs, since small
other Caribbean countries is added to the market size and medium businesses account for a significant
of these four countries then the 27,000 active loans proportion of both GDP and the overall number of
provided by the CMFA is likely to be less than the loans in each country. A detailed analysis of access
17.9% metric computed above since the total number to finance in each of the eight BMCs is provided in
of persons needing loans would be greater than the Appendix 4: SME Access to Finance in eight BMCs.
91,518–150,676 range for the four countries in The findings for this analysis are highlighted in Table
Table 2.5. 2.6 below. It is important to emphasise that the Table
reflects Loans and Advances to the Private Sector
2.3.2 SME Access to Finance in the as defined by the Central Banks of the eight BMCs.
Caribbean There is some degree of overlapping of the databases
since L&A data includes personal loans and loans for
It is difficult to pin down the degree of SME access to (personal) mortgages. However, it is impossible to
finance in the Caribbean primarily because loans to separate the data primarily because both categories
this group are not formally recorded in the statistical of loans influence directly the level of business carried
records of any of the eight countries surveyed i.e. out by the private sector, i.e. personal loans lead
by the Central Bank, by the commercial banks and to purchases from MSMEs, and mortgages lead
credit unions or by the national statistics departments. to the contracting of MSMEs for various aspects of
Instead, they are subsumed into the Central Banks’ the construction process (e.g. land clearing, block-
classification of “Loans and Advances” (L&A). making, electrical, plumbing, etc., by MSMEs).
Table 2.6: Average GDP Growth and Average L&A Growth in Eight BMCs
Country Average Total L&A Average Rating

GDP Growth L&A
growth 2009-2015 Growth
Guyana 4.5% 119% 20% Excellent
Suriname 4.2% 72% 18% Excellent
Trinidad 0.8% 19% 4% Average
St. Lucia 0.2% 13% 2.5% Average
Belize 2.4% 7% 2% Poor
Barbados -0.2% 4% <1% Poor

Source: The
Jamaica -3% Negative V. Poor Economist Intelligence
-0.4%
Unit (Average GDP
growth) and Central
Antigua -0.8% -8% Negative V. Poor
Banks in 8 BMCs
11
These estimates exclude the loans already being provided by alternative financiers such as commercial banks and credit unions. It is
assumed that the total loan book of 27,000 loans is reflective of very short term loans to the micro enterprise sector and that the demand for
loans estimated by EA consultants are also of a short term nature.
The Table shows that there has been considerable improved business environment – in this case access
variability in Access to Finance in the eight BMCs: to finance. Nonetheless, the findings should not be
Access has been exceptional in Guyana and interpreted to mean that MSMEs, generally, do not
Suriname, notwithstanding those countries’ relatively have difficulties accessing financing in BMCs – but
poor rankings under Getting Credit in the most only, that in countries with above average rates of
recent (2016) Doing Business Rankings. The Table economic growth, access to finance would appear
also reveals that access to credit improved modestly to be more readily available to MSMEs, than it is in
in Trinidad and Tobago - although that country was countries that are experiencing sustained economic
the first BMC to introduce a credit bureau. Access contraction.
was poor to very poor in four of the eight BMCs
– Belize, Barbados, Jamaica (despite Jamaica’s 2.3.3 Bank liquidity and SME demand
gains on Getting Credit under the Doing Business
Rankings) and Antigua and Barbuda. The findings indicate that the demand-supply
equation is more complex than the micro-level
What is driving these divergences? The answer is analysis of the financial sector would suggest.
the average economic growth rate of each BMC. A December 2014 newsletter of the Caribbean
Again, the table reveals that GDP growth was Centre for Money and Finance noted that, with an
strongest in Guyana and Suriname and weakest inordinate amount of unutilized lending capacity in
in Barbados, Jamaica and Antigua and Barbuda. banks, excess liquidity had reached troubling levels.
As revealed in Appendix 4, Jamaica experienced For instance, on March 31, 2014, total liquid assets
contractions of as much as 24% in its L&A in 2010 of Jamaican commercial banks were USD754 mn,
and 17% in 2012 – mainly as a result of the severe of which USD181 mn were in excess of the legal
economic challenges which that country encountered (minimum) liquidity requirement. Such large amounts
during those years. of unused lending capacity in the Caribbean is
explained by several factors. One factor is weak
The lesson learned is relatively obvious - MSMEs demand for credit by potential customers deemed
in countries that experience robust economic to be creditworthy by the banks. The insufficiency
growth will have more favourable access to credit of credit demand is itself the result of protracted
than in countries where economic performance is anaemic economic growth, business closures,
poor or lacklustre – even in those countries (e.g. higher than usual levels of unemployment, and job
Trinidad and Tobago and Jamaica) where Doing redundancies in many Caribbean economies.
Business reforms such as credit bureaus and
electronic moveable collateral registries have been Another factor is an increase in loan delinquencies,
established to improve MSME access to finance. mainly as a result of the initial impact of the
Also, constraining factors such as levels of collateral global economic crisis and its lingering effects on
requirements and interest rates are not as significant Caribbean tourism and other service exports, real
in explaining performance as economic growth - estate markets, and household capacity to service
Guyana’s collateral requirements, at approximately personal debt. Some commercial banks estimate
200% are among the highest in the region, but the that non-performing loan (NPL) levels exceed 15%
growth in its L&A still out-performed the other seven in the Eastern Caribbean and 9% in Guyana.
BMCs. In contrast, the collateral requirements in Faced with substantial increases in the proportion
Barbados were the lowest of the BMCs (see Table of delinquent loans, commercial banks have raised
2.6 below), but that country still performed poorly in their credit assessment standards and have become
terms of the average growth in its L&A between 2009 more risk averse. The result is that bank loans have
and 2015. A second lesson learnt is that Doing either declined or have expanded incrementally.
Business Rankings do not always correlate with an
In contrast, bank deposits have increased quite put together projects that meet bank-lending criteria
substantially in many Caribbean countries since (i.e. financial statements, asset quality, borrowers’
2011. The exceptions are the ECCU members financial integrity from credit bureau information,
and the Bahamas, where collectively bank cash flow statements, collateral requirements, etc.).
deposits decreased, but at a slower rate than bank Such constraints are compounded by limited growth
loans. In effect, loan supply capacity measured in consumption spending – and, with the exception
by bank deposits is growing faster than loan of Trinidad and Tobago and Guyana, low levels of
absorptive capacity12. For instance, in Guyana, the exports by SMEs generally. Consequently, SMEs
commercial banks are lending as much as G$110 are caught in a revenue trap −with limited upside
billion of total deposits of G$248 billion, or about potential in domestic markets. Access is also made
44% of their deposit base to Government, via more difficult by the relatively high levels of collateral
investments in Treasury Bills that generated interest required by banks, at a time when the secondary
at 2.67%−3.78%, substantially lower than the markets for liquidated assets are especially weak
9%−15% loan rates charged to consumers and and bankruptcy laws are mostly outdated.
SMEs13. On the demand side, the underserved SME
sector is incapable of accessing those funds because 2.3.4 The Cost of Capital Issue
of: 1) information asymmetries, i.e., missing borrower
creditworthiness information, linked to the absence of Figure 2.5 (below) highlights interest rate trends in
credit bureaus; and 2) limited capacity of the sector to the 8 BMCs between 1974 and 2014:
Figure 2.5: Interest Rates in Eight BMCs,1974 - 2014.
Source: World Bank, World Development Indicators.
12
The Caribbean Centre for Money and Finance, The Liquidity Problem in Caribbean Commercial Banks, 2014. | 13
See: http://www.
chrisram.net/?tag=guyana-stock-exchange.
As Figure 2.5 clearly shows, lending rates in the 2.3.5 The Collateral Issue
Caribbean have been trending downwards in
some countries since 1999. Only Suriname’s have It is well known that the capacity to meet commercial
trended upwards since 2007. But on average, they banks’ collateral requirements is a key deciding
are still very high when compared with loan rates factor in MSME access to finance. Figure 2.6 (below)
in more developed countries. In 2014, average provides a snapshot of collateral requirements in
lending rates varied from a low of 7% in Trinidad most Caribbean countries. One reason for such high
and Tobago to a high of approximately 17% in requirements is the absence of a robust secondary
Jamaica – although Jamaica’s lending rates have market for fixed assets. Therefore, banks over-
been on the decline in 2015. Also interest rates in compensate and demand high levels of collateral.
the OECS and Barbados have seen recent declines,
partly as a result of Central Bank policies aimed at Another reason is that, in some Caribbean countries,
increasing the intermediation of commercial banks banks are not allowed to auction off collateralised
in weak domestic markets. The Eastern Caribbean property at values that are lower than the minimum
Central Bank reduced its minimum deposit rate from levels stipulated by law (e.g. in Barbados and in
3% to 2% and the Central Bank of Barbados has Grenada). This restricts the liquidation of collateral
eliminated minimum deposit rates altogether. Lower in cases where offers made by bidders are below
interest rates should help MSMEs. They also make the minimum levels (e.g. below 67% of the market
commercial bank lending more attractive to MSME value of the assets). A third reason is that Central
borrowers when compared with the lending rates Bank prudential regulations stipulate that banks must
of MFIs – which usually exceed 15% throughout the secure adequate cover (i.e. collateral) for their loans.
region. In addition, it should be noted that lower
interest rates reduce bank profitability−a concern that
has led to a recent increase in fees being charged
on depositor accounts by commercial banks.
Figure 2.6: Value of Collateral as a Percentage of Loan Values
Source: World Bank, World Development Indicators.

The collateral issue also reflects the absence of 1. Adoption of international standards:
adequate (alternative) financial intermediation. A The adoption of quality assurance standards
presentation on “Moving Beyond Collateralised by the MSME sector will improve operational
Financing” by Ram Ramesh at the 1st Caribbean efficiency and therefore productivity. The
Competitiveness Forum in Trinidad and Tobago CARICOM Regional Organisation for Standards
noted that there was limited intermediation for and Quality (CROSQ) has published a regional
venture capital; angel funding; IPO funding; standard entitled “Requirements for Good
and government subsidies i.e. the alternatives to Management Practices for Micro, Small and
collaterised finance14. Medium Enterprises” which was approved by the
Council for Trade and Economic Development
Logically most banks would prefer to engage in (COTED) on February 9, 2010. Guyana’s
lending activities that maximise their interest income National Bureau of Standards, attempting to
and return on (loan) assets employed. However, introduce the Standard to Guyana’s MSMEs
overall: 1) the economic outlook is mixed but not yet without fiscal incentive support, is finding that
buoyant enough to engender stronger confidence MSMEs are reluctant to adopt such practices.
in the near term future; 2) many MSMEs are not
bankable enough to encourage an expansion of 2. Deliberate promotion of export sector
bank lending – despite the deliberate development development: This will incentivise increased
of Small Business departments or service units levels of productivity in local businesses.
introduced within many banks; and 3) the MSMEs’ Exporting is associated with the reallocation
own business prospects are equally dampened by of resources from less efficient to more efficient
insignificant growth in consumer demand within the plants. In the aggregate, these reallocation
region. effects are quite large, making up over 40%
of total factor productivity growth in the
2.3.6 The MSME productivity challenge manufacturing sector in the United States. The
in the Caribbean positive contribution of exporters even shows up
in import-competing industries and non-tradable
In terms of access to finance, the issue of MSME sectors. The overall contribution of exporters to
productivity is important because low levels of manufacturing productivity growth far exceeds
productivity result in lower cash flows. This impedes their shares of employment and output15.
the capacity of MSME borrowers to repay and to
access new loans from the financial system. For 3. Establishing supply chain linkages
instance, the purchase of new equipment tends to between large businesses and MSMEs:
improve productivity since it increases output per The development of value chains that integrate
hour worked. But low MSME productivity (and backwards into the MSME sector will force
consequent reduced cash flow) limits capacity to smaller firms to improve their productivity –
upgrade equipment through loans. The challenge is so that they may become and remain viable
to break the vicious cycle of low productivity, low suppliers to larger firms. It is important to
revenue flows and the inability to access funding. recognise that the development of MSMEs –
There are four inter-connected approaches to in a region of mostly inward-looking private
addressing the MSME productivity challenge in the sector activity, is also dependent on the linkages
Caribbean: established between larger firms in-country and
14
Ramesh, R.,“Moving Beyond Collateralized Financing: Alternative Models based on Case Studies for the Regional Private Financial Sector”.
15
Bernard, A. and Jensen, J., “Exporting and Productivity,” National Bureau of Economic Research paper No 7135
the MSME sector. Such linkages increase the However, the report also observes that
productivity of MSMEs, because larger firms productivity gaps between the USA and
have refined their operations to be productivity developing countries are the highest in services.
and output-driven. Examples of such firms Since services account for more than 60% of
include Sandals in the tourism sector, and employment in developing countries, that sector
Massey Stores in the retail sector. Both groups is increasingly dragging down aggregate
of firms have established clear performance productivity. The study emphasised that
standards which local suppliers (mostly MSMEs) increasing productivity in the services sector is
have to meet. As a result, MSMEs have had key to boosting economic growth and reducing
to increase and align their levels of productivity poverty in the LAC region.
with international norms.
4. Increasing productivity in infrastructure

2.4 Financing
and in the services sector: Cutting the time Challenges Facing
frames for doing business will enhance enterprise
productivity, because improved logistics will
the MSME sector
save MSMEs both time and money. The IDB
2.4.1 Policy Measures to improve Access
report, “The Age of Productivity: Transforming
to Credit
Economies from the Bottom Up”, emphasised
two related points: 1) that too many resources
The financing challenges facing the MSME sector
were under the control of MSMEs in most of the
can be partly explained by the gaps between
LAC region, i.e. relative to larger firms; and 2)
policy measures to improve access to credit in the
that infrastructure development/expansion was
OECD countries and the BMCs. Table 2.7 (below)
key to returning to more sustainable productivity
provides a synopsis of policy measures in 19 OECD
levels in the foreseeable future.
countries compared with the policies in the 8 BMCs
analysed in this study.
Table 2.7: Gaps in Policy Measures to Improve MSME Access to Credit – OECD vs. BMCs
Mechanism OECD BMCs Comment
1. Loan Guarentee Schemes 100% 50% OECD very strong
2. Lending targets 0% 0% Not applicable
3. Export Finance support 89% 63% Selective in BMCs
4. Credit: code of conduct 32% 0% Not usd in BMCs
5. Credit Registry 37% 37% Recent in 3 BMCs
6. Central Bank scheme 10% 25% Barbados and OECS
7. Securitization support 16% 0% Not used in BMCs
8. Govt. direct lending schemes 53% 100% Initiated in all BMCs
9. Direct lending +private sector 68% 0% Not in BMCs
10. Peer to Peer Support 42% 0% Not yet in BMCs
11. Retail Bond Markets 26% 0% Very small in BMCs
Source: Central Bank of Ireland, Measures to Improve Access to Credit, 2015 and Consultants’ Estimates.
As the Table shows, the main differences between Registered firms have better access to technology
the OECD countries and the BMCs are that: 1) and human capital. By complying with the law, the
all of the OECD countries ensure that they offer firm has better business predictability and may avoid
loan guarantee schemes to MSMEs; 2) the OECD situations where paying fines or bribes is the norm
countries tend to combine or bundle public and to stay in business. Formal firms may also access
private sector loan programmes; and 3) there is a the judicial system for any contract enforcement
higher level of government initiated direct lending procedures. Furthermore, formal firms have better
in the BMCs. These differences strongly suggest access to credit, especially in some countries where
that the BMCs should focus on introducing and/ a tax identification (ID) or registration certificate is
or expanding their loan guarantee schemes on a needed to open a bank account. This is the case in
national basis as a top priority. However, these most Caribbean countries.
are not the only policy measures that need to be
addressed (see also 2.5 Improving MSME Access There are two well-known approaches to addressing
to Finance in the Caribbean). informality:
2.4.2 Addressing Informality 1. Improving the enabling environment:

Making it easier for the informal sector to
The prevailing view of the informal sector is that register businesses, to pay taxes, and to comply
it stimulates enterprise development, and makes with regulations will improve the prospects for
invaluable contributions to social stability. While formalising the sector. Evidence shows that
most developing countries view business informality reducing corporate tax rates and simplifying the
positively, the McKinsey Global Institute (MGI) paperwork for registration and tax compliance
data on research conducted in Brazil (2006) and help to increase the formal organisation and
Mexico (2014), and the IDB “Age of Productivity” consequently, the efficiency of SMEs. One-stop
report suggest that the growth of informality can: 1) shop services for registration and tax payments,
adversely affect the viability of the SME sector; 2) and offering business support services to newly
fragment the sectoral structure of business; 3) infuse registered entrepreneurs have also been found
excessive levels of imports and price competition; and to be highly effective. In 2011, in Brazil, a total
4) significantly impede the attainment of reasonable of 1.9 mn micro-entrepreneurs had formalised
productivity gains and consequently, GDP growth via an online portal one year after it was
rates of emerging and developing countries16. The launched17.
challenge facing the Caribbean is two-fold: how to
foster the development of enterprises, but also reduce 2. Incentives to formalise the informal
business informality, i.e. the exponential growth of sector: The options include free training
the informal sector, simultaneously. incentives, simplified tax structure, labour
market reforms, and access to government
Formalisation should be a priority procurement business. For example, Jamaica
from a public policy and private sector uses an Employer Tax Credit– which lowers the
perspective. It can lead to higher tax revenues; effective tax rate from 25% to 17% for SMEs to
better quality jobs; access to new markets, suppliers, encourage SMEs to operate in the formal sector
and clients; more reliable supply chains; and higher and generate employment as well.
rates of productivity, to name a few examples.
16
MGI, “How Brazil can grow,” 2006 and “A Tale of Two Mexicos: Growth and Prosperity in a Two-Speed Economy,” March 2014.
17
“Formalising the informal sector,” https://www.innovationpolicyplatform.org/content/formalising-informal-sector
Asian countries that have joined the ranks of or other registered businesses – a strategy that is
the wealthy nations or dramatically narrowed now being adopted by the Guyana Government
the gap with them have not had a serious in its 2016 budget and exists in Jamaica under the
informality problem. Japan, Singapore, South MSME policy adopted by the Ministry of Industry,
Korea and Taiwan all benefited from relatively Investment and Commerce (MIIC).
small tax and regulatory burdens as well as
from strong legal and law-enforcement systems; Other measures that could be more effective are
so did Western countries in the early stages of centred on co-opting larger private sector businesses
their development. The corporate tax rate was into formality solutions. Some examples include:
only 4% of GDP in the United States in 1913, for
example, when it had reached Brazil’s current 1. A micro distribution and retail
stage of economic development. Brazil’s model: A number of corporate clients in
corporate tax burden is now nearly 25% of the manufacturing, service, and wholesale
GDP18. sectors—such as Coca Cola in East Africa,
Grupo Martins and Tribanco in Brazil, and Mi
According to an International Finance Corporation Tienda in Mexico—are working with small and
(IFC) report, converting informal businesses into informal firms using a micro distribution and
formal SMEs is a complex and difficult challenge19. retail model. The business model relies on co-
Based on 15 informal sector surveys by World Bank opting smaller businesses into the distribution
Enterprise Surveys (WBES), the main reasons that system. Because small retail outlets have
firms are not registering their business are: 1) lack of financial and managerial capacity constraints,
information on how to register an enterprise; 2) time large corporations have also included a set of
taken to complete the registration process; 3) taxes training and coaching initiatives to better educate
that must be paid by registered businesses; and 4) business entrepreneurs. In addition, some have
the lack of perceived benefits from formalisation. created specialised financial solutions such as
Studies have also indicated that high entry costs; inventory purchases on credit to ease the access
strict labour regulations; lack of access to resources to finance constraints that small and informal
such as land, and credit; as well as complicated firms face to operate and finance their working
registration procedures are also important factors capital needs. Imperceptibly, these processes
that contribute to low rates of formalisation. integrate informal MSMEs into formal SME
practices and behaviour.
Experiments and interventions in Bangladesh,
Bolivia, Peru and Sri Lanka show that simplifying 2. Mobile Banking and e-transaction
business registration channels, reducing registration platform: A second model includes the
costs, and providing greater information on the use of mobile and e-transaction platforms
benefits of registering a business have proven to to reduce the transaction costs that financial
have little effect on increasing the formalisation of intermediaries face when trying to reach small
firms. and informal businesses. Examples include
FINO PayTech (FINO) in India, which deploys
Nevertheless, some firms found formalisation to be field agents to enrol consumers in rural and
advantageous because it permitted the enterprise semi-urban regions of India and conducts low-
to sell goods and services to the government and/ cost electronic transactions.
18
Capp, J., Elstrodt H.P., and Jones Jr, W.B, “Reigning-in Brazil’s Informal Economy” by The McKinsey Quarterly, Web exclusive, January
2005 | 19 IFC, “Closing the Credit Gap for Formal and Informal Micro, Small and Medium Enterprises,” 2013
Its service model relies on the provision of intermediaries face when servicing small
biometric smart cards used for saving accounts and informal firms include poor customer
and transferring funds, point of sale terminals, knowledge, lack of skills and literacy of
and accounting and management information MSME owners, low profitability, lack of
systems. FINO has a client base of 27 banks, collateral, assets, credit history, and land
15 government entities, and four insurance registry certificates, among others. However,
agencies. Other examples include YellowPepper, financial intermediaries in various developing
which is a leading mobile financial network in countries have been able to overcome these
Latin America and the Caribbean, and which barriers through creative means including cash
has over 3.6 mn monthly users in nine countries, flow based lending, introducing psychometric
conducting 18 mn financial and informational tests to identify higher ability entrepreneurs,
transactions per month. The YellowPepper and leveraging leasing solutions when the
business model has relied on mobile banking firms do not have any collateral or assets to
solutions, enabling banks to deliver financial pledge in exchange for investment financing.
services via mobile phones,m-wallet solutions Other banks, such as Türk Ekonomi Bankasi,
obtained via a pre-paid account accessed using Standard Chartered Bank and ICICI Bank,
the mobile device, and business to business are using nonfinancial advisory services, such
(B2B) products which facilitate mobile payments as financial literacy and business operations
and collections between large corporate clients training, face-to-face or web seminars, web
such as Coca Cola and SABMiller and their portals and e-learning courses. They also offer
suppliers, distributors, and retailers. specialised small business consulting services to
increase the capacity of the firm, strengthen the
Such strategies are still underdeveloped in the client/bank relationship, and determine which
Caribbean. However, there are positive signs firms and what sectors are lower lending risks.
that mobile banking and e-transaction platforms
are about to be expanded in the region. In Offering such non-financial services is
February 2016, Transcel Limited in Jamaica increasingly becoming an interesting
announced that the government-backed mobile opportunity for banks looking to
money product under development for the micro strengthen the long-term bank-client
sector will hit the market in July 2016. Transcel relationship, while greatly benefiting
indicated that it has raised USD 2 mn for the roll- and strengthening the capacity of the
out and the technology company’s expansion SMEs receiving these services.
into other Caribbean markets, possibly with
JMMB Group and/or Republic Bank of In this regard, the Caribbean is not far behind.
Trinidad and Tobago. The Mobile Money for Republic Bank in Guyana hosts business
Microfinance or M3 initiative is a project of the seminars in poorer communities. It also hosts
Development Bank of Jamaica, which has taken a five-week Commercial Customer Business
on Transcel and National Commercial Bank, Programme in collaboration with the Arthur Lok
Jamaica (NCB) as partners20. Jack School of Business in Trinidad and Tobago.
The programme takes commercial customers
3. Small business banking solutions: through various training modules on finance,
The most common challenges that financial human resources, marketing and innovation.
20
Given the viral nature of new ICT “convenience services”, the opportunity should not be lost to include a formalisation incentive package
offered by Government that is institutionalised within the M3 project.
The bank promotes the use of the IFC Business offer to micro entrepreneurs; and 2) strengthen their
Toolkit as an online business guideline service capacity to deliver such services including ways to
for MSME customers. Republic Bank is a collaborate with larger financial institutions. In that
partner with the Small Business Bureau Credit regard, the approach used by the Jamaica Small
Guarantee Programme in Guyana, which offers Business Loans Company of encouraging their micro
a 40% credit guarantee and caps the interest borrowers to establish banking relationships with the
loan rate at 6% to eligible SMEs. The bank Jamaica National Building Society (JNBS) is highly
also lends to the Small Business Development commendable. With regard to broadening the
Finance Trust which on-lends those funds to range of financial services and capacity building,
micro entrepreneurs in various sectors of the the MFIs would have to continue to strengthen their
economy. own institutional/product delivery capacity via
such programmes as the Caribbean Micro-Finance
4. The supply chain model: Finally, supply Capacity Building Project (CARIB-CAP), the IDB-
and value chains can be used as a private funded project aimed at enabling Caribbean MFIs to
sector model to provide market opportunities improve financial performance and outreach.
for informal firms. (Note: This has already
been highlighted as an MSME productivity Finally, deliberate information dissemination on
solution under section 2.3.6 above). Large the benefits of business registration should not be
corporations, notably in the extractive industries, overlooked as a strategy to increase formalisation
power, tourism and hospitality, agribusiness and and access to finance. Many small businesses are
forestry and telecommunication sectors, want actually unaware of the advantages of formalising
reliable and standardised supply chains for the their commercial activities and need to be sensitised
production and distribution of their products and about the pros and cons of formal registration. Such
services. Several multinational companies have benefits could include access to: 1) government
prerequisites for companies that become part of contracts, 2) grants, and 3) government-funded
their value chains that involve, among others, loan guarantees schemes. Other initiatives could
having a registered business. This presents a include improvement in land/property registries,
great opportunity for MSMEs to participate in lower taxes, and reforms to labour laws that make
larger value chains. it easier to hire and lay off workers, given that the
latter two factors (i.e. high taxes and cumbersome
Currently, a supply chain model is being labour laws) have spurred exponential growth in
implemented in Jamaica under the World Bank- informality in the recent past.
funded Foundations for Competitiveness and
Growth Project, which includes a component 2.4.3 Addressing SME financial literacy
aimed at supporting MSME capability via weaknesses
provision of funding to SMEs to support supply
chain learning through commercial interactions Of all the factors that impact SME access to finance
with larger Jamaican firms. in the Caribbean, perhaps the most important one to
address is the acute deficiency of SMEs in providing
These four examples of strategies aimed at lenders that dominate financial intermediation
advancing the formalisation of very small firms are in the Caribbean, i.e. commercial banks, with
useful ideas for further consideration by Caribbean adequate evidence that their businesses are being
countries. However, the findings from the EA well managed and that their ideas for growth and
Consultants study for the IDB would suggest that a credit have been especially well thought through. The
first logical step would be for MFIs to: 1) increase evidence that supports this prioritisation is especially
the range of financial services and products that they strong.
First, the findings of an IDB study on “Access to Finally, expanding Government-funded loan
Finance for Productive Development in Jamaica” capital for lending to MSMEs will be difficult. Most
in April 2015 clearly points to the dearth of SME Caribbean governments are increasingly cash-
capacity as the primary reason why SMEs are strapped, primarily because of their excessive debt
having difficulties accessing finance from the system burdens and low economic growth. Therefore, at
– whether from banks, credit unions or micro finance least over the short to medium term, they are unlikely
institutions. to be in a position to increase either: 1) public sector
procurement; or 2) their contributions to specialty
Second, interviewees in this study in all of the eight loan funds sufficient to influence the SME finance
countries surveyed – commercial banks, credit market substantially. However, some countries, like
unions, micro finance institutions, development Trinidad and Tobago and Jamaica, have increased
banks, and government and private sector-funded the level of resources to special financial mechanisms
business support organisations –all point to SME like the National Enterprise Development Company
business management deficiency as the primary (NEDCO), the Development Bank of Jamaica and
reason why investment finance is difficult to come the Small Business Development Corporation21.
by. Consequently, there is a need to strengthen the
capacity of lending institutions to guide potential Commercial banks control at least 67% of the loans
clients in the development of stronger financing market and, from a risk management perspective,
management systems in their businesses. are acquiring the expertise to help MSMEs upscale
their businesses as they grow. Consequently, a
Third, the financial system, including micro finance modest increase in loan volume from commercial
institutions, is now more acutely aware of the banks is likely to have a much larger impact
benefits of financing bankable projects because on access to finance than from other financial
successful MSMEs can become profitable long-term intermediary mechanisms, such as development
clients. Consequently, the signals (or criteria) that banks, because the latter group is operating with
those institutions look for, focus on the capacity of a much smaller client base and with significantly
the potential borrower to manage successfully his/ lower loan resources.
her business affairs.
Fourth, the problem is not availability of capital.

2.5 Financial
Most financial institutions have considerable Literacy of SMEs
excess liquidity and are aware that they are
facing extended periods of excess liquidity in the
future. Therefore, they are genuinely keen to lend 2.5.1 Approaches and Strategies to
funds to SMEs, notwithstanding ultra-conservative Improve Financial Literacy of
screening processes and collateral requirements. Caribbean SMEs
Moreover, banks are already “on board”. As noted
elsewhere in this report, the study found that most of Various public and private sector institutions are
the larger banks have or plan to establish special already serving the SME capacity building market.
SME departments or units to strengthen their own These include specialty programmes offered by
capacity to process SME financing requests and development banks such as the Development Bank of
manage such loans more effectively. Jamaica (DBJ); investment promotion agencies, such
21
It should be noted that, in the case of Jamaica, most of the increase in funding for lending and/or for technical assistance support has come
from international donor agencies like the IDB, World Bank and the European Union.
as the Grenada Industrial Development Corporation the available time. The added benefit is that these
(GIDC); donor-funded projects, for example, materials would continue to be open to business
Caribbean Export and Compete Caribbean; even after the programme is finished”. The study
government-funded agencies, such as JBDC; private adds that a variety of approaches could be used
sector business development services, for example, to incentivise participation, including the provision
Action Coach, and established educational of recognised certificates upon completion of the
institutions. Accordingly, the first step in approaching programme. However, there is some ambivalence
the capacity building challenge is to “map” the about the “completion of certificate” requirement
existing resources that are being deployed to help because such an approach implies complexity and
SMEs and to identify niche areas that are not possibly failure – two factors that could diminish
being served by such programmes. Any proposed the attractiveness of the programme to the smallest
solutions should also take into consideration: 1) the SMEs, some of which will obviously struggle to
lessons learned from prior related initiatives, and 2) complete the programme successfully. Such an
opportunities to leverage existing capacity-building approach could give the programme a “bad” or
efforts that are currently producing above average daunting reputation.
results.
For example, attempts by the Guyana Bureau of
Therefore, the approach should be one of Standards to introduce CARICOM SME certification
additionality rather than of (risking) a possible standards to the private sector have met with
duplication of effort that may complicate rather than considerable resistance by the sector itself, partly
streamline existing capacity building efforts. The because of “fear of failure”.
perspective of the IDB study on “Access to Finance for
Productive Development in Jamaica” is that “to solve The programme could be promoted as capacity
the (capacity) problem, a well-designed, well-funded, building that would make SME projects bankable
properly-marketed and effectively-executed training and/or investable to the financial system i.e. where
and capacity building programme for businesses is suitable forms of financing could be accessed.
required. It should be designed in a manner that To that end, it should be delivered as part of a
affords struggling, necessity-driven entrepreneurs partnership with private financiers (both credit and
the opportunity to participate, and at the same time equity), with a proviso that all participants would be
attracts opportunity-driven entrepreneurs by virtue of guaranteed an opportunity to make funding pitches
the benefits to be gained from the offerings”. to groups of well-placed financiers. Also, there
would be related opportunities for synergies to be
The IDB study postulates that “an Open University created between the programme and established
concept could be utilised, wherein trained educators, institutional initiatives. For instance, Republic Bank in
communicators and business facilitators could be Guyana and the Jamaica National Small Business
hired to create online teaching modules in critical Loan Company are moving toward a system of
areas such as accounting/record-keeping, corporate online loan application. It is possible that such
governance, human resource management, etc. (loan) systems may be integrated into the training
These modules could utilise video lessons, along (business plan) modules of the capacity building
with step-by-step learning aids that are designed in a programme. Also, if the opportunity to borrow is
manner that shows entrepreneurs in a practical way linked to a minimum certification standard, such a
what is to be done and how it will benefit their firms. prerequisite would encourage MSMEs to take the
Although a few short face-to-face sessions would related training seriously. Furthermore, opportunities
be useful, the pedagogy should rely heavily on self- could also be explored to fuse the programme with
learning and asynchronous delivery techniques, to the M3 (mobile money for microfinance) project,
allow entrepreneurs to learn at their own pace in which is scheduled for launch in mid-2016.
Marketing and the degree of institutionalisation of Obviously, technical assistance would be required
such a programme within an integrated fabric of for the design of all areas of such a programme,
registration, business start-up and access to finance including online learning resources, delivery
would have to be carefully addressed. Innovative methods, marketing, IT infrastructure, and capacity
mass media advertising using successful local and building for the executing agency. Consequently,
regional business people would help. An emphasis financial assistance would be required for the design
on app usage and text messaging to capitalise phase. However, the project’s operating budget
on widespread mobile phone usage could be should be self-financing in that the main beneficiaries
established. To be more revolutionary, all registered (i.e. the lending institutions and governments) should
companies and business name owners could be be prepared to contribute to the operating costs of
given free introductory course materials as an such an agency since they would be the primary
incentive to access the training programmes, and beneficiaries22.
the courses could be provided as a fee app as one
of the incentives to informal businesses to register. To be relevant, the proposed capacity building
For effective leveraging, such a venture would best programme should focus on developing SME training
be delivered through partnership with a number modules that address the nine priorities listed below
of public and private agencies, including but not (i.e. financial statement analysis, cash flow analysis,
limited to development banks, credit unions, business physical business organisation/visit to client, owner’s
support service organisations and donor-funded net worth articulation, credit bureau registration,
projects in each country. Based on capacities articulation of asset quality, business plan analysis,
developed and successes to date, one of the leading and management of social and environmental risks).
business support entities – with appropriate capacity Consequently, banks and other financial institutions
– could be appointed as executing agency for such would have to be actively involved in designing
a project. curricula.
Figure 2.7: Loan Analysis Procedures used by Banks and % of Bank Usage
Source: IDB Group, “Banks and the Missing Middle,” 7th Regional Survey, 2014
22
CDB acknowledges the contribution of the IDB consultant who developed the ideas for the Small Business Open University highlighted in
this section of the Study.
There are also other options worthy of consideration. 2. Inward focusing private sector: The
Not all SMEs will need a mandatory or fixed number Caribbean private sector is struggling to cope
of business development training modules. Therefore, with a number of commercial challenges,
Government could consider using “sweetener” tax primarily in markets and in the rapidly evolving
incentives that allow SMEs tax write offs of 150% structure of the tourism sector. Notwithstanding
of expenditures made on business management the recent return to strong tourism growth, the
capacity training that meet the curricula requirements sector itself has lost its competitive edge on a
of the financial system. global scale and returns on investment (in
tourism) are not nearly as robust as they used to
While this is a direct SME subsidy, the upside is that be.
the financial system will make more loans to the
sector, increase its profitability, and pay more taxes 3. Absence of critical business enabling
to government on interest income earned from the environment/access to finance support
SME loans, partially or completely offsetting the tax measures: In the Region, only Guyana,
subsidy inducement offered to MSMEs. Jamaica and Trinidad and Tobago have
introduced reforms aimed at improving the
Additionally, this should boost the delivery of training Doing Business “Getting Credit” indicators –
services by the private sector itself. Governments namely the establishment of credit bureaus – and
can promote more strongly the inclusion of business in the case of Jamaica, an electronic registry for
management training into donor-funded projects moveable collateral.
aimed at the sector by donors such as the World
Bank and the IDB. To ensure that the programme 4. Formal financial sector dominance and
is deliberately relevant to the needs of financiers it control: The Caribbean’s retail financial sector
should address priorities articulated by commercial has adopted increasingly stringent screening
banks23. processes for private sector and consumer
access to bank credit – even when faced with
2.5.2 Improving MSME Access to Finance above average levels of excess liquidity in the
in the Caribbean system. The commercial banks still have, by
far, the largest market share of the financial
The preceding review of MSME access to finance market. Therefore, strategies aimed at unlocking
has led to the following conclusions, in summary: those resources have to be a top priority if the
Caribbean is to advance SME growth beyond
1. Questionable growth prospects the incremental level. Such strategies, e.g.
and now additional non-economic Credit Guarantee Schemes and MSME training
challenges to be addressed: At the in financial literacy, are highlighted under the
macroeconomic level, the Caribbean is still specific recommendations below.
facing strong headwinds over the short to
5. Less than optimal MSME policies and
medium term. The global economy, after
strategies: In recognition of the access to
more than five years of highly creative policy
finance challenges which SMEs face, some but
measures to boost growth, is still in a relatively
not all governments have developed SME policies
fragile state.
to lay out a clearer strategy to strengthening the
23
IDB/MIF “Banks and the Missing Middle,” 7th Regional Survey 2014. The loan analysis procedures in Figure 2.7 above are based on
a survey of 110 small, medium and large banks conducted in 19 different LAC countries, including Jamaica, in 2014 by the Multilateral
Investment Fund (MIF).
sector’s contribution to economic development. If the Caribbean chooses to address MSME access
The Region faces two challenges: 1) the general to finance constraints, then it must focus on the ones
lack of comprehensive policy frameworks; and that would unleash SME development “across the
2) in terms of additionality –and relative to the board” by identifying a limited number of issues to
overall size of the private sector at country be worked on now, leaving the longer-term issues
levels– all of the national MSME support to be addressed at a later time. Such an approach
programmes are operating at incremental avoids over-planning the development of all of the
impact levels primarily because most countries possible institutional solutions.
have categorised their MSME development
initiatives as “projects”. This means that such The specific recommendations are as follows:
interventions are not actually being assimilated
2. Develop training programmes aimed
into the larger institutional support framework
at improving the capacity of MSMEs
for MSMEs. Overall, countries concentrate
to address financial management of their
on establishing and using special delivery
operations in line with financiers’ information
mechanisms or projects.
needs. This is the main challenge that MSMEs
face − the capacity to demonstrate that
In contrast, however, their policy design and
management of their businesses and resources
implementation framework (credit bureau
are “information based” and that they have
legislation, national credit guarantee legislation
institutionalised such approaches to running
and programmes, tax policies and training
their operations on a day-to-day basis.
policies and incentives, etc.), could be much
more effective at unlocking MSME access to
2. Expand the range of financial products
credit. However, these are not being developed
available to MSMEs. Governments should
by the relevant government entities.
expand the range of financial products offered
to MSMEs along similar lines to those offered
6. Yet, there are still promising signs on
to MSMEs by OECD countries24. This can
the MSME horizon. These include the
be achieved by accessing and re-deploying
increase in training services being utilised by
previously under-tapped institutional funds such
MSMEs, the formal alignment of commercial
as the NIS and the proposed Dormant Account
banks with the sector via establishment of MSME
Scheme in Jamaica. The most important
Units and Departments, the introduction of credit
mechanism to create/expand is Credit
bureaus in some countries, the increased access
Guarantee Schemes. The reason is, that apart
to technology that MSMEs now have, and the
from MSME financial management literacy,
more direct access to foreign markets afforded
MSMEs have limited collateral capacity, and
by the World Wide Web.
that limitation is one of the main reasons why
The preceding findings and conclusions establish they experience difficulty in accessing loans
the rationale or platform upon which the ensuing from the financial system.
recommendations to enhance MSME access to
finance are based.
24
The Small Business Bureau (SBB) in Guyana, supported by IDB funding, is an example of how a credit guarantee system can work
for very small MSMEs.
Also, given the limited scope for domestic market funding sources such as crowdsourcing, angel
expansion in most countries, export support investments and P2P investments can become
programmes similar to those managed by the more available to Caribbean MSMEs; and 3)
Trinidad and Tobago EXIM Bank (factoring, upgrading bankruptcy laws to allow insolvent
export insurance etc.) are the second most companies to return to the financial systems
important financing mechanism to develop in more quickly than is currently allowed under
all Caribbean countries. outdated bankruptcy laws. All three initiatives
will improve the bankability of MSME project
3. Introduce tax reforms that allow formal proposals in the region.
MSMEs to retain a much larger share of
their profits and cash flows. Increased 8. Overcome the limitations of domestic
cash flows will improve MSME attractiveness markets by promoting and fiscally
to local financiers. Admittedly, such reforms favouring export growth of MSMEs
may be more difficult in some countries than and by increasing the use of ICT
in others, partly because of the stringent fiscal “information access” mechanisms. An
circumstances in many Caribbean countries. excellent example of information access is T&T’s
“Made-in-TnT” portal, which promotes more
4. Increase the adoption of tax reforms than 400 products in 19 product categories
that shift the burden of taxation away online. Overall, both measures will increase
from direct taxes to indirect taxes and the growth and income generating prospects
deliberately lower the tax rates for MSMEs. This for MSMEs that would be operating in an
would improve MSME “formality” and reduce expanded global market place. This should
administrative inefficiency of the tax system improve the bankability of MSME projects to
generally. local financiers.
5. Introduce labour reforms that allow 9. Introduce regulatory reforms that

MSMEs to be more flexible in terms would allow AFIs and MFIs to take
of hiring and firing. Apart from taxation, deposits and offer an expanded range
this is the second most important reason why of financial products to their MSME
informality thrives in the Caribbean private clients. This would strengthen the AFIs and
sector. MFIs and allow them to be more creative on the
supply side of the Access to Finance equation.
6. Create stronger tax incentives to
increase financial intermediation 10. Increase the inclusiveness of Credit
and encourage MSMEs to seek out Unions in terms of affording them
alternative forms of investment funds access to SME financial programmes
(other than bank loans) via such mechanisms as DFI recipients, including funding, credit
as the Junior Stock Exchange in Jamaica. This guarantees and technical assistance in risk
would strengthen the Finance Life Cycle for management.
MSMEs.
11. Put in place legislation that would
7. Improve the enabling environment for allow each Caribbean country to adopt
access to credit by: 1) introducing Credit Mobile Banking solutions at every level
Bureaus in countries that still do not have within those societies. Like MPESA in Kenya,
them; 2) opening up credit bureau information this should contribute substantially to MSME
access to foreign financiers so that alternative productivity.
12. Examine the feasibility of establishing Therefore, there is limited scope for adopting
Mutual Guarantee Schemes in the larger financing initiatives on a regional basis, e.g.
Caribbean countries. As noted earlier in this a regional credit bureau, or a regional credit
study, such schemes have worked reasonably guarantee scheme. Also, when recent experiences
well in European countries that have a high of larger institutions like CLICO are considered, the
proportion of formal SMEs (e.g. Spain and history of regional financial integration has been
Italy). Accordingly, their potential viability should questionable, mainly because of the absence of
be examined in the Caribbean region. standardised regulatory requirements for such
institutions that are legislated at country level. This is
13. Create deliberate incentives to not to conclude that financial sector integration is not
encourage the informal sector to possible, since this has been achieved by the ECCB
formalise their businesses. One very clear in the OECS sub-region. But as regional experience
conclusion arising from the preceding analysis has demonstrated, Caribbean-wide regional
is the need to change the incentive structure/ integration is a much more complex challenge and
policy in favour of formality, increase training, is proceeding too slowly to warrant inclusion of a
and increase access to financing. Attractive similar recommendation in this study.
incentives through very good, well thought out
policy can make a significant difference. These Nevertheless, there is considerable scope for copying
include low cost and readily available ICT- over initiatives that have been tried and tested in one
designed or app-based training programmes or other BMCs. In that regard, the collaboration
and fiscal incentives to training providers to challenge is relatively simple. How can the region
develop more relevant courses aimed at MSMEs. establish an information-sharing mechanism whose
primary objective and purpose would be to increase
The preceding recommendations are mostly policy- the knowledge of policy makers with regard to the
based. The reason is that such an approach would development of financing options across the Region?
enable more comprehensive coverage in addressing Perhaps the most effective way to encourage
the “access to finance” challenge in the Caribbean. regional collaboration on improving access to
The first two recommendations (i.e. improving MSME finance is to establish a benchmarking system that
financial literacy and expanding Credit Guarantee allows the various countries to:
Schemes) are the ones that are likely to have the
greater impact on improving Access to Finance. 1. Compare their suite of financial products offered
to MSMEs;
2.6 Regional 2. Highlight institutional initiatives and strategies
Collaboration to being undertaken in each country to improve

MSME access to finance;
improve financing
3. Publish the Doing Business Rankings and Global
options Competitiveness Index ratings along with steps
being taken to address key “access to finance”
The challenge with attempting to establish regional reforms and the competitiveness challenge;
collaboration to improve financing options for
MSMEs is that each BMC’s financial system is 4. Highlight special programmes that have been
legally, and therefore operationally, independent of introduced in some countries to address the
the others. MSME financing challenge (e.g. Ignite and
Start Up Jamaica);
5. Provide examples of donor-funded programmes 2. Establish a benchmarking system on “Access to

that have supported supply side improvements Finance” for all countries that is updated at least
such as the MIF-funded Enterprise Risk once annually;
Management and Financing Programme
(ERMFP) aimed at adjusting Scotiabank’s SME 3. Copy over solutions already used by some
loan appraisal processes in Jamaica; countries to improving their Competitiveness
and access to finance;
6. Provide examples of legislative reforms used
to introduce new enabling environment 4. Replicate donor agency policies that have been
mechanisms aimed at improving MSME access effective in supporting reforms in the MSME
to finance in the region. and financial sectors (e.g. IDB and IMF reform-
inducing policies in Jamaica)
Examples include: a) Jamaica and Trinidad and
Tobago MSME Policies; b) the consolidation of the A benchmarking project would require the support
business registration system into a “Superform” in of country governments, leading private sector
Jamaica; c) the regulatory guidelines governing the agencies at country and regional levels (e.g. MSME
establishment of Junior Stock Exchanges in Jamaica and MFI Alliances, CAIC, the Caribbean Business
and Trinidad and Tobago; and d) the legislation Council, etc.), and the main development agencies
used to establish credit bureaus in both countries – involved in providing country-specific support in the
along with reforms aimed at upgrading the status of areas of competitiveness and MSME development.
insolvent firms in Jamaica and St. Kitts-Nevis.
Such a project would have to be designed by co-
Such an approach would allow countries in the
opting the BMCs to contribute to its objectives,
Region to:
purpose and scope, and to articulate its operating
agenda and performance targets. Most importantly,
1. Identify and propagate “good practices”
it would establish the basis for information-sharing
already being used in the Region by some
and regional collaboration on many MSME-related
countries;
development issues.
CHAPTER 3III
CHAPTER
regional
policy and regulatory
frameworks
CHAPTER 3: The study indicates several gaps and mismatches
REGIONAL POLICY
between best practice and the prevailing status
quo. Some of these are highlighted below in Table
AND REGULATORY 3.1. For example:

• Only Belize, Jamaica and Trinidad and
FRAMEWORKS Tobago have in place dedicated MSME policy
and regulatory frameworks and strategies;
• Whereas 4 of the 8 countries have MSME-
specific legislation in force, only Antigua’s was
less than 10 years old;
3.1 Gap Analysis • Jamaica’s Business Names Act dates back to
of the adequacy 1934 and St. Lucia’s Act was passed in 1998;
of the enabling It should be noted that even where policies and

framework strategies, acts and regulations exist, concerted
implementation –so necessary for realising the
enabling climate for a viable MSME sector
While successive governments have repeatedly – has generally not been pursued. Lack of
acknowledged the significant contribution of sustained political will; frequent changes in
MSMEs to social and economic development political administrations; and, above all, limited
over the past decades, MSME policy and programmatic resources voted in the national
regulatory frameworks and implementation remain budgets, account for this inertia.
unimpressive.
Belize appears to have been the exception to this
3.1.1 MSME Policy and Regulatory practice, as successive governments since 2000
Framework inadequacies have sought to address the ‘productivity dilemma’
through sustained investments in MSME financing
and technical assistance.
Table 3.1: The Policy, Legislative & Regulatory Framework for MSMEs and Supporting Lead
Institutions in 8 CDB Borrowing Member Countries
COUNTRY POLICY STRATEGY SECTOR ACT Lead TA AGENCY & FI
ANTIGUA & None None Small Business Development Act, Enterprise Development Unit/
BARBUDA No. 24 of 2007. Antigua and Barbuda Investment
Small Business Regulations, 2007; Agency (ABIA).
Investment Authority Act, No. 15 Finance: Development Bank
of 2006.
BARBADOS None None Small Business Development Act, Barbados Industrial Development
[January CAP 318C 2002 Corporation (BIDC).
2016 Draft] Fiscal Incentives Act (Amendments), Finance: Fund Access, Barbados
Sep. 1998. Central Bank
Table 3.1: The Policy, Legislative & Regulatory Framework for MSMEs and Supporting Lead
Institutions in 8 CDB Borrowing Member Countries cont’d.
COUNTRY POLICY STRATEGY SECTOR ACT Lead TA AGENCY & FI
BELIZE MSME Policy and Entrepreneurship Belize Trade and Investment BELTRAIDE/SBDC
Strategy, (March Strategy, July 2014 Development (BELTRAIDE) Services Finance: DFC, BEST.
2012 Report) Act - Cap 282, 2000. [Draft
MSME Development Act, March
2012].
GUYANA None None Small Business Act, No. 2 of 2004 Small Business Bureau,
Ministry of Business
Finance: Development Bank
JAMAICA MSME & MSME & Business Names Act (1934) Jamaica Business Development
Entrepreneur-ship Entrepreneurship Corporation (JBDC) & HEART Trust /
Policy, February Policy, February NTA.
2013 2013 Finance: Development Bank of
[14th Draft] Jamaica (DBJ).
ST. LUCIA None None Trade and Export Promotion Act Small Business Development Centre
Industrial Policy (TEPA) Act, No 16 of 2013. (former SEDU) launched 2014: MSEs.
January 30, Micro and Small Scale Business Commerce & Industry Department:
2001: focus Enterprises (Amendment) Act No. Medium size.
onmanufacturing 6 of 2009. Micro and Small Scale TEPA: Export-oriented.
Business Enterprises Act, Cap. Finance: Development Bank (SLDB)
13.19 (1998).
SURINAME None None None Suriname Business Centre (SBC) and

A Private Sector KKF: MSMEs.
Policy only Microenterprise Finance: Suri-Trust
TRINIDAD & Enterprise Ministry of Labour & None NEDCO: MSME development.
TOBAGO Development Policy, Small EXIM Bank finances Exports, ADB
September 2014. Microenterprise supports Agri-finance,
Strategic Plan 2011- NEDCO for Microfinance.
2015.
Source: BMC Ministries and other Public and Private Sector Institutions dealing with MSMEs.
3.1.2 Gaps in the Policy Framework 3. The Fiscal Incentives and Hotel Aid Ordinances
provide substantial incentives and concessions
The following gaps have been identified: to businesses; however, micro and small
enterprises (MSEs) are generally ineligible,
1. The Companies Acts are largely silent on the because they either do not satisfy the value-
needs of MSMEs for developmental support. added criteria or lack the resources to present
satisfactory investment plans.
2. Registration and de-registration of businesses
(names and companies) are deemed voluntary, 4. Customs laws provide for the conditional
at the discretion of the entrepreneur, in contrast exemption of duties. However, whereas farmers
to the French and Dutch-Speaking Caribbean, and Fisher folk generally enjoy such relief on
e.g. Suriname, Martinique, Guadeloupe, Sint imported inputs, benefits to MSEs −particularly
Maarten, Aruba or Curacao, where formal in the manufacturing and services sectors− are
registration is compulsory and membership of usually extended on a discretionary and ad-hoc
the Chamber of Commerce is automatic. basis, with Cabinet approval given only after
long delays and complicated procedures.
One notable exception is the Antigua and MSME sector during the past 10 years. Attempts
Barbuda Investment Authority (ABIA) whose are being made in Barbados and Jamaica to
performance has been rated ‘exceptional’ update their legislation.
by local stakeholders, thanks to regulations
entrenched in the ABIA Act. 9. In Belize, one of the more progressive
jurisdictions, the Policy and Strategy Report
5. While the removal of tax rebates on credit union (2012) observed that “there are eight (8)
shares has been accepted in Trinidad and major legislative measures providing fiscal and
Tobago, Barbados and St. Lucia, taxation on operational benefits to companies. There is none
their assets (via sunset legislation in Barbados) specific to MSMEs.” The Belize Companies
and on surpluses (hinted by the Government of Act, Chap 250 (Revised 2000) makes hardly
Grenada) should also be rescinded, if credit any reference to the peculiarities of small
unions are to invest significant financial and businesses. The BELTRAIDE Services Act, Cap
technological resources as partners with the 282, 2000 is vocal on trade, investment and
State – alongside the Development Banks/DFCs export development functions, but mentions
– in increasing access to serviceable credit by a “small business” only once, in respect of the
larger number of viable MSMEs. composition of the Board of the Council (Section
5).
6. The enactments for the various Bureaus of
Standards in the eight countries and their Therefore, it is evident that current policy and
attendant policies, still advocate voluntary regulatory frameworks do not encourage a culture
standards, a major drawback to economic of inclusion for all businesses, irrespective of size,
competitiveness. Adherence to quality sophistication or scope; nor do they recognise
standards is not enforceable in most industries. or provide adequately for the special needs and
The absence of legislation that obliges the value-added potential of MSMEs. Achieving
producer, processor and purveyor of tradable completeness in the design of the national
goods and services to be liable for any defects policy and regulatory frameworks is
or deficiencies has been explained away by therefore a major issue to be resolved.
firstly, the notion of allowing market forces
(including consumer choice) to dictate, and
secondly, the prohibitive costs of policing the 3.2 Review of
entities concerned. Regional best
7. Existing laws in all countries directly and/ practice Policy
or inadequately impact the development of
MSMEs. Yet, there is a marked absence of
and Regulatory
enabling legislation deliberately crafted to Frameworks
facilitate the expanded provision of technical
assistance, training, advocacy and other 3.2.1 Guyana Small Business Act, No. 2
sources of institutional support clearly necessary of 2004
for small and micro businesses to survive and
grow. The Act defines the sector, and provides for the
establishment and administration of a Small Business
8. With the exception of Antigua and Barbuda Council; a Small Business Bureau; and a Small
and St. Kitts-Nevis, no CDB BMC has legislated Business Fund. It commits government “to use its
fiscal and monetary benefits specifically for the best endeavours to ensure” that MSMEs procure at
least 20% of goods and services required annually Administrative Reform Agenda to the Minister,
by Government, similar to the 25% set aside by the who must present it to the National Assembly
Antigua and Barbuda Act. The Council is required within 60 days of receipt [Section 4].
to prepare and submit each year to the Minister a
Small Business Procurement Programme. However, Apart from covering the expenses of the Small
this benefit has only been recently highlighted by the Business Bureau, the resources of the Fund may be
new Guyana Government. used for supporting access to finance by MSMEs
−“non-financial services and assistance to help
The Act requires that 4 of the 11 members of the small businesses improve their productivity and
Council be representatives of the small business competitiveness,” and provide subsidies to BSOs,
sector and owners of enterprises in their own right NGOs and other organisations supporting the
[Section 3(1)]. This augurs well for inclusiveness. The sector [Section 7(1)]. Section 12 assures that “a
mandate and responsibilities of the Council are set small business shall be eligible for every applicable
out in Section 5. They include: fiscal incentive under the law”. Adherence to the
spirit and provisions of the Act and its attendant
1. Bringing issues that affect MSMEs to the attention Regulations would certainly impact favourably on
of government planners and policy makers; the performance of the Small Business Bureau and
2. Quarterly reporting to the Council on the other organisations providing services to the MSME
uptake of procurements and fiscal incentives by sector.
approved MSMEs;
3. Provision of current statistics on small businesses; 3.2.2 Belize Enabling Policy (2012) and
and Strategy (2014)
4. A register of all small businesses approved by
The Belize agenda seeks to improve the response
the Minister for funding, fiscal incentives and/or
capability and the capacity for institutional
technical assistance.
strengthening of MSMEs by:
While the latter two provisions speak to improving
1. Enhancing the entrepreneurship support
data collection, a major challenge and requirement
ecosystem;
for improved policy making, in order to improve
2. Promoting collaboration between the public and
the quality and flow of available MSME data to
private actors in the national entrepreneurship
all, there is a need for greater clarity in respect of
ecosystem;
the functional interface between the Small Business
3. Promoting entrepreneurial financial support
Bureau, the Registry of Companies and all other
through diverse non-refundable, promotion,
service provider organisations in Guyana.
warranty, fiscal and credit instruments;
4. Encouraging business creation; and
The accountability requirements for resources
5. Strengthening entrepreneurship training within
provided are extensive, when compared to the
the education system.
Barbados, Antigua and St. Lucia Acts. For example:
Belize’s policy identifies five pillars as vital for
• The Minister must receive the audited accounts
developing a strong entrepreneurial culture:
of the Development Fund; the performance
report of the Small Business Bureau and the 1. Education;
Fund; and updates on any other project within 2. Industry Support;
five months after the end of the financial year; 3. Financing Flows;
• The Council must also submit at the end of 4. Institutional Infrastructure; and
each financial year a Small Business Policy and 5. Mentality and Culture.
These are given emphasis in the Strategy, under four 3. It requires establishment of an MSME
headings: legislative and regulatory framework; Development Fund supported by an annual
increased flow of capital; market access and allocation of not less than US$0.5 mn by the
competiveness; and education and training. The Government of Belize; donations from local and
matrix below indicates the linkages between international institutions or foreign governments;
these focal points –as key performance indicators monies accruing to the fund from investment,
(KPIs), and the policy-regulatory framework. The loan or other income; loans and grants obtained
absence of a Small Business Development Act from national, bi-lateral and multilateral sources;
and regulations is the missing link in an otherwise and any other contributions.
enabling framework.
A Grant Scheme is to be established to issue
The major features of the Belize Policy, Strategy and grants to support investments in ICT; alternative
Strategic Plan (Table 3.2) are: energy; and certification to approved technical
standards. Financing must be accompanied
1. It offers customized incentives that can create by mentoring, hand-holding and counselling
business opportunities for serial entrepreneurs programmes delivered by BSOs, and
(multi company); retired entrepreneurs (with networking among micro enterprises.
vast experience); intra-cluster entrepreneurs;
young entrepreneurs (with talent); public 4. A portion of the MSME Development Fund is
employees and officers (retirement plan or extra to be set aside annually for equity and loan
income generation); and entrepreneurs without financing of approved MSME projects, based
experience (vulnerable population, facing on rules determined by the Council. Loans
extreme poverty). shall be made to enterprises operating in the
following sectors:
2. It recognises the need for different approaches
in serving micro-enterprises, which operate a. Agriculture, including fishing;
largely in the informal sector and need extensive b. Agro-processing;
education, mentoring and coaching, and SMEs, c. Manufacturing, including forestry;
which tend to be more organised and have a d. Tourism and related services;
greater need for capital. e. Repair and maintenance;
f. Information and Communication
Technology (ICT); and
g. Crafts and Cottage industries.
Table 3.2: Policy, Strategy and Regulatory Framework – Belize
Source: Source: Belize MSME Policy and Strategy (2014)
5. A matching legislative framework, driven by an The turnaround time for microfinance

MSME Development Act, that will stimulate and approvals should not be more than three
sustain the sector by: days.
a. Defining an MSME and establishing
guidelines for development and regulation of 6. Business development services are to aid in the
the sector; improvement of entrepreneurship knowledge,
b. Creating an MSME Policy and Strategy acquisition of business skills and access to
implementation organ to be called the “Belize technical assistance. Inclusion of entrepreneurship
Agency for the Development of Enterprise in primary and secondary education and training
(ADE)”; of university students in business management is
c. Introducing an MSME category in the intended to improve the relevance of the education
national accounts so that data on the sector curriculum.
can be collected and disseminated;
d. Providing an array of fiscal incentives 7. In addition to increasing information sharing
specifically for MSMEs; and and promoting ICT penetration among MSMEs,
e. Reducing the bureaucracy and paperwork successful and innovative entrepreneurs will be
in accessing credit so that microcredit showcased in mass and social media as role
applications should not exceed one page. models.
Table 3.3: Strategic Initiatives – Belize
SUMMARY OF STRATEGIC INITIATIVES: BELIZE

Name of Objective Strategy Strategy Description
the Pillar
Support To strengthen the Incubation Programs To create and strengthen institutions that develops
Industry entrepreneurial support business incubation processes.
industry. Innovation Labs To promote innovation through supporting spaces that
favors the strengthening of innovative entrepreneurship
(innovation labs).
Financing To promote the development Seed Capital To create and strengthen financial vehicles such as
of the entrepreneurs seed capital, pre-seed capital, entrepreneurship
financing chain for microcredit.
entrepreneurs with diverse
non-refundable, promotion, To create a regulatory framework to ease and promote
Tax Incentives
guarantees, and tax credit the creation of financial instruments, guarantees and
instruments. tax exemptions for entrepreneurs.
Institutional To promote spaces for Strengthening Creation and strengthening of an entrepreneurship

Articulation collective action between National network through technical committees that design and
public and private Entrepreneurial consolidate the National Entrepreneurship Policy.
actors in the national Networks
entrepreneurship ecosystem.
To develop a platform in the cloud that facilitates the
Joint Structure
communication between the actors of the ecosystems
Ecosystem
and the entrepreneurs.
Mentality To Encourage Disseminate To create spaces and methodologies to inform and
and Culture entrepreneurial thinking entrepreneurial inspire the people on successful business stories.
in citizens to stimulate the success Stories
creation of new firms. Nationally
Media Campaigns To use the media in order to promote the importance of

entrepreneurship.
Education To strengthen the Transfer of

To implement models, methodologies and tools to
System entrepreneurship as a cross Entrepreneurship
foster entrepreneurship in primary and secondary
axis in the education system. Model to primary and
education.
secondary education
Training for Trainers To develop training and coaching programs for

trainers training.
Source: BELTRAIDE, CENPROMYPE- NEXUS, 2014.
8. Finally, the proposed ADE –as a statutory or at The Belize approach to regulatory and policy
least a semi-autonomous body under the Ministry modernisation is particularly outstanding for the
of Trade, Commerce and Industry– will play importance it attaches to entrepreneurial education
the lead role in implementation of the policy, both in the primary and secondary school system,
legislation, strategy and strategic plan. As a vital and as a key ingredient of the programmes aimed
support institution, it is expected to be adequately at existing and hopeful business owners and
resourced by Central Government and would not operators. Any policy, strategy or law is only as
become self-financing at the expense of the sector. sound, however, as the capacity of the apparatus
put in place for its implementation.
Table 3.3 above illustrates how the five pillars are
articulated across the policy objectives, strategy and A direct result of Belize’s MSME Policy and Strategy
strategic description in the current Belize agenda for has been the emergence of the Small Business
MSME development. Development Centre (SBDC), which has been pivotal
in promoting business awareness and providing 4. Inclusion of entrepreneurship education in all

training and mentorship to entrepreneurs across the institutions and at all levels; and
country. Deliberate strengthening of the SBDC as a
full-fledged quadrant within the BELTRAIDE complex, 5. Establishing standards for certification and
alongside EXPORTBelize, BelizeINVEST and accreditation.
BTEC, will strengthen Belize’s progress to become
a best practice jurisdiction for enabling MSME Like Belize’s BELTRAIDE, Jamaica’s MIIC is seeking
competitiveness and growth. to foster a deep-seated Culture of Entrepreneurship
and Innovation across Jamaica as a platform for
transforming the economy. The introduction of
3.2.3 Jamaica MSME Policy and entrepreneurship in the curricula of all primary,
Strategy (2013) secondary and tertiary institutions is a game-
changing strategy. Knowledge and skills transfers
The Micro, Small and Medium Enterprise and are contemplated in such subjects as Business
Entrepreneurship Policy, produced in May 2013 by Planning, Cash Flow Projections, Management,
the Ministry of Industry, Investment and Commerce Bookkeeping, Marketing and Customer Service.
(MIIC) following extensive consultation and research, The Strategy caters for the creation of an online
provides a good example of an attempt to develop directory of available technical assistance and
a comprehensive legal and policy framework training resources - including consulting firms, tertiary
for MSME development. It is presented as “the institutions and BSOs - on an MSME business news
intervention framework that offers coordinated, web portal, another vital construct for capacity
coherent and targeted support to the sector in an building. A structured Mentorship Programme
effort to expand its contribution”. Unlike the Belize seeks to utilise entrepreneurs, senior executives and
Policy, it highlights the need to lead the process business professionals with proven track records in
of internationalizing the sector by strengthening their fields, to volunteer as mentors, supported by
Jamaica’s bilateral, regional and international facilities for online business counselling.
economic and trade relations and the promotion
of local and foreign investments in certain areas. The policy gives special focus to the creative industries
It combines a timeless policy statement and a time- (film, music, animation, fashion, etc.) which are seen
bound implementation strategy. as possessing strong linkages with various sectors
of the economy and having the potential to create
Its goals are very specific and far-reaching: wealth for a wide range of MSMEs. Their export
potential is also substantial, as acknowledged
1. A strong focus on this sector as a key part of by respondents from the OECS Commission and
Jamaica’s vision to go global and become a Barbados.
developed nation;
The Jamaica Policy also acknowledges the lack
2. Increasing capacity building and business of supply of “adequate and serviceable credit”
awareness around available support and from financial institutions and the limited options
resources for MSMEs (e.g. an online database, available to small businesses. The strategies, similar
expanded technical assistance and mentorship); to those distilled in Table 3.4 below, place emphasis
on recognizing non-traditional collaterals such
3. Special focus on creative industries which are as inventory, accounts receivable and intellectual
less explored but growing and full of potential property.
(e.g. fashion, music, animation);
Table 3.4: Jamaica MSME Policy Objectives and Strategic Actions
MSME POLICY OBJECTIVE SUBORDINATE STRATEGIC ACTIONS
Encourage business formalization in the MSME Encourage the formation of business clusters as a means of
sector. developing the MSME Sector.
Create an enabling institutional and legislative Enact new enabling MSME legislation with supportive tax and other
framework to aid the development of creative incentives and coordinate & strengthen the key public and private
enterprises. sector institutions.
Increase the market share for goods and services Increase the competitiveness and market access of goods and
produced by MSMEs. services produced by MSMEs through standards, certification and
accreditation.
Increase the level of technical skills/capacities in the Implement a structured Mentorship Programme for the sector.
MSME sector. Increase the marketing and communication skills of MSMEs. Assist
viable MSMEs experiencing losses or insolvency to restructure.
Provide on-going informational support to MSMEs.
Build an internationally competitive labour force that Implement standards and competency-based training and certification
will bolster productivity performance. for workers and owners in target industries. Promote greater use of
the Internet/ICT and of energy efficient practices among MSMEs.
Foster innovation among MSMEs through greater Foster a culture of innovation through more productive use of science
supply of and demand for ICT products and services. and technology and R&D among MSMEs.
Source: Distilled from The Jamaica Micro, Small and Medium Entrepreneurship Policy (2013).
Cross-cutting issues addressed by the Policy include: The Jamaica Policy and Strategy document goes
beyond the parameters set by the Belize instruments
1. Collaboration among Governments, by defining specific measurable outputs to underpin
associations representing MSMEs, and trade its KPIs; ten of these are as follows:
associations, to foster greater social capital
among MSMEs through various programmes; 1. Increase the number of formally registered
2. Special emphasis on the attainment of equality MSMEs by 10% each year;
of opportunity between men and women in the 2. Improve the technical skills of 100 MSMEs per
development of all spheres in which MSMEs annum;
operate; 3. Reduce the processing time for business
3. Youths, rural communities and persons with registration by 60% by 2015;
disabilities are also given special attention 4. Increase the number of MSMEs securing loans
through a number of proposed strategies by 20% by 2020;
to promote and increase the level of self- 5. Increase the number of MSMEs utilizing ICTs by
employment via entrepreneurial activities; 30% by 2020;
4. Strategies to protect the environment; and 6. Increase the number of MSMEs utilizing R&D in
5. Collection and dissemination of reliable data their business operations by 75% by 2025;
and information on MSMEs. 7. Introduce Entrepreneurship in the curricula of all
primary, secondary and technical institutions by
For good planning and effective tracking of 2020;
quantitative and qualitative results, Key Performance 8. Ensure Jamaican firms are innovative and
Indicators (KPIs) like Critical Success Factors are a competitive by 2030;
very important policy and management tool that 9. Promote and secure equity and equality of
should become standard fare in use by MSME opportunity which enable women-owned
development practitioners. and family-owned businesses to be effective
economic actors in the MSME sector; and
10. Promote and secure equality of opportunities MSME sector by international standards, so that it
among MSMEs. can contribute to the creation of quality employment,
and improve the quality and range of goods and
For completeness, an Evaluation and Monitoring services available to domestic and overseas
Methodology is built into the planning and markets. The new policy direction must be driven
implementation processes required by Jamaica’s by a collective vision of the future inspired by a
comprehensive roadmap for transforming the new paradigm and framework for the
enabling eco-system for MSMEs. Delivery of the sustainable growth of globally competitive
policy, strategy and planned outputs as summarised MSMEs in various industries across the
above is entrusted to the Jamaica Business region. The core objectives of this Common
Development Corporation (JBDC) which will lead Enabling Policy and Regulatory Agenda for MSMEs
the training of MSMEs, with support from other key in the Caribbean Region are noted below.
entities such as the national training agency (HEART
Trust/NTA). 3.3.2 Innovation
Policy and financial support for innovation is

3.3 Further generally not available to MSMEs. UNESCO notes
that agencies dedicated to science, technology and
Enhancing MSME innovation are lacking in Antigua and Barbuda,
Frameworks in the Belize, Dominica, Grenada, St. Kitts and Nevis, St.
Lucia and Suriname: “Given the small size of many
Caribbean Caribbean economies, a regional innovation system
could prove an effective solution”. The Economist
Based on the foregoing analysis, it is clear that an Intelligence Unit observes likewise: “…coordination
imaginatively designed, robust and multi-pronged between business, academia and government is
MSME Policy and Regulatory Framework is an essential, but government funding for innovation
urgent necessity if governments are to become more policy is generally low in the Caribbean, and thus
effective in developing and sustaining MSME sector most innovation and competitiveness strategies are
growth. However, in addition to the formulation funded by international donors. Ideally funding
of the appropriate frameworks to incentivise the should come from the private sector which is more
establishment and growth of MSMEs, it is very clear efficient in stimulating applicable innovation.”25
that, given the very difficult economic challenges Imperatives for Caribbean innovation are detailed
facing Caribbean economies, there is need to in Chapter 5, but they are woven into each of the
enable refocusing of the sector towards greater recommendations below.
competitiveness though increased productivity and
innovation. 3.3.3. Improving Worker Productivity
3.3.1 Vision 2025 An enlightened, skilled and motivated workforce

is another major theme that should underpin the
The consensus vision for a business-friendly new Policy and Regulatory framework. Hands-on
environment must be premised on the overriding training and in-factory counselling are vital support
priority of developing and growing a competitive
25
Source: Economist Intelligence Unit, Private Sector Development in the Caribbean - A Regional Overview, 2014.
services required by MSMEs, especially those Another medium-sized business is planning to

producing for international markets. More detailed equip its mobile sales team with the capacity to
recommendations on improving productivity complete application forms on mobile devices
are presented under the ICT and R&D policy instead of using paper; this facilitates automatic
recommendations below. information capture and faster processing.
Other useful app types include accounting (e.g.
3.3.4 Increasing the use of Information QuickBooks), sales tracking (e.g. salesforce).
and Communication Technology • Training on how to use these apps is important
(ICT) among MSMEs so that business owners have a chance to learn
best practices.
A critical path to strengthening productivity and • Through regional public-private partnerships, ICT
extending market access lies in increased ICT incubators should be established that encourage
penetration. the development of ‘home-grown’ apps made
especially for Caribbean businesses.
Priority initiatives are: • The Caribbean should also explore crowd
1. Provision of ICT training opportunities for MSME funding/kick starter funding specifically for ICT-
workers and owners; enabled innovation.
2. Enhancement of the legal and regulatory • Use of card machines can improve growth of
frameworks for telecommunications sector MSME sales. However, MSEs may need support
development; from governments, their trade associations and
3. Establishment of an independent and capable financial institutions in expanding the use of
oversight entity for ICT sector development to portable point of sale and card machines.
ensure the maintenance of competitiveness in • A Universal Hub is desirable and the technical
the industry and enhanced consumer access; knowledge, support structure and connectivity
4. Provision of adequate ICT infrastructure especially to create such a hub. However, there is need
with regard to broadband development; for persons to administer the roll out; manage
5. Expansion of ICT education in schools. the operations; and commit to supporting it (i.e.
trainers, lecturers and sponsors). Training would
The following recommendations were offered by be a very key part of this offering and online
Regional Executives of the Telecommunications training videos/self-paced learning would be a
industry: great option for MSMEs.
• Social media should be exploited and
• MSMEs have to take internet access more businesses should receive hands-on training on
seriously. Smaller businesses tend to opt for the social media best suited for their business
the lower speed/more affordable internet type. Many options exist (e.g. Facebook,
packages, which limit their ability to exploit the Instagram, Pinterest, Reddit and Tumblr). More
available technologies. Caribbean MSMEs should also be exposed
• The mobile platform along with business to migrating from operating as “bricks and
applications (apps) is also widely available but mortar” institutions to online businesses, thereby
small businesses use their smartphones mainly reducing overheads while broadening their
for calls and messaging as opposed to using client outreach.
them for business operations. Good practice
examples include a small recruiting agency in In addition to global successes cited in Chapter 2
Jamaica that uses an app to capture business (e.g. the EXIM Bank’s “Made in TnT’ web portal),
card information via the phone that feeds these recommendations strengthen the case for
straight into its database. replicating the policy instruments already initiated
by the Jamaica MSME Policy (discussed in sub- Closer integration with the national TVET programmes
section 3.4.3 above). Establishing the regional will result in expansion of CVQ awards, in sync with
online university, technical resource directory and the demand by industries for well-trained, skilled
information/news web portal will bring major workers. As a result, it is anticipated that the brightest
benefits to traditional MSMEs (e.g. farmers, fishers, minds will be exposed to the rudiments of business
retailers and manufacturers) as well as to the non- and technology. The design of a public policy for
traditional services and creative industries. entrepreneurial education integrated into every level
of the educational system is a major policy and
3.3.5 Growing the Entrepreneurship strategic shift that will boost emergence of a business
Culture through Education Reform culture, productivity and competitiveness within the
Caribbean.
A new policy directive that inculcates
greater ICT usage, financial literacy and 3.3.6 Trade Policy
entrepreneur knowledge content into the
kindergarten, primary and secondary Given the openness of Caribbean economies,
school curricula is overdue. BMC efforts to grow intra-regional trade must be
accompanied by efforts to also expand trade into
The ILO has developed a training package to teach internationally competitive goods and services
entrepreneurship in vocational, secondary and markets. Trade policy priorities that will bring value
tertiary schools, now used in 56 countries of which to MSMEs include removal of inefficiencies in the
18 have integrated Know About Business (KAB) into system, building national and regional capacities
their national curricula. This follows the introduction and establishing harmonised and common
of a new curriculum called startUP&go to more than regulatory frameworks.
60 secondary schools in South Africa, designed to
foster entrepreneurial attitudes and competencies. Specific objectives must be:
Subsequent assessments show that “learners taking • Increasing market access by maximising usage
the classes seem to be more interested in starting of current opportunities such as those in Canada
their own business after graduating from schools (a and Europe; by negotiating new arrangements
statistically significant increase of 4% as compared to to new markets in emerging economies; and
the control group)”26. by assessing and addressing the constraints to
future trading arrangements.
It is recommended that the new Entrepreneurial • Developing mechanisms for facilitating business
Studies syllabus include modules on ICT, Financial and trade, including improving transportation.
Literacy, Marketing, Management, Accounting This demands supporting and facilitating
and Innovation. The shift to Business Management achievement of the single economic space
should address the skills gaps in Tourism and through the removal of the physical, technical,
Hospitality, Agricultural Science, Financial Services administrative and fiscal barriers to the
and Co-operatives at the supervisory, technical and movement of goods; enhancing trade and
managerial levels. Renewed emphasis on attracting transport-related infrastructure and services; and
more students to the vocational trades is also vital in other trade enhancing initiatives.
view of the shortage of these skills. • Building capacity in the productive sectors
points to the continuing need to overcome
26
Ibid.
the significant human resource and technical 6. Annual report to the Minister responsible for
challenges that limit BMCs’ responsiveness and MSME development on the performance of
pace of implementation of their obligations the Sector;
under existing trade arrangements such as the
CARICOM-EU Economic Partnership Agreement 7. Minimising bureaucracy by establishing
(EPA). a division within the central government
Ministry to address the specific needs of
3.3.7 MSME Model Policy MSMEs, including use of the Business
‘Superform’.
Given the significant gaps in MSME policy and
(ii) MSME Capacity Building
regulatory frameworks noted above, it is useful to
1. Enhanced Capacity building by facilitating
at least identify the essential elements of a regional
increased access by more entrepreneurs
comprehensive policy and regulatory framework.
(especially women and youths) to online,
These essential elements, while not necessarily
web-based and other entrepreneurship
exhaustive, are presented below:
courses and hands-on technical assistance
(i) Roles of Key Institutions in key subject areas (as listed earlier), but
1. Definition of MSMEs and the classifications with a greater role being played by private
by size, as set by the Policy; sector expertise and BSOs;
2. Entrepreneurship training should be

2. Identification of the different public (for
provided throughout the formal Education
example, identification of a Single Ministry
System, with ICT- based training maximised
as the focal point for MSME development),
to ramp up learning in schools and in adult
private, non-state institutions involved in
education/training for MSMEs workers.
MSME growth and development, and
Amendments or revisions to the Education
clarification of the roles of each;
Act to ensure closer linkages between the
3. Provisions to ensure that representatives goals of academia and the needs of the
of the MSME sector are included in the national and regional labour markets,
appointments by the Minister to the Board including MSMEs’ labour requirements;
of Directors and Advisory Committees on
3. Minimum certification/training/capacity
Enterprise Development, Productivity and
building accomplishments should be
Economic Competitiveness;
prerequisites for accessing Government-
4. Clear formulation of the role of the supported BDS. For example, Action Coach
Companies Registry, its mandate, is a small, Barbados-based consulting
functions and essential data requirements; company that offers short intensive training
clarification of relationship with the Statistics for small businesses via an Australian
Department, the National Insurance/Social franchise;
Security Corporation, and the Research and
4. Provision of assistance to more MSMEs
Development Units of the lead government
to improve the quality of their statements
agencies and of the BSOs;
of financial position, cash flow, capital
5. Enforcement of compulsory registration for adequacy, proposal writing and
all businesses operating in any country, managerial training in order to satisfy the
irrespective of age, sector or size; objective requirements for commercial bank
financing;
5. Quality assurance standards entrenched in effective delivery of needed services

the Bureau of Standards legislation making including business training, research and
compliance with food safety, manufacturing, development at lower per capita costs; and
etc., obligatory and no longer voluntary.
3. Access to online training.
(iii) Access to Finance
1. Facilitating increased access to credit (v) Fiscal Incentives
unions and identified MFIs as affordable 1. Establish the objective criteria for accessing
but sustainable, indigenous sources of Fiscal Incentives e.g. tax holidays, duty
finance, recognising the unsustainability free imports, exemptions from the VAT and
of 30 year-old models e.g. retail lending company tax;
by government banks, ministries and
corporations; low/subsidised interest rates 2. Listing of specific export goods and
on loans to MSMEs; services targeted for expansion such as
creative industries; ICT exports; specific
2. Enable increased access by MSMEs and agriculture products with clear presentation
MFIs to an improved financial services of the appropriate supporting initiatives and
system, by including an Electronic Registry incentives for expansion;
for Moveable Collateral, a Credit Bureau
and a Junior Stock Exchange; 3. Fiscal incentives that support export growth,
foreign exchange earnings and increased
3. Strengthen and activate innovative technology usage by MSMEs;
financing models that can reach at least
25% of all registered MSMEs, grow 4. A reduction in taxes to ease working capital
surpluses and achieve capital adequacy constraints for businesses, and stimulate
and sustainability; demand among consumers. Many of these
measures are applicable to enterprises of
4. Set out specific guidelines for the all sizes but can be particularly beneficial to
disbursement of relief, seed, angel and MSMEs.
other grants to enterprises; and
(vi) Monitoring and Evaluation
5. Implement mechanisms that minimise the 1. Inclusion of a robust KPI based Evaluation
risks to financial institutions that provide and Monitoring System for MSME
credit to MSMEs, by removing the legal programmes;
and bureaucratic constraints affecting the .
smooth enforceability of debt contracts. 2. Reporting to the Minister of the core
Ministry on the output/outcome results
(iv) Infrastructural Support Services per the KPIs for MSME development
1. Institutional strengthening of infrastructural at the three tiers of implementation: (i)
support service organisations (e.g. business productivity and quality enhancements;
support centres, incubators & ICT Parks); job creation and contribution to GDP (First
Floor); (ii) strengthening the efficiency and
2. Institutional strengthening of specific BSOs effectiveness of intermediary organisations –
registered with the Ministry, including BSOs, financial intermediaries etc. (Second
consolidation of some entities and Floor); and (iii) impact of the policy and
revised mandates for others to achieve regulatory initiatives (Third Floor).
3. Inclusion of risk analysis and management Finally, whereas each policy must reflect regional and
strategies which identify important risks international best practices, it must also be crafted to
to Policy implementation (e.g. lack of be responsive to the needs of the sector and the actual
commitment, inadequate skills and business environment in each country. The new Act
knowledge, financial constraints, economic and the Regulations should be passed into law early,
downturn, etc.) and offer mitigation avoiding the typical lags and delays associated with
approaches. the legal drafting and review processes.
CHAPTER 4:
ADEQUACY
OF THE INSTITUTIONAL
SUPPORT
FRAMEWORK
However, only in Barbados and Trinidad and

CHAPTER 4: Tobago has the MSME sector been assigned
as a distinct portfolio to a Cabinet minister. It is
ADEQUACY OF THE recommended that one Ministry be given the
INSTITUTIONAL overarching responsibility for the development

and expansion of the Private Sector, inclusive of
SUPPORT MSMEs. This portfolio should envision a single
Ministry, mandated to serve as the focal point and
FRAMEWORK central hub for implementing the national strategy
and action plans, thereby increasing MSME
productivity, creating jobs and growing incomes.
This Ministry should collaborate effectively with
all private sector players; become the exemplar
Having outlined the importance of a comprehensive
for business-friendly service; facilitation and
and robust enabling regulatory and policy
supervision; and stimulate closer co-operation
climate for the growth of MSMEs (i.e. the “Third
among the various public sector agencies.
Floor”), it is necessary to assess the adequacy
and scope for modernisation of the state and non-
4.1.2 State-run BDS providers
state organisations that service the growth and
developmental needs and demands of the MSMEs
Interviews with MSME stakeholders during the in-
(“Second Floor”).
country visits and their observations of the public
sector agencies providing business development
Overall, there are several agencies per country
services to the sector generated several perspectives
providing critical support services to the MSME
on the need for reorganisation and strengthening,
sub-sector, with very limited financial and personnel
as follows:
resources and hence severe capacity constraints.
Additionally, there is considerable duplication of
1. The “one stop agency” promised by most
roles, replication of programmes, protection of
governments since the 1990s has not
“turf”, with evident variances in delivery capability
materialised. Most MSME operatives continue
and sustainability. The analysis below focuses on
to find it difficult to access user-friendly
both the public and private institutional support
information; are often unclear as to “whom to
frameworks.
approach for what;” and have to contend with
time-consuming processes and forms resulting
in loss of business hours and productivity. A
4.1 Public Sector minority of regular clients, who are accorded
institutional priority status within the available resources, or

who “know the ropes”, benefit from training,
framework coaching, promotion and/or advice offered by
different entities.
4.1.1 Governing Ministry 2. Whereas business owners and prospective

entrepreneurs are usually directed to the lead
A strong central ministry is a key coordinating state agency for MSME development assistance,
factor leading the governance of the MSME eco- the extent to which the latter is resourced is a
system towards competitive growth and expansion. function of the national priority accorded to this
sector; ministerial influence in securing annual the MSME Policy approved by Cabinet
budgetary support; and the agency’s success and cleared through Parliament. It employs
in mobilising complementary external funding. 105–120 Business Development Officers
Across the BMCs under review, variations were who perform business model appraisals;
noted in their range of service offerings; internal guide entrepreneurs to formalize their
systems; staffing and sphere of operations/ businesses; and help businesses to get
reach: through required regulatory processes. Its
a. The National Enterprise incubator system accommodates resident
Development Corporation (NEDCO), and non-resident businesses.
Trinidad and Tobago, operates
a network of 11 entrepreneurship JBDC partners with banks and large
development centres country-wide, including companies to leverage financial and
Diego Martin, Arima, San Fernando, Point technical assistance resources, including
Fortin and Tobago. It has a fully staffed accessing the Development Bank’s (DBJ)
Corporate Business Unit in St. Augustine “Ignite” Programme which provides grant
that performs Research and Development funding of up to JD4 mn28 per client on a call
functions, and also targets business services for proposals basis by registered businesses
to students at the University of the West under 4 years old and undertaking
Indies and the University of Trinidad and innovation projects across all sectors. It
Tobago. NEDCO has been effective in also teaches business plan development
providing start-ups with coaching sessions, throughout the rural parishes, using a
and has been delivering entrepreneur and Mobile Clinic; and engages consultants to
business management training, counselling upgrade business plans; package products;
and technical assistance to thousands of or conduct market surveys. However, by
existing entities by combining in-house JBDC’s analysis, 80% of the businesses
coordinators and technical staff with a roster in the parishes have never done a
of subject specialists on-call. It also operates business plan and only 14% have
a National Integrated Business Incubation business bank accounts, indicating
System (IBIS). Its small grants and loans that there is possibly a substantial
(ranging from TT$50,000 to $250,00027) capacity deficit on the part of JBDC
facility has been highly subscribed for and/or a lack of awareness on the
more than 15 years. With the economic part of potential beneficiaries. This
downturn, government funding has been alarming statistic triggered a Ministerial
significantly reduced and the corporation Task Force which assessed the financing
has no experience in mobilising or system for MSMEs in Jamaica.
managing donor funds, having been 100%
government funded since its inception. c. SBDC-BELTRAIDE, Belize employs five
members of staff to service huge demands
b. The Jamaica Business Development from over 30,000 registered and informal
Corporation (JBDC) leads MSME micro and small enterprises (MSEs) over
development on Government’s behalf, and vast terrain. The Unit is effectively led;
is mandated to articulate and implement proactive in using ICT and social media;
27
US$1 = TT$6.30 | 28
US$1 = J$120
and strong on partnering, networking with to help businesses become globally

financial institutions; proposal writing; and competitive by providing long-term
management of donor projects. As in the consulting, training, financing and
case of JBDC, there are clearly substantial market research solutions that create
capacity deficits in serving the needs of the real economic impact.”29
MSME sector. If given additional institutional
resources, the SBDC will be able to reach However, the latter two
a larger clientele through accelerated agencies experience regular
implementation of the deliverables in its shortfalls in programme
approved MSME Policy and Strategy. funding, while SBDC staffing
is admittedly inadequate. A
d. In St. Lucia, a somewhat different model recent consultancy recommended
is at work as compared with Jamaica and that SBDC should be merged with the
Belize. Three principal agencies serving more proactive TEPA. However, this
designated segments of the MSME sector in itself would be inadequate to meet
report to the Ministry of Commerce, the needs of the MSME sector in the
Business Development, Investment and absence of adequate human and
Consumer Affairs: financial resources.
• The Trade and Exports Agency (TEPA) e. The Enterprise Development Unit (EDU)
provides development support to of Antigua and Barbuda’s Investment
exporters, export-ready firms and Authority has been viewed as a model
potential exporters. It also administers agency for business development in
grants to approved businesses; the OECS sub-region. However, since
• The Commerce and Industry the change of administration in June
Department assists medium-sized firms 2014, the ABIA’s role and operations
especially in the manufacturing and have been lessened, and enterprise
services sectors with on-site advice, development grant funds are being
facilitation for concessions and other channelled through the Ministry of
off-site support. Finance.
• The SBDC (known as SEDU up to
Table 4.3 below indicates that in each of the eight
November 2014) is the GOSL’s lead
BMCs at least one lead government agency is in
agency for business development
place with the mandate to implement the policy
knowledge and expertise. It offers
direction and related legislation; promote the use of
“a more holistic approach to the
fiscal incentives; disseminate needed information;
development of the Micro and
and extend development services to the MSME
Small Enterprise (MSE) sector in St.
sector, including training, coaching and mentoring.
Lucia, with the core mission being
29
www.commerce.gov.le/
Table 4.1: Eight CDB BMCs - MSME Enabling Policy and Institutions Matrix
Source: BMC Ministries and other public and private sector institutions serving MSMEs
As a result of successes in Central and South Four private operators entered into contract with the
America, The Organisation of American States RDB to manage all 30 district BDCs as follows:
is providing technical assistance to Barbados,
Jamaica, Guyana and St. Lucia in strengthening • Africa Development Consultants (ADC): Eastern
harmonised adoption of its Small Business Province and Kigali City;
Development Corporation (SBDC) model. • Rwanda Telecenter Network (RTN): Northern
Province;
3. Notwithstanding the potential dislocation in • Agence de Fiscalité, Comptabilité et Courtage
institutional arrangements triggered by changes (AFICCO): Southern Province
in political administrations, indications are that • Business Development Fund (BDF): Western
most governments will continue to work with Province.
the MSME sector through one department
or corporation designated as the national The developmental services provided by the district
lead agency for non-financial enterprise BDCs include, but are not limited to:
development. This has proven to be more
efficient in utilising scarce public sector resources • Entrepreneurial Development – training
than multiple channels serving MSMEs with entrepreneurs to develop essential skills for
overlapping interests. However, in most cases, professional development; this helps participants
there is clearly a need for significant ramping to identify, develop and implement business
up of human, financial and technical resources ideas.
within public sector BSOs in order to accelerate • Business Registration –encouraging commercial
MSME sector growth and development. In registration for companies to reduce informality
other words, there is urgent need for substantial and facilitate closer rapport with the business
institutional strengthening. community by start-up businesses. This service
is already in place in eight Centres and will be
4.1.3 Rwanda State Agencies extended to others.
• Skills Training, Business Advice and Counselling
The Rwanda Development Board (RDB), the lead form an important part of daily BDC activities.
BSO, has embarked on a highly transformative Participants vary from new entrepreneurs with
process particularly with respect to regional minimum skills needing general assistance to
institutional capacity building, enhancing the established businesses to skilled operators in
efficiency and effectiveness of government support need of specialised knowledge or a specific
institutions in the provision of business services, and intervention.30
is potentially an example of substantial relevance to
the Region. In 2011, RDB took a strategic decision Replication of the foregoing business services model
to involve private operators in the management of and the delivery structure from post-conflict Rwanda
its Business Development Centres (BDC), utilizing potentially can make a positive and significant
a private-public-partnership (PPP) model, whereby difference in expanding the capacity and reach of
Government retains ownership of the BDCs’ assets, state agencies and BSOs in the Caribbean.
and the private operator assumes responsibility for
all expenditures.
30
http://www.rdb.rw/departments/export-development-and-business/business-development-centre.html
4.1.4 Decentralised Government

Support via PPP ISRAEL
4.2
Recommendations
Another example worthy of note is that of The Israel
Small and Medium Enterprises Authority (ISMEA), 4.2.1 Recommendations – State
which was created in 1993 as a partnership between Agencies
Government ministries, economic organisations and
the public. Its main objectives and functions are: 1. The core role of the Government lead agencies
should be to coordinate the work of the various
• To promote and implement policies that agencies, and establish funds and other
encourage small and medium-sized businesses financial instruments to assist the MSMEs.
and to create tools for assisting them;
• To coordinate all of the institutions and bodies 2. Mindful of the size and continuing growth of the
engaged in encouraging small and medium- informal sector and building on the successes
sized businesses; already achieved, it is recommended that the
• To establish local, regional and professional lead agency in each country:
support centres for entrepreneurs and • strengthen its capacity to plan, coordinate
businessmen and to support and guide them in and evaluate implementation of an
their activities; and increased flow of development initiatives to
• To promote the establishment of funds and other the sector;
financial instruments to assist these businesses. • collect data/information on critical MSME
indicators (number of enterprises in each
Programmes and initiatives established by subsector; age of enterprises; number
Government include: of enterprises leaving and entering a
• 26 Business Development Centres with 10 particular sector; Profitability; Cash Flow;
Branches operating country-wide, created Debt; annual revenue; access to business
through the SBA; training, access to finance, number of
• The Israel Export Institute which operates a persons employed, markets to which
support centre for small and start-up exporters to goods and or services sold (domestic and/
increase sales volumes in international markets; or external)) etc. Collection of necessary
• The Nitsos Programme which focuses on MSME data is an absolute requirement for
creative growth management and operates improved policy, regulatory formulation
facilities employing 10−250 workers; and and the construction of appropriate
• The Governmental Loan Guarantee Fund to institutional infrastructure. The provision
assist small businesses through the reinvestment of such information annually should be
of capital and new investments. tied to incentives (tax incentives, access
to government contracts, etc.) in order
In addition to the provision of advice and training accelerate formalisation of the sector;
through Development Centres, ISMEA provides • establish an automated database and
courses and workshops especially designed for new management information system, with
businesses. at least one competent Research and
Development Officer on staff, as at
NEDCO and JBDC;
• provide the Minister responsible with • enabling more MSME products and services to
timely and measurable quarterly indicators penetrate competitive markets, through effective
and analysis on progress made versus set application of expertise provided;
targets and goals; and • enhanced synergies and merger/consolidation
• target at least 25% of the MSME encouraged among existing private and state
populations for business development agencies; and
support within five years. • significant improvements in the quality of data
3. It is recommended that governments be generated.
dissuaded from continuing or initiating lending
activities through government agencies. Issuing
small grants to assist or reward innovators and
high performers is acceptable, once based on
4.3 Institutional
strictly applied, transparent criteria. However, Capacity –
money lending is the specialised business of
licensed or registered financial institutions. Not
Private Sector
only does lending detract from the Government’s Business Support
primary focus on providing technical services,
but government agencies are not designed to Organisations
conform to good practice processes in loan
screening; securing collateral; disbursing; Private Sector BSOs through Training and
tracking; and collections. Educational Services seek to improve trainees’
theoretical knowledge, technical skills and
4. Engagement of competent private sector firms attitudes. Their impact is generally increasing as
or networks in PPPs, similar to the Rwanda business owners appreciate the importance of new
BDCs, can increase the quantum and range of knowledge and contacts to growing their businesses.
resources invested in growing the sector; reduce Whereas full cost recovery is not the norm, MSMEs
Government expenditure; increase its revenue; are now more disposed to invest in employee and
and enable the lead agency to focus its energies management training than a decade ago. However,
on higher-end policy refinement; strategy and the lack of full cost recovery can pose a challenge to
law enforcement; results-based coordination; the sustainability of private sector BSOs, especially in
sector oversight and planning. the absence of public sector and/or donor funding.
The extent to which each participating agency is Marketing Assistance has become a critical demand
deemed to have met or exceeded the ILO’s EESE to increase SME visibility and market access. Trade
reform methodology will be pivotal to its credibility fairs, trade missions, sale of packaging materials,
as the competent authority for driving transformation expansion of international contacts and the
of the MSME sector. Effective implementation of the introduction of certification for marketed produce
activities recommended above will demonstrate that have become vital services. The ability to access
better organised, purpose-driven and productive market intelligence is critical to business success
public BSOs can contribute substantially to reducing in the new liberalised trading environment. Internet
constraints by: usage and smart phones have become crucial
• strengthening the management depth, business resources for business, as increased use of ICT
know-how and self-confidence of more MSME and social media are providing notable efficiency
owners; gains and market growth for both progressive
• improving productivity, efficiency and entrepreneurs and service providers.
innovation levels within client enterprises;
Generally, one-on-one counselling, hands-on 4.4.2 The $20 BEF (FLOW) Challenge -
technical coaching and on-the-job attachments Barbados
are more effective in transferring knowledge,
skills and behaviour change, but are more time- The Barbados Entrepreneurship Foundation (BEF)
consuming and costly. The challenge here is to was established in 2010 from a vision to make
persuade MSME owners to adopt preventive and Barbados the World’s #1 Entrepreneurial Hub.
early detection measures, instead of seeking help The BEF launched the $20 Challenge to inspire
when conditions have significantly deteriorated. and generate high interest among young students,
Advocacy and Representation are also critical in particular, about the idea of entrepreneurship.
BSO services requiring development. Lobbying for The BEF aims to bridge the gap between learning
the interests of the sector in the public domain, as in school and entrepreneurship by providing
well as in the corridors of power require excellent an opportunity to students for real life business
communication skills, reliable research capacity and experience, under the guidance of experienced
a good network of contacts. Enlightened companies entrepreneurs. The BEF’s $20 Challenge is an annual
tend to place a high premium on paying for good entrepreneurship competition intent on sparking the
advocacy services. spirit of entrepreneurship among 4th and 5th form
students in secondary schools across Barbados. It
operates as follows:
4.4 Examples of • Students are loaned $20 to start a business;
Private Sector BSOs • Students are coached through the ins and
outs of entrepreneurship by a $20 Challenge
Ambassador;
4.4.1 UPstart Caribbean - Barbados • The Contest runs for ten weeks; and
• The students present their businesses to a panel
UPstart Caribbean’s mission is to become the of judges.
regional leader in public education and advocacy
campaigns that excite and economically empower The BEF is led by Peter Boos, Chairman Emeritus of
citizens - especially youths and women - to become Ernst & Young Caribbean, and a group of local and
business owners and social entrepreneurs. The use international entrepreneurs called the E-Team. The
of an online campaign featuring the dramatised BEF structure comprises five main pillars: finance,
adventures of “Betty”, a female entrepreneur, won government policy, mentorship, business facilitation,
Silver in the 2016 American Advertising Federation and education and talent. The $20 Challenge is an
(ADDY) Awards. The 30-second series of video initiative of the Education and Talent Development
business tips chronicle the fictional adventures of Pillar which is co-chaired by Keith Miller and Derek
Betty as she writes her business plan; expands sales; Browne.
and formulates a strategy to deal with competition.
Other Projects include:
In addition to appearing on Facebook, YouTube and • Angel Investor Network;
www.upstartcaribbean.com, the audio versions of • Classroom to Boardroom;
the webisodes were broadcast on 2 popular radio • Mentorship Mingle;
stations.31 UPstart Caribbean is a novel movement • Business Mentorship Portal; and
advocating a culture of support for entrepreneurship. • WiFi Project.32
31
http://www.upstartcaribbean.com/learn/about-upstart/, http://www.upstartcaribbean.com/resources/roadmap-to-success-
show/, http://www.loopnewsbarbados.com/content/young-barbadian-entrepreneurs-win-silver-american-awards | 32 http://
bef20dollarchallenge.org/, http://www.barbadosentrepreneurshipfoundation.org/20-challenge-winners/
4.4.3 MSME Alliance - Jamaica 4.4.4 Public-Private Sector Collaboration

for MSME Development – KKF
Formed in 2000, this is an alliance of MSME Suriname
Associations intent on improving the e-business
environment for MSMEs through timely information In November 2003, supported by a CIDA-CPEC
sharing and effective advocacy. The Alliance provides institutional strengthening sub-project (2003-2005),
member associations and affiliated businesses the Suriname Chamber of Commerce and Industry
with knowledge to enhance their businesses and (KKF), a large private sector body comprising
sustainability over time, from information acquired membership of both large companies and SMEs,
via attendance at key stakeholder meetings with produced its 2004-2007 Development Strategy
the Ministry of Industry, Investment and Commerce seeking to “promote a culture of enterprise”. The
(MIIC); the Partnership for Transformation; and other following is a synopsis of KKF’s strategic objectives
organisations. Information provided on policies, for SME development:
laws, regulations and upcoming projects is circulated • An environment that promotes the growth and
by email to elicit feedback and to make suggestions development of all enterprises, particularly
for change. Initiatives by support institutions (e.g. small and medium enterprises (SMEs), identified
HEART-NTA, the DBJ and JAMPRO) are also as the most important providers of employment;
highlighted and shared with its membership. • A tax system that stimulates rather than
discourages enterprise;
Current plans include a committee on Access • Increased awareness among entrepreneurs
to Finance; a quarterly magazine to feature with respect to international trade trends and
sector initiatives; and rating the quality of MSME enhanced capacity to take advantage of
development support provided by prominent State- trading opportunities;
subsidised agencies. • Removal of legal and non-legal barriers
affecting the business community; and
Fundamental areas of technical support identified by • Strengthening of KKF’s technical and financial
the Alliance for Government and donors’ attention capacity, including the establishment of a
are: One Stop Window to facilitate domestic and
• How to prepare contracts; foreign investors in accessing the required
• How to track your money; information and completing the required forms
• How to respond professionally to requests for for conducting new business in Suriname;
quotations; establishment of an online Trade Registry;
• How to deal with insurance (e.g. employers’ and formation of a KKF subsidiary, Business
liability; goods in transit; employees’ liability; Development Foundation (BUSOS), to advance
and general insurance for a business); business and trade development services on a
• Clustering or “grouping” to get best deals from fee-for-service basis and to mobilise external
insurance and other companies; and funding for enterprise development.33
• How to pressure larger businesses that take
up to and over six months to pay MSMEs who It should be noted that unlike the common practice
think they have no recourse but to wait patiently. in many Caribbean jurisdictions, as a Chamber of
Commerce and Industry uniting both SMEs and large
enterprises, KKF plays a very strong advocacy role
33
Suriname Chamber of Commerce and Industry, Policy 2004-2007.
on behalf of the private sector as a whole, and is a • Delivery of relevant training and technical
model worthy of emulating across the Region. Such support programmes to members and non-
a framework would impart considerable strength members;
to the regional MSME sector which, in the main, is • Negotiation and delivery of several donor
representationally weak. BUSOS was established agency-funded and private sector projects
as a Foundation in 2002 with the mandate to that bring value to KKF members and other
drive the Strategic Plan and strengthen KKF, by customers;
delivering value-added business support services • Building effective networks and linkages with
in a commercially sound manner. BUSOS has an organisations throughout the Caribbean and
11-member Board of Directors and its President sits beyond; and
on the board of the KKF. Project implementation was • Continuous management of national trade fairs,
timely and as a result: exhibitions and missions.
1. Since January 2006, the One Stop Window− In 2016, BUSOS continues to operate as an efficient,
an updated comprehensive database as part responsive, self-sustaining development organisation
of the KKF’s Information System−has been in that serves the needs of MSME entrepreneurs
place, linked to automated systems in related throughout Suriname. The sustainability of BUSOS
Government agencies. The time taken for is a point worthy of note. This is due to the fact that
acquiring business licences has been reduced while it charges fees for its services, these reportedly
considerably through a simplified KKF-assisted are not high and hence affordable. Resolution of
process. Business licences are now being issued the issues of financial capacity and sustainability
by the Ministry of Development and Planning of regional BSOs is one that needs to be urgently
and the (rural) District Commissioners within addressed if the MSME sector is to grow and thrive.
30 days. All other licenses are issued within a
fortnight by the Chamber. Other private sector organisations providing
business services to MSEs in Suriname are industrial
2. The KKF is the official Registry of all businesses. associations, the Suriname Business Forum and
The Trade Registry captures comprehensive Vocational Training Centres. Membership of the
data of all companies in Suriname. business associations comprises both large firms
and SMEs, and provide business development
3. BUSOS produces and manages trade fairs services to their membership. This training is often
and donor projects; develops proposals; and done in collaboration with the donor community, for
coordinates training activities. It organises example, ILO, CARICOM and other organisations.
activities relating to financial services sector The training focuses on ICT development; research
modernisation, including new bank and credit and development; business clustering; certification;
union products. human resource management; and market
intelligence, for example, with respect to CARICOM
4. A Small Enterprise Financing programme, co- and the EU.
funded by the IDB and the HAKRIN Bank, has
been implemented by KKF-BUSOS. The Suriname Business Forum (SBF), established as
a PPP to advance public and private sector dialogue
Key factors which have contributed to the success of in relation to policy, similar to the Jamaica MSME
BUSOS as a best practice development centre are: Alliance, is another institutional development
• Operating in a commercially sound manner worthy of emulation in the Caribbean with respect
to ensure long-term financial viability of its to advocacy on behalf of MSMEs.
operations;
In 2006, the SBF established the Suriname Business

Centre (SBC) to provide online business services to
4.5
its membership. SBF/SBC is sponsored by the EU. Recommendations
IntEnt, a Dutch funded NGO, also provides business
service support to newly established enterprises. It 1. Policy-makers and the heads of lead agencies
provides training and coaching on business plans; should include the private sector (firms,
marketing studies; and implementation plans. It also trainers, consultants, institutes and trainers)
monitors the progress of startups. in the design and delivery of all awareness-
building; policy and law reform; training and
Suriname notably also has organisations specifically technical assistance programmes to grow
for support to business women, another institutional entrepreneurship and modernise MSMEs.
development worthy of replication in the Caribbean.
These are the National Movement for Women; the 2. Public-Private-Partnerships take numerous
National Movement for Women Entrepreneurs and forms, but they bring knowledge, expertise
the Foundation for Management and Women’s and vital information while widening the pool
Organisations, which provide advice, assistance, of investment resources for developing more
training, project development services, and technical MSMEs. The KKF-BUSOS partnership is a
assistance to enhance business productivity. Caribbean model for sustainability that other
BSOs may emulate and build on.
3. Business development and product marketing • MSMEs can learn at their own pace with free
approaches that make maximum use of social eLearning modules;
media and ICT, appeal more to youths, women, • They can learn when and where they want, on
immigrants and other demographics, while or off mobile.34
keeping costs affordable.
4.5.3 Caribbean Business Portal
4. Advocacy is a crucial strength that BSOs should
develop. Rather than seeking to ‘be all things The establishment and management of a Business
to all people’ with limited resources, at least Portal linked to the Regional Hub has also been
one organisation per jurisdiction should be recommended. This would resolve the longstanding
identified to assume that role. KKF-BUSOS is constraint of information asymmetry faced by MSMEs
a good example of successful advocacy. The in every BMC, resulting in expanded business
national lobbying capacity of Jamaica’s MSME contacts and transactions for the entrepreneur.
Alliance should be strengthened as a pilot
project, for subsequent replication. Additionally, Chambres De Métiers et L’Artisanat
(Chambers of Trades and Handicrafts; Martinique
4.5.1 Online Training and Development and Guadeloupe) can be a very useful source of
training and business services. These Chambers
The case has been extensively presented for making of Trades and Handicrafts have been providing
optimal use of high-speed internet facilities to information training, technical assistance, marketing
leverage greater business opportunities at regional and representation to their members for over 40
and global levels. years; both have achieved ISO 9001 certification.
A significant portion of their services delivery
Internet-based educational material, business training is processed via the internet, and is aimed at
and certification have been in vogue for at least 15 accompanying artisans in all stages of professional
years. Webinars, for example, are a convenient and advancement –business creation; training; business
low cost means of diffusing knowledge, concepts development, etc. Both websites provide free
and experiences to interested global audiences. translation and enjoy constantly high global traffic.35
MSME owners, managers and employees should
be encouraged, trained and assisted to utilise their Now that Martinique has joined the OECS Member
computers and hand-held devices to obtain more States, the opportunities for regional co-operation
practice to address business-related issues. in business development and trade, utilising
information and communications technology-based
4.5.2 Free Facebook Training training modules and consultations, have expanded.
Closer collaboration within the Francophone and
Blueprint currently provides free online training (on Anglophone Caribbean will also benefit the budgets
a 24-hour basis) to any entrepreneur, in the skills of the government agencies and BSOs in the CDB
required to move his/her business forward. It has BMCs, by releasing national resources to attend to
more than 50 eLearning modules: other crucial business development needs.
• MSMEs should master the tools to get the most
from Facebook;
34
https://www.facebook.com/blueprint?_rdr | 35
http://cma-martinique.com/, http://www.cmarguadeloupe.org/
4.5.4 Towards an appropriate regional 3. A public-private partnership network should

institutional infrastructure be explored between selected MFIs, Business
Development Agencies (BDAs) and BSOs to
Further to the recommendations made in section facilitate a larger flow of domestic resources into
4.3 above to improve the value-for-money offerings MSME growth and expansion, using Barbados
of the current BSOs and state agencies serving at and Belize as pilots. A nexus of 3-4 large credit
the national level, a complementary structure and unions and Fund Access in Barbados and
approach that can create synergies by tapping into likewise a linking of the four largest credit unions
the resources of capable regional organisations and in Belize, BEST, DFC and BELTRAIDE, is also
projects seem logical. All initiatives proposed here envisaged. With competent pre-screening and
will have direct outcomes beneficial to the MSMEs post loans assistance performed by competent
themselves: staff in the BSOs and BDAs, the credit unions
will be assisted in setting up special desks or
1. The governance and operations of all support units that specialise in MSME loans. The credit
organisations and agencies require supervision. unions’ savings-driven and value-chain lending
Conducted regionally, and utilising globally methodologies, already practised in Peru,
accepted criteria, emphasis should be Kenya, Poland and Brazil can be replicated in
placed on performance monitoring, ranking the Caribbean.
and disseminating quality information on a
predictable frequency in respect of: 4. The CIDA-CPEC Regional Model (1999-2005)
• Ministries and lead agencies in transforming completed 10 years ago, has been an effective
their policy, legislative and regulatory institutional arrangement for enhancing
framework; productivity and competitiveness in Caribbean
• non-financial service providers in delivering MSMEs, by building technical capacity,
training and technical assistance; and financial sustainability and institutional resilience
• financial institutions and related mechanisms in selected public agencies, private sector firms
in enhancing access to finance. and their trade associations at regional and
national levels.
The related publication/report will also highlight
innovations at all levels of MSME activity. This The CIDA-financed Caribbean Programme for
will keep regional policy makers, legislators and Economic Competitiveness (CPEC), implemented
service providers informed and accountable 62 sub-projects in six key economic sectors
and will motivate them to set positive examples across 15 CARICOM countries (including
in MSME development. Suriname and Belize). MSMEs as well as the
public and private sector agencies serving
2. Extensive institutional strengthening is imperative them, were by far the major beneficiaries of the
so that Business Support Organisations (BSOs) human resource development; trade expansion;
can benefit from modern business development and institutional strengthening outputs of this
training and certification. The internal systems of highly successful programme.
each should be upgraded to meet the growing
demands of new entrants. Shared resources and The St. Lucia-based Regional Office of CPEC
services, amalgamations and mergers, where exceeded all its contractual obligations by
suitable, with other like-minded but strategic strengthening the capacities of:
organisations will increase their sustainability.
• 1,900 large, medium and small companies • Tourism Development in Guyana, Suriname,
across the six economic sectors of focus: Tourism, Antigua-Barbuda;
Forestry; Financial Services; Agriculture and • Visitor Safety and Security in Trinidad and
Agro-industry; Manufacturing; and Construction; Tobago, Jamaica, Barbados, St. Kitts-Nevis and
• over 360 Government agencies, academic Dominica;
institutions, private sector associations and civil • Strengthening the skills base and product
society networks; and quality in Construction in seven East Caribbean
• 29,151entrepreneurs, regulators, managers, countries;
supervisors, technicians and line workers, • Fisheries Development in Jamaica and Guyana;
approximately 51% of whom were females. and
• Financial Services Modernisation and Expansion
Twenty-four pieces of standards-driven legislation in Dominica.
drafted by the Project, were also approved by
various governments. Fifteen policy statements and It is strongly recommended that the Region attempt,
sector strategies were produced, utilizing exhaustive at this juncture, to re-instate a similar programme
stakeholder discussion, and presented for Cabinet focused particularly on the strengthening of public
approval, including: and private sector BSOs and training in selected
MSMEs.
CHAPTER 5:
nurturing innovation in the

msme sector
It is the means by which the entrepreneur either

CHAPTER 5: creates new wealth-producing resources or endows
existing resources with enhanced potential for
NURTURING creating wealth.”
INNOVATION IN 5.1.2 Sources of Innovation
THE MSME SECTOR Peter Drucker in his 1985 book “Innovation

and Entrepreneurship” lists seven sources of
innovative opportunity. They are referred to as: 1)
the unexpected, 2) incongruity, 3) process need,
5.1 What is 4) industry and market structure changes, 5)
innovation? demographics, 6) changes in perception, meaning

and mood, and 7) new knowledge. In almost all of
the preceding examples, innovation is researched-
5.1.1 Multiple definitions based. It is driven by inquisitiveness to find unique
ways to do things differently – shorten the time
Wikipedia quotes a definition of innovation as “a frame for a given task; increase the accessibility of
new idea, or more-effective device or process”, but decision-making information; create and improve
goes on to say, it can be viewed as “the application product usage; introduce new services; and improve
of better solutions that meet new requirements, the packaging and delivery of services. The engine
unarticulated needs, or existing market needs. This of innovation is therefore a culture of inquisitiveness
is accomplished through more-effective products, and inquiry that becomes pervasive in society.
processes, services, technologies or business models
that are readily available to markets, governments Today, there are four main types of innovation, most
and society. The term “innovation” can be defined of which are ICT-based or influenced:
as something original and more effective and, as a
consequence, new, that “breaks into” the market or 1. Process Innovation. This involves new and
society”.36 deliberate organisational attempts to change
production and service processes. Example:
The World Bank Institute, using a somewhat broader Expedia.com and Trip Advisor.com. (It is
definition in its 2010 report “Innovation Policy for important to note that these examples are ICT-
Developing Countries”, points out that innovation based innovation solutions.)
means technologies or practices that are new 2. Product Innovation. This is the introduction
to a given society. This means that innovations of a good or service that is new or has been
can be imported and not necessarily created significantly improved with respect to its
internally. They need not be new in absolute characteristics or intended uses. Product
terms. Moreover, management guru, Peter Drucker innovation is also a key factor for successful
claimed that “Innovation is the specific function of market entry in models of creative destruction
entrepreneurship, whether in an existing business, a and Schumpeterian growth. Example: Apple
public service institution, or a new venture started by computers and Kindle.
a lone individual in the family kitchen.
36
https://en.wikipedia.org/wiki/Innovation
3. Social Innovation. The creation of innovative 5.1.3 The Structured Approach

activities and services that are motivated by
the goal of meeting a social need and are In the organisational context, innovation may be
predominantly developed and disseminated linked to positive changes in efficiency, productivity,
through organisations whose primary purposes quality, competitiveness and market share. Recent
are social. Example: Kickstarter, Facebook. research findings highlight the complementary role of
organisational culture in enabling entities to translate
4. Management Innovation. The invention and innovative activity into tangible improvements. In
implementation of a management practice, addition, organisations can improve profits and
process, structure or technique that is new to performance by providing work groups with the
the state of the art and is intended to further opportunities and resources to foster creativity
organisational goals. Example: FedEx, while performing core tasks. The guidelines for
Walmart, Carnival Cruise Lines. organisational innovation are summarised in Figure
5.1 below:
Figure 5.1: Guidelines for Adopting Innovative Processes at Organisational Level
Source: Innovation Management, “Innovation Without Borders: Six Best Practices to Improve Innovation Success Rates,” 2015.37
Innovation by businesses is achieved in many ways, such as industry, medicine, engineering, and
with much attention now given to formal research and government. Yet, innovations can be developed
development (R&D) for “breakthrough innovations”. by less formal on-the-job modifications of practice,
R&D helps in developing patents and other scientific through exchange and combination of professional
innovations that lead to productive growth in areas experience and by many other routes.
37
NPD = new product development
However, the more radical and revolutionary The Global Innovation Index (GII) is the point of
innovations tend to emerge from R&D, while more reference for best practices in innovation across
incremental innovations may emerge from practice. the developed and developing world. GII relies on
However, there are many exceptions to each of two sub-indices: the Innovation Input Sub-Index and
these trends. the Innovation Output Sub-Index, each built around
pillars. Five input pillars capture elements of the
An important and obvious innovation driver is national economy that enable innovative activities:
customers buying products or using services. 1) Institutions; 2) Human capital and research; 3)
Increasingly, firms are incorporating users in focus Infrastructure; 4) Market sophistication; and 5)
groups (user-centred approach); working closely Business sophistication.
with so-called lead users (lead user approach); or
users might adapt products themselves. Aditionally, two output pillars capture actual
evidence of innovation outputs: 6) Knowledge and
5.2 Best Practices in technology outputs and 7) Creative outputs. Each

pillar is divided into sub-pillars and each sub-pillar
MSME innovation is composed of individual indicators (79 in total).
Sub-pillar scores are calculated as the weighted
Best practices in SME innovation are mainly attributed average of individual indicators; while pillar scores
to the models used to support innovation in the USA. are calculated as the weighted average of sub-pillar
However, the country of reference for emerging scores. The framework is revised every year in a
economies is Israel, but both sets of practices are transparent exercise to improve the way innovation
well advanced, and are therefore difficult to relate to is measured. The methodology used is highlighted
from a developing country perspective. in Figure 5.2 below.
Figure 5.2: Methodology used to Establish Rankings on the GII
Source: Global Competitiveness Index, 2015

There were 141 countries ranked in the 2015 Global Innovation Index (GII). The top five were Switzerland,
the United Kingdom, Sweden, the Netherlands and the United States of America (USA) in that order.
Only four of the eight countries surveyed in this study were ranked on the GII. The rankings were as follows:
Table 5.1: Ranking of Selective Caribbean Countries on World Innovation Index 2015
Country World Ranking Regional Ranking (LAC)

1. Barbados 37th 1st
2. Trinidad and Tobago 80th 11th
3. Guyana 86th 12th
4. Jamaica 96th 15th
Source: Global Innovation Index Rankings, 2015
Two main policy strands form the core of present This interest is evident while using classic instruments
innovation policy. On the one hand, there is a need such as public procurement, as well as testing out
to improve the framework conditions for innovation. new approaches to promote innovation specific to
These conditions include the business environment, overcoming key societal challenges in fields such as
access to finance, competition, and trade openness, clean energy and health.
as captured in the Innovation Input Sub-Index of
the GII model. On the other hand, nations also Another new policy development is the focus on
need dedicated innovation policies, targeting both creating an “innovation culture” with businesses,
innovation actors and the linkages among them. students, and society at large. This is meant to
spur greater entrepreneurial activity and to achieve
Such policies include collaborative research projects, a better public appreciation of the role of science
public-private partnerships, and clusters. High- and innovation. The design of proper metrics and
income countries follow a set of dedicated supply evaluation strategies of policies is also emphasised.
and demand-side innovation policies. This entails Moreover, formulation and measurement of
creating a strong human capital and research base innovation policies is increasingly treated as a
that includes research infrastructures; sophisticated science in its own right. Notwithstanding these
firms and markets; innovation linkages; and developments, finding the right combination between
knowledge absorption that fosters innovation outputs demand and supply measures, and between public
as captured by the GII. and private funding for innovation, remains largely
a trial-and-error endeavour.
Under this second strand, direct support for business
R&D and innovation is provided in the form of Although it is tempting to think so, a simple migration
grants, subsidies, or indirect measures such as of policy mixes developed in high-income countries
R&D tax credits. Universities and public research to developing countries, is unlikely to bear fruit.
organisations are funded via across-the-board or The reason is mainly that innovation policies and
more competitive funding mechanisms. In addition, institutions need to be context-specific, reflecting the
there is also renewed interest in demand-side extensive heterogeneity and varying trajectories of
measures. countries.
Accordingly, a number of differences between In developing countries, the human resource base
developed and developing countries need to be remains comparatively weak. In the Caribbean,
emphasised in this report: the brain drain is persistently high; and innovation
actors and linkages between them are usually
First, the framework conditions for innovation are weaker than in developed countries. Furthermore,
more challenging in developing countries. Beyond public research organisations are usually the only
macroeconomic challenges, this often manifests itself actors engaged in research and often operate in an
in poorer infrastructure; weaker product, capital, isolated fashion without links to the real economy,
and labour markets; and weaker education systems. while firms tend to have low absorptive capacity.
Ineffective regulatory set-ups that do not provide the In the formal sector, improvements in maintenance,
proper incentives to innovation are often an obstacle. engineering, and quality control, rather than fresh
R&D investment, tend to drive innovation.
Second, for sheer budgetary reasons, the capacity to
finance, coordinate, and evaluate a large package Also, sources of learning and innovation frequently
of innovation policies is constrained in developing result from foreign direct investment (FDI), or more
countries. While arguably all components of frequently, acquisition of technologies developed
innovation policy dimensions seem important, abroad. Firms tend to have low absorptive capacity
tough priority setting is needed. This is certainly a and do not interact with scientific institutions or
significant challenge in the Caribbean. Moreover, in science more broadly. Therefore, collaborating with
the context of developing countries, the innovation external partners in innovation, generally remains
policy coordination between various local, regional, an important challenge for companies in developing
and national levels of government is often even more countries.
demanding than it is in developed nation states.
Third, the industrial structure of most low- and

middle-income countries is usually different, with a
5.3 The MSME
greater reliance on agriculture, the extraction of raw Innovation
materials (Trinidad, Guyana and Suriname), and
too few—mostly low-value-added— manufacturing
Landscape in the
activities (e.g., food processing, textiles), as well Caribbean
as an increasing reliance on services industries
such as creative sectors, tourism, transport, and 5.3.1 Current Status
retail activities. Micro- and small businesses play
an above-average role for the broader economy This section examines the current status of the
potentially for innovation too. Given the structure of innovation landscape for MSMEs in the four
the Caribbean’s private sector, this is likely to be the Caribbean countries that are ranked on the Global
case in this region as well. Innovation Index: Barbados, Trinidad and Tobago,
Guyana and Jamaica. It should be noted that the
Fourth, country- or sector-specific exceptions aside, issue of improving the Access to Finance component
innovation capabilities in developing countries are has already been addressed in Chapter 2.
typically less advanced than those in developed
countries.
In Barbados, the commitment to innovation of Barbados (GOB) has taken the view that
is embedded in that country’s Human Resource “innovation and entrepreneurship are grounded
Development Strategy 2011–2016 under in the application of scientific research principles
Chapter 6.0 -Enhancing Research, Innovation and to solving, social, economic and development
Entrepreneurship. In that regard, the Government challenges”.38
38
Barbados Human Resource Development Strategy, Science, Innovation and Entrepreneurship, 2011-16, Section 6.1, p.62
The GOB has recognised the importance 2. The intent to create science and technology
of investments in research, innovation, and parks, and the harnessing and exchange
entrepreneurship as providing a competitive of information along with enhancement of
advantage in an increasingly global economy. knowledge management systems;
This priority is underlined in Goal 2 of the National
Information and Communication Technologies 3. A focus on innovation in agriculture on the basis
Strategic Plan of Barbados (2009-2015). This goal that a high level of development can only occur
envisions support for innovators, for development if there is close cooperation and interaction
and research of technology infrastructure, and the between scientists, extension advisers, growers,
development of technical and entrepreneurial skills. and agriculture-related industries;
This relatively definitive position suggests that 4. USD $2.5 mn set aside in 2003 for the
Barbados, although heavily dependent on Innovation Fund, managed by the Enterprise
Services, has opted to take the educational/ Growth Fund Limited that provides seed capital
scientific approach to innovation policy, rather than in the range of USD 12,500 -125,000 to
emphasise user-experience innovation as the driving assist entrepreneurs with the implementation of
force behind its innovation agenda. The position commercially viable project ideas. The fund was
is reinforced by the Government’s statement that also used to coordinate the National Innovation
“through the HRD Strategy, Government envisages Competition, which encouraged management
the enhancement of science, technology, and and other personnel to think outside the box
innovation policies to facilitate the fostering of a in enhancing the competitiveness of their
culture of research and innovation from as early as businesses.
primary and secondary school, through to tertiary
level education. To achieve this, emphasis will be 5. Enhanced policies and programmes, which
placed on reinvigorating science education at all target the SME sector and provide incentives
levels of the education system, as well as building to drive more extensive use of research,
human capacity in science, technology, research, development, and innovation. This includes
and innovation through a system of education, enhancement of the national innovation
lifelong learning, professional development and competition to ensure that more innovative
training which will involve the enhancement of the products and services reach the realization
functions of several associated agencies”.39 stage, and are ready for export and development
under a programme for the implementation and
The commitment to innovation is supported through marketing of innovative products and services.
the following mechanisms:
6. The leveraging of ICT-related research-oriented
1. BDS3 mn committed to the University of the activities including the continued development
West Indies over three years to support the of linkages with the Caribbean Knowledge
development of a research programme at the Learning Network (CKLN), which supports
postgraduate level; the development of national research and
educational networks.
39
Ibid.
Barbados owes its high ranking to its ranked status Relative to its benchmark group, Barbados had the
Pillars “business sophistication” and “institutions”. largest proportion of firms with their own website.
According to the IDB 2014 country PSAR, Barbados
was ranked second in terms of technological The only indicator in the index on which Barbados
readiness within the benchmark group of countries in lagged behind its peers was that for the use of
2013-14, largely owing to high Internet penetration technology licensed from foreign companies.
rates and availability of technologies. This may suggest that there is scope for greater
collaboration with overseas firms.
The Technology Readiness Index, compiled by the
World Economic Forum (WEF), is based on indicators Figure 5.3 below highlights Barbados’ technological
of the availability of the latest technologies, firm level readiness – relative to that of other Caribbean
technology absorption, foreign direct investment countries.
and technology transfer, Internet use, broadband
Internet subscriptions and Internet bandwidth.
Figure 5.3 Technological Readiness
Companies in Barbados have access to technological It should be noted that the modest level of investment
platforms that can enhance the efficiency of their in innovation is not a result of limited availability of
enterprises. On the downside however, corporate appropriately skilled personnel, as Barbados boasts
investment in innovation lags significantly behind the highest scores for availability of scientists and
investment in technology. In terms of company engineers among its benchmark group of countries.
spending on Research and Development (R&D), Given the importance of services in the domestic
Barbados was ranked 78th out of 148 countries economy, this could suggest that R&D expenditure
in this category in the WEF’s 2013-2014 Global may not accurately capture the extent to which firms
Competitiveness Report. are innovating.
However, the low level of R&D expenditure does and Tobago develop a National System
reflect the dependence of local firms on the domestic of Innovation (NIS), with the application of
market, and is an area in which further policy knowledge to production as its focus;
support is required. • In 2006, the National Institute of Higher
Education, Research, Science and Technology
One of the driving forces behind Barbados’ alignment (NIHERST) created a similar report.
with R&D innovation is the National Council for • A draft national policy on science and
Science and Technology (NCST), which promotes technology was developed in 2007 by
the assimilation and adoption of science through NIHERST.
a lecturing and debating series; dissemination of
S&T information; popularization of science; and Since Independence, Trinidad and Tobago has been
an annual Caribbean Youth Science Forum (CYSF). steadily building institutional capacity. The number
NCST publishes “The Monitor” through which of STI based institutions in the country substantiates
Science and Technology (S&T) professionals are this commitment −the University of the West Indies
given the opportunity to publish articles on similar (UWI); the University of Trinidad and Tobago (UTT);
topics. Also, since 1998, NCST has been hosting the College of Science, Technology and Applied Arts
biennials of “Sci-Tech Xpos” for students to showcase of Trinidad and Tobago (COSTAATT); the Caribbean
their research efforts in this field. Industrial Research Institute (CARIRI); Trinidad and
Tobago Bureau of Standards (TTBS); the Caribbean
Overall, while such initiatives have fuelled the shift Agricultural Research and Development Institute
toward applied priority technologies such as solar (CARDI); the Institute of Marine Affairs (IMA);
power usage through joint ventures between UWI NIHERST etc.
and foreign private firms, there is no integrated
innovation policy or strategy and the impact in But the challenge was that not enough attention
Barbados has been modest at best. was being paid to stimulating the demand side for
knowledge in the productive sector, i.e. in local firms
In Trinidad and Tobago (T&T) there have been and in the productive sectors. In 2005, a National
systematic attempts to develop a cohesive approach Innovation System (NIS), as a dynamic interconnected
to Innovation since 2001: system with interaction, learning, linkages and
information flows, was seen as central to success.
• In 2001, a National Task Force on Science, The key pillar of this strategy was intended to be
Technology and Innovation Policy produced a the creation of an independent National Council on
report on the subject of a national innovation Science, Technology and Innovation (NCOSTI) that
policy. would be the NIS conductor, bringing the players
• In 2004, the then Ministry of Science, Technology together (i.e. Institutions, the Firms, Government,
and Tertiary Education (MSTTE) developed NGOs, Policies and other enabling instruments). But
a Draft Policy on Science, Technology and even if a relevant institution were actually assigned
Innovation. responsibility for leading and directing innovation
• In 2005, a seminal paper was presented at a research effort, the underlying constraint was that
conference in Peru40. At that time, the Vision the manufacturing sector had “near zero investment
2020 Sub-Committee on Science, Technology in R&D” and that Government investment in R&D
and Innovation (STI) had proposed that Trinidad was very low (about 0.13% of GDP).
40
Sankat, C. “Building a National Innovation System for Trinidad and Tobago - A Vision 2020 Perspective,“ UWI, 2005.
Since then, T&T has made progress towards the • Business intermediaries seem to have little IP
development of an Integrated Innovation System, know-how and services;
but that progress has been uneven. For instance, • There is a lack of clarity as to ownership of
in 2008, the Government of Trinidad and Tobago research results and that has proven to be a
(GOTT) decided to create its own version of Silicon barrier for commercialisation;
Valley, by investing an estimated USD150 mn in • Incentive systems for researchers at universities
the Caribbean’s first Science and Technology Park, are based mostly on academic performance
i.e. the Tamana InTech Park. This initiative has had (publications), which is a barrier for IP-related
mixed results, achieving far less to date than the level commercialisation activities;
of investment would warrant. EtecK, which manages • There is no equivalent of the U.S. Bayh-Dole
the Park, points out that Phase One of the 1,100- Act in the Caribbean. Enacted in 1980, the
acre park facility is complete, and that spaces are Act created a uniform patent policy among
available for ICT/BPO, high value manufacturing, federal agencies that fund research, enabling
clean technologies and business services. small businesses and non-profit organisations,
including universities to retain title to inventions
However, a May 2015 World Intellectual Property made under federally-funded research
Organisation (WIPO) study entitled “Integrating programmes;
Intellectual Property into Innovation Policy • There is a lack of trust in institutions, e.g. whether
Formulation in Trinidad and Tobago”41 summarised they would honour IP created by others;
the current status of the country’s innovation system • Access to finance and funding sources are an
as follows: issue; and
• The innovation system of T&T is fragmented with • There is a shortage of legal Intellectual Property
little coordination among actors; Rights services and expertise in the country.
• Strategies tackling innovation are well drafted
and ambitious, but have deficiencies in the The study which had an IP orientation, implied that
translation into operative goals and activities; the overall system was not well organised; that
• Overall innovation and intellectual property (IP) there was limited knowledge about the use of IP
performance is low; in innovation activities; and that there was a lack
• One of the main reasons for low innovation of trust between institutions on intellectual property.
performance is the “Dutch” disease. Success Overall, then , these findings suggest that Innovation
in gas exploration means that much of the is still at a relatively nascent stage of development
competitive pressure and needs to invest in in T&T.
other sectors have been lifted/neglected;
• There are IP hotspots and positive deviants In May 2013, the Minister of Finance announced
particularly in the creative sector, as well as in a the Government’s intention to develop a National
small number of research institutes and firms; Innovation Policy, and added that it would also
• The level of integration of IP issues in the finalise a new ICT plan for 2012–2016. Yet the
innovation system differs across institutions, but challenge of creating an innovation culture remains
is generally rather low; daunting. Despite the progressive importance noted
• There is little overall Intellectual Property Rights at senior policy and technical assistance levels,
(IPR) awareness and also observable differences there is limited entrepreneurial exposure and use of
across industries; innovation in T&T.
41
Radauer, A., “Integrating Intellectual Property into Innovation Policy Formulation in Trinidad and Tobago,” Technopolis Group,
Austria, for WIPO, 2015.
A study entitled “Towards Economic Diversification: including capacity building in innovation policy at
A National Innovation System for Trinidad and MPSLD and NIHERST.43
Tobago” published in October 2013, was based on
a survey of 100 business enterprises, and concluded Also in September 2014, the Government
that: 1) 86% of total early-stage entrepreneurial announced the introduction of a TTD50 mn
activity did not incorporate any new technology; Innovation Fund to be utilised as matching grants for
and 2) 87% of enterprises were offering products the innovation needs of companies. However, the
that were not new to any of their customers, reflects Fund’s effectiveness within its first year of operations
the limited adoption of innovation in T&T.42 Also, the has not yet been assessed. The Government also
National Innovation System (NIS) that was proposed confers bi-annual awards, established in 2000,
in 2005 was still not yet established in 2013. for innovative science and technology projects via
NIHERST.
In 2014, the Inter-American Development Bank,
in collaboration with the Government of Trinidad Such awards have included initiatives creating: 1)
and Tobago (GOTT), established a project a safe oil and water paint remover; 2) a music CD
entitled “Support for the National Competitiveness learning tool for CXC students; 3) a Smartphone
and Innovation Agenda”. The project has four Application for finding lost keys; 4) Mobile Osh
components: 1) financing support for private sector Inspection App; 5) a biocatalyst for the removal of
innovation including support for innovation in greenhouse gases; and 6) a drinking straw holder.
existing firms, and assistance for business incubation
and acceleration; 2) research and technology Guyana has one of the lowest GDP per capita,
support including mission-oriented research carried but stands out because of its relatively high ranking
out by academic institutions and the strengthening on the Innovation Index in Latin America and the
of technology transfer offices; 3) sector-specific Caribbean (12th). An early indicator of Guyana’s
innovation policies including support for innovation status was its rankings on Innovation and Technology
agendas in three priority industry clusters; and 4) in the 2010 World Bank Enterprise Surveys.
institutional development and capacity building
Table 5.2: Comparative Innovation and Technology Status for Guyana
Source: World Bank, 2010 Enterprise Surveys (Guyana).
42
Ramkissoon-Babwah, N., “Towards Economic Diversification: A National Innovation System for Trinidad and Tobago,” ACRN
Journal of Entrepreneurship Perspectives, Oct. 2013, Page 70. | 43 Various reports have been referenced to support this project
including “Assessment of the National Innovation Ecosystem” and “Assessment of the Innovation System in Trinidad and Tobago” but
these are deemed to be confidential documents and are therefore not available for reference or circulation.
For each of the five indicators, Guyana ranked Additionally, the information and feedback from
higher than all LAC countries and also surpassed innovation stakeholders in Guyana is limited. Lance
the average for all countries: i.e. percentage of firms Hinds, President of the Georgetown Chamber of
with internationally-recognised technology quality Commerce and Industry, points out that “technology-
certification; percentage of firms using technology driven knowledge management industries could
certified from foreign companies; percentage of be the cornerstone of [Guyana’s] future”. Hinds
firms having their own websites; percentage of firms noted that if the ICT plan is to be successful, it must
using email; and percentage of firms with audited be placed in a priority position in the overall plan
financial statements (Table 5.2). for National Development. Therefore, it should be
based on two fundamental pillars: 1) the growth of
Guyana scored highly on the 2015 GII under the ICT as an independent sector; and 2) its application
Pillar “business sophistication”, in terms of both as a cross cutting component in other sectors. These
knowledge workers and firms offering formal include education, health, science innovation and
training, and in terms of royalty and license fee creative industry.
payments. It also scored highly under the Pillar
“creative outputs” in terms of national feature films Another potential area of innovation lies in
as a percentage of total population and creative Guyana’s low carbon development strategy (LCDS),
export goods as a proportion of total trade. and its orientation towards innovation in agriculture.
Local and international investors have given seed
According to the 2014 IDB PSAR, Guyana is in the funding to establish a loan fund for development
early stages of becoming a hub for the provision of low carbon enterprises, dubbed the Rupununi
of business process outsourcing (BPO) services. Innovation Fund. The United Kingdom’s Department
Qualfon, the first company to provide such services in for International Development (DFID) has also
Guyana, employs over 1,700 people in a call centre, launched a GBP 1.3 mn project to support growth
and plans to expand in the near term. Guyana offers in non-traditional agriculture and aquaculture.
an educated labour force that speaks English as its
first language, and has competitive wage rates— The Science Unit of the Education Ministry,
factors taken into consideration by investors when the National Centre for Educational Resources
deciding where to locate. Successfully expanding Development (NCERD), in collaboration with
BPO services will require complementary investment the Office of the President, has coordinated the
in information and communications technology, as development of a National Science and Technology
well as in research and development. Policy and Master Plan for the Socio-Economic
and Environmental Advancement of Guyana.
According to the WEF’s Global Competitiveness This was approved by Government in 2014. So
Index (GCI), Guyana needs to invest in mobile far, draft science and technology indicators have
broadband technology. The country also needs to been developed. However, Guyana has not yet
take advantage of the opportunity offered by BPO established a cohesive framework for innovation
services. This report suggests that an assessment of overall.
the specific needs of BPO firms and complementary
services, be performed. This would identify gaps in Jamaica, was ranked 96th on the 2015 GII and
infrastructure and know-how that need to be filled to 15th within the LAC region, and is addressing its
enable Guyana to take full advantage of investments innovation system from various perspectives. The
in BPO. The experience of other countries, e.g. core strategy and reference point for an innovation
Jamaica, indicates that a concerted effort to facilitate framework in Jamaica is the National Development
the expansion of the services sector requires the Plan (NDP) – Vision 2030.
participation of both public and private actors.
The plan addresses innovation in various sections, Inadequate data on ICT industry. The NDP
and includes a number of performance indicators. calls for more data on ICT usage at macro and micro
When the plan was completed in 2009, it included levels. The main strategic approach to addressing
the following observations about innovation in these constraints was to focus on the establishment
Jamaica: of a world class National Innovation System (NIS)
which was to include: 1) creation of finance and
Low levels of investment in R&D. The incentive mechanisms to attract research; 2)
country spends less than 1% of GDP on R&D, promotion of STI capacity formation and inward
although it claims to have “path-breaking work” in technology transfer; 3) creation of knowledge parks
agricultural research and has expanded the science and centres of excellence; and 4) investment with the
infrastructure. private sector in research infrastructure.
Lack of a National Innovation System. The institutional framework to support innovation

Linkages between key players in the innovation is extensive. It includes: 1) the Ministry of Science,
process are weak or in some cases non-existent, Technology, Energy and Mining (MSTEM); 2) the
when compared to innovation processes in the National Commission on Science and Technology
developed world. (NCST); 3) the Science Research Council (SRC);
4) the Ministry of Education (MoE); 5) University of
Protection of Intellectual Property. Jamaica the West Indies (UWI) and UTech; 6) HEART Trust/
already has the basic legal framework for protection NTA, the national training agency for vocational
of IP. However, the framework has a number of training; and 7) the Ministry of Industry, Investment
weaknesses, including limited capacity of collection and Commerce (MIIC), which oversees the work of
agencies and other institutions; high levels of piracy; the Bureau of Standards; the Jamaica Intellectual
and low public appreciation of the importance of IP Property Office; and the Jamaica Business
rights. Development Corporation.
Limited role of government. The NDP states Other entities involved in promoting and facilitating
that the government could play a greater catalytic innovation include: Start-Up Jamaica; the National
role through adoption of ICT and e-government Foundation for Development of Science and
technologies, but that it lacks a specific vision or Technology; the National Innovation Awards; the
agenda for science and technology development. Technology Investment Fund; and an R&D tax credit
scheme operated by NCST. Also, the University
Human Resource Development. The Plan of Technology (UTech) has a School of Graduate
points out that secondary school examination pass Studies, Research and Entrepreneurship (SGSRE)
rates are particularly low in subjects that are critical for and an incubator facility at its Technology Innovation
technological progress, including Mathematics and Centre. Likewise, UWI has a Mona Office for
Sciences. Jamaica acknowledged that it had a low Research and Innovation (MORI).
capacity for enquiry-based approaches to learning,
and that scientific enquiry is not a core component Given such an extensive range of innovation-related
of teacher training. Technology deployment and support institutions, how well has Jamaica done in
usage was curtailed by a combination of human terms of actually fostering innovation nationally? In
resource factors including high illiteracy rates; loss of the 2015 GII, Jamaica scored highly under the Pillar
ICT skills due to migration; as well as low skill levels “market sophistication” where it was ranked 11th in
and high technology anxiety among the elderly. the world for Ease of Getting Credit.
Other attributes include ease of starting a business • Aside from the creative sector, overall innovation
under the “Institutions” Pillar; domestic resident is low. There are IP hotspots in the creative sector,
trademark application under the “Creative Outputs” and also in some research institutes such as the
Pillar; and computer software spending as a UWI, and UTech. The nutraceutical industry,
percentage of GDP, under the “Knowledge and the app development and games/animation
Technology Outputs” Pillar. industries, as well as the upcoming logistics hub
are fields of opportunities.
With a ranking of 79th out of 142 countries for
technological readiness in the GCI, Jamaica was • The level of integration of IP issues in Jamaica
outperformed in this area by Barbados (25th), differs across institutions, but is relatively low.
Trinidad and Tobago (61st) and the Dominican There is little overall IPR awareness in the
Republic (76th). Jamaica received a below average majority of institutions. However, the creative
ranking overall for the innovation category (at 83rd) sector has strong IP awareness on copyright
in the GCI. This is in spite of the fact that Jamaica issues and a strong anchoring of IP topics.
has an above average ranking for the quality of
scientific research institutes, at 48th. However, the • Linkages between research and industry,
2014 IDB Private Sector Assessment Report (PSAR) including incentives, are weak.
on Jamaica, pointed out that to be competitive,
Jamaican businesses must strive for higher levels • Access to finance and funding sources is an
of productivity, which can be attained through issue, which is exacerbated by the tight public
innovation and utilization of technology. budgets and the current IMF requirements.
An October 2015 WIPO report noted that:44 • Legal IPR services particularly in relation to
patents and respective expertise are in limited
• Jamaica has a very ambitious and complex supply.
overarching development strategy with ‘Vision
2030’ that tackles also the innovation dimension. These findings are corroborated in a 2012
However, the ‘vision’ may be over-ambitious and presentation by the Digital Society of Jamaica
there are issues with respect to implementation, −“Overcoming Barriers to Caribbean Innovation”.45
including the planned development of an S&T Overall, the capacity of Caribbean firms for
Strategy, which is delayed. innovation displays a marked inflection on the
Global Competitiveness index as depicted in Figure
5.4 below.
44
Radauer, A., “Integrating Intellectual Property into Innovation Policy Formulation in Jamaica,” Technopolis Group, Austria for
WIPO, October, 2015. | 45 Clarke, S., “Overcoming Barriers to Caribbean Innovation: Towards a Restructuring of the Innovation
Payoffs,” June 19, 2012
Figure 5.4 Caribbean Firm Capacity for Innovation in Six Countries
Source: World Economic Forum, Global Competitiveness Index 2010 and Clarke, S., “Overcoming Barriers to
Caribbean Innovation,” June 2012
Regionally, innovation support has emerged,

but is still relatively underdeveloped. There is no
5.4 Missing Links
CARICOM Innovation Policy and the Region’s in the approach to
commitment to innovation is confined to a March
2007 policy paper on Science, Technology and
MSME innovation
Innovation for Sustainable Development sub-titled
5.4.1 Industry or Services?
“Caribbean Regional Policy Framework for Action”.
The most important finding on innovation in the

There are two main regional initiatives on
Caribbean is that the Region has attempted to adopt
innovation: 1) InfoDev’s USD20 mn Entrepreneurship
wholescale a techno-centric focus with respect to
Programme for Innovation; and 2) Compete
innovation rather than a more eclectic approach,
Caribbean’s Innovation Challenge Fund. It was
which could lead to the application of more
not possible to carry out an in-depth assessment
innovations in the economic and social sectors. It is
of either programme. However, the IDB/Compete
very difficult to imitate the approach of developed
Caribbean has noted that its Innovation Fund has
countries to innovation without the matching
had limited effective coverage in the region to date.
resources (skills, finance, institutional infrastructure,
etc.).
Therefore, the Caribbean needs to redefine its than those domestically-owned to invest in
own innovation path. As the preceding innovation innovation. This is probably because their
profiles of the four Caribbean countries listed on the innovative activities generally take place in their
Global Innovation Index reveal, all are orienting country of origin.
their innovation policies towards R&D. Moreover,
despite commitments to establish national innovation 6. But in the Caribbean, larger, mostly foreign
systems, each of the innovation strategies being firms nevertheless introduce more innovative
pursued is still fragmented. In that context, the world techniques than domestic ones, perhaps
is replete with lessons learned about R&D focused creating the opportunity of spillovers to local
innovation. Consequently, there are many reports firms.
on this subject that provide poignant examples of
the strategic orientations of both developed and 7. Investment in innovation appears to be as
developing countries in this area. successful in the Caribbean as in Latin America,
in the sense that it translates into the introduction
In the 2014 study “Innovative Activity in the of new products and/or processes.
Caribbean: Drivers, Benefits and Obstacles”,
the authors conducted an econometric analysis 8. Most importantly, new products and processes
of manufacturing firms based on the 2,771 increase productivity in the region, and the
firms interviewed in 2010 by the World Bank for return may be larger than in some, but smaller
Enterprise Surveys46. The findings were that: than in other Latin American nations.
1. There are indeed productivity differences, Overall, the study showed that the benefits to
regardless of the definition of productivity, investing in innovation in the Caribbean, are not
between innovative and non-innovative too different from those found in much larger Latin
manufacturing firms in the region. America nations.
2. Firms not spending money on innovation tend to Such findings and lessons are valuable, but perhaps
be less productive, although they are also more not the most appropriate points of reference to use
heterogeneous in their productivity. as the basis for developing sustainable innovation
frameworks in the region.
3. While there are economies of scope, size
appears to be less an obstacle to undertaking There are three main reasons for this:
innovation in the Caribbean than in Latin
America. 1. First, the region’s economic engine is driven by
Services - not industry. With little exception, all
4. The fact that neither group of firms has patents of the region’s economic statistics point to the
or cooperate with other firms is worrisome – increasing emphasis on services. In Barbados,
although this is not the only metric that can be services contribute up to 83% of GDP; in
used to evaluate innovation activity. Jamaica, the sector accounts for nearly 80% of
GDP.
5. Foreign-owned firms are not more inclined And even in petroleum-driven Trinidad and
46
Mohan, P., Strobl, E., and Watson, P., “Innovative Activity in the Caribbean: Drivers, Benefits and Obstacles,” Impag Business
School Working Paper Series.
Tobago, it accounts for 42% of GDP (petroleum in industry R&D, and 2) have much larger impacts, in
accounts for 45% of GDP). Furthermore, terms of the contribution to future economic growth,
the Region has been quite innovative in the especially since Services have been growing
provision of services – especially in offshore while Manufacturing has been on a downward
education (as in Grenada and the rest of the trajectory for some time. It must be emphasised that
Eastern Caribbean) and in health tourism focusing on Services Innovation does not exclude
(as in the establishment of Health City in the manufacturing or product development, since
Cayman Islands). Health tourism and offshore Services are intertwined with product development
education represent potentially high-value sub- in numerous ways.
sector diversifications within a now maturing
traditional tourism sector. For example, an industrial engineer develops the
technological basis for Fab Labs (services), but Fab
2. Second, while it is true that some countries still Labs then need to be manufactured, and used by
retain capacity for further manufacturing sector designers (services again), who produce custom
growth, the trend towards Services in almost all made products (manufacturing again) which need
countries seems irrevocable and so the share to be marketed (services again).
of Services in GDP will continue to grow in the
foreseeable future. To date, the evidence of MSME initiation and/or
adoption of innovation practices in services have
Therefore, emphasis on service sector innovation been positive but uneven:
is arguably more likely to offer greater value to
the Region than innovation in industry. 1. In Dominica, it was discovered that there were
125 innovations between 2005 and 2009 in
3. Third, Services have so far been pulling down the tourism sector in product (55), marketing
the average productivity of the region – making (39), process (24) and organisational
the area less competitive than it needs to be47. management (7) - although Dominica does not
This challenge is compounded by the fact that even register on the Global Innovation Index.49
most of the sector consists of, and is served by
MSMEs. This is of major concern – not just In that country the innovations in services were
to the Caribbean – but to highly developed largely successful, mainly because they were
economies as well48. autonomously started from the bottom up,
ensuring strong ownership and follow-though
In contrast, the OECD countries have found by the various project initiators, most of whom
ways to infuse higher productivity into the were young entrepreneurs.
growth of Services in those economies (e.g.
Uber, Facebook, online training services, etc.) 2. There have been at least 12 cluster projects
in the Caribbean region since 2005 – mostly
Given the sheer scale of Service sector development funded by USAID. These include: a) value
in the Caribbean, it is logical that innovations in adding agricultural or agro-processing projects
Services are likely to: 1) represent a better “fit” in Dominican Republic, Guyana, Haiti,
between existing capabilities and investments than Grenada, the OECS region and in Jamaica;
47
Rubalcaba, L., “Innovation and the New Service Economy in Latin America and the Caribbean,” in Baumol’s Cost Disease, June,
2013. Ruprah, I., Melgrarejo, K., Sierra, R., “Is there a Caribbean Sclerosis? Stagnating Economic Growth in the Caribbean,” IDB,
March, 2014. | 48 Rodrik, D., “The Past, Present and Future of Economic Growth,” Global Citizen Foundation. Working Paper 1,
June, 2013. | 49 Cherrett, N., “Innovation in the Tourism Sector: A Case Study from the Commonwealth of Dominica,” ECLAC,
June, 2011.
b) tourism projects in Jamaica; and c) an ICT Examples of these elements are the rapid emergence
project (EtecK) in Trinidad and Tobago50. of knowledge-intensive business services (KIBS), and
the development of new technology, together with
Some projects (e.g. the Jamaica Cluster the associated ICT services of particular importance
Competitiveness Project coordinated by JEA) to organisational innovation.
have been much more successful than others
(e.g. the Grenada Nutmeg SME Project The importance of services in modern economies
coordinated by GIDC). The underlying reason calls for the formulation of service innovation
for success or failure is the degree of elimination policies. Service innovation policies should address
of ambiguity in the roles and responsibilities of gaps in productivity and competitiveness, in the most
participants in each cluster group. In contrast to important economic sectors.
the Dominican innovation projects, most of these
cluster initiatives were driven from the “top”, Services can create new advantages for some
i.e. by donor-funded projects whose longevity developing countries, including those hosting
did not extend beyond the various lives of the offshoring services (e.g. in Barbados, Jamaica, and
respective projects. Also donor support for Guyana), and service outsourcing from developed
cluster projects has since waned, and there is economies. New and improved services can
limited support for such initiatives today. provide competitive advantages in countries that
have traditionally concentrated on commodities or
3. The use of pre-designed ICT services by the tourism. Service innovation can reinforce existing
MSME sector is also producing positive results. competitive advantages (e.g., better service logistics
Smaller hotels in the tourism sector, which associated with commodities trading), and create
account for most of the hotels in the sector, new types of services (e.g. ICT off shoring services).
have moved away from travel agencies and
instead have tapped into commercial websites However, such arguments may not suffice to
like Hotels.com and Expedia to reduce justify public policies aimed at improving service
booking fees for stay-over visitors. According innovation. Perhaps the strongest argument for
to Expedia, room bookings for smaller hotels the dismissal of a focus on Services Innovation is
have increased by as much as 30%, and net that “Industry is the key sector to promote”. This
revenue per visitor has actually improved in this argument is partly valid for countries that have
sub-sector. already established strong industrial development
strategies (e.g. Trinidad and Tobago). However,
The IDB report “Innovation and the New Service policy makers should consider promoting Services
Economy in Latin America and the Caribbean”, Innovation given that: 1) all manufactured products
identifies key lessons learned about Innovation in need innovative services such as design, marketing,
Services that are relevant to the Region51. logistics, etc.; and 2) the economies of the Caribbean
are service-sector driven.
Elements that help promote innovation in all areas
exist at the crossroads of sectoral innovation in Given the Caribbean’s economic orientation, the
service, service-oriented innovation activities in absence of an emphasis on Services Innovation as a
business, and service innovation co-production regional priority is glaring.
through specific services or a special use of services.
50
OTF Group, “Cluster Best Practices in the Caribbean,” Private Sector Development Discussion Paper, No. 5, 2010. | 51 The
exceptions are Trinidad and Tobago and Guyana and Suriname but even in those countries Services i.e. tourism is growing at an
above average rate and is therefore likely to become far more important as an economic driver in the future than it is today.
For example, the Caribbean Tourism Organisation International exposure and coverage are
(CTO) promotes the US billion dollar tourism sector, increasing exponentially as many aspects of
but puts limited focus on promoting innovative Caribbean culture are cross-pollinating into
services that feed off or support that industry. other global settings (e.g. Nigeria, Uganda,
South Africa and Japan). In recent years,
5.4.2 The Export Dimension and new music genres have emerged in Grenada,
Opportunities for MSME growth Barbados and other parts of the region as well
– organically through the cultural evolution of
The opportunities for export growth by Caribbean those societies.
MSMEs are especially strong for the adoption of
innovative business solutions in Services, once idea- 2. Offshore education. The Caribbean, especially
generating activities are actively fostered. There are the Eastern Caribbean is now a well-established
three primary areas of possible exponential growth: hub for offshore medical education. Recent
years have witnessed the sale of 50% of St.
1. Culture and Creative Industries (CCI). The Georges University for USD 750 mn to private
significance of these industries is highlighted investors in Canada. Increasingly, the industry
in a December 2015 Ernst and Young (EY) now makes use of online lecturing services to
report, “Culture Times – the first global map address the specialty needs in its curriculum.
of cultural and creative industries”, for the The growth of the industry has been strong
International Conference of Societies of Authors and will remain so – primarily because of
and Composers (CISAC). Interestingly, CCI the acute shortage of medical practitioners in
revenues worldwide exceed those of telecom North America and the aging of the Western
services (USD 1,570 billion globally). CCI World’s population. However, MSMEs
employs 1% of the world’s active population need to be more effective at leveraging this
with the top three employers being visual arts, comparative advantage – possibly through
books, and music. Digital cultural goods are ICTs – into: a) strengthening and diversifying
by far the biggest revenue source for the digital its now conventional tourism products and
economy, and cultural production is young, services into health tourism, and b) increasing
inclusive and highly entrepreneurial. Also, its international training offerings by them in
creation is driven by small businesses and non-medical services on an international scale.
individuals, i.e. MSMEs, and generates agile
and innovative employers. Most importantly for 3. Business Process Outsourcing. So far, Business
the Caribbean where youth unemployment is Process Outsourcing (BPO) has been limited
especially high, CCI contributes significantly to to the establishment of call centres around
youth employment and CCI careers are open to the Caribbean – initially in Jamaica but now
people of all ages and backgrounds. in Guyana and in some Eastern Caribbean
countries. However, the leveraging of this
In the Caribbean, the culture and creative sub-sector into higher value added services
industries are organic, robust and dynamic. remains largely untapped. The scope for
Noticeably, CCIs function autonomously without MSME IT/ICT-related BPO services includes
“targeted” government support. Reggae, Application Services (application development
Steel Pan, Calypso, Carnival and other ethnic and maintenance, system integration, IT
festivals, have emerged as highly innovative infrastructure services such as help desks,
and sustainable products and services in their data centre services, etc., and IT and network
own right. consulting).
They also include Engineering Services stronger opportunities for innovation growth.
(upstream product engineering, downstream Recommendations on the prerequisites for fostering
product engineering and software product MSME participation in these sectors are highlighted
development) and Business Process Services under section 5.4.3 and section 5.4.5 advancing
(horizontal processes such as call centres, and re-Thinking the approach to innovation, below.
human resource management, finance and
administration, vertical processes such as 5.4.3 A Framework for Service
banking insurance, travel, etc., and knowledge Innovation Policies
process outsourcing such as animation, data
analytics, legal process and patent research). Most Caribbean countries recognise the importance
The reason why BPO is so important to of service sector development, but there has been
Caribbean innovation is that: 1) MSMEs can limited examination of the types of policies needed
develop direct or indirect support services to to foster service sector innovation, especially for
the sector in almost every area of activity noted MSMEs.52 Essentially, there are three main policy
above; and 2) the advancement of these types approaches aimed at facilitating Services R&D and
of ICT services in the Caribbean will strengthen Innovation: a horizontal focus, a vertical focus, and
the Region’s capacity for “idea generation” and a systemic policies approach. Each approach
therefore to innovate in other areas of business, emphasises different orientations for R&D policy,
such as the CCIs and offshore education and innovation policy and non-innovation policy. But
training. for MSMEs in the Caribbean, the main priority is
the need to send policy signals that confirm that
Of course, there are other potential areas for governments are encouraging and rewarding
MSME innovation – agro-processing, app MSME innovation in services. Possible policy
development, advertising and marketing etc., options are highlighted in Table 5.3 below.
but the three preceding sectors currently offer
Table 5.3 Options for Framework for Service Innovation Policies
Policies Horizontal Approach Vertical Approach Systemic Approach
R&D policies 1. Open existing R&D 1. Support public R&D in services 1. Introduce service
programmes to service 2. Introduce vertical R&D innovation elements in
companies programmes aimed at services existing topics (R&D for ICT
2. Increase accessibility of existing sectors (tourism, business and related services)
R&D support schemes (to services, and public services). 2. Understand and support
service providers) 3. Develop Service IPR instruments role for R&D services in
3. Include Services in 4. Create dedicated centres and innovation systems
technological foresight and clusters for Service innovation 3. Support Services R&D in
road mapping exercises 5. Increase role of the Humanities hybrid firms
4. Include Service firms in policies in Service innovation 4. Pay attention to tech and
aimed at improving industry/ non-tech R&D innovation in
sciences relationships Services
52
Some countries, such as Jamaica, Trinidad and Tobago and Barbados have identified the creative industries as a sub-sector for
innovation and others – like Grenada and other OECS countries, have facilitated offshore education investment. But such initiatives
are not deliberately linked to Service Sector Innovation Policies, none of which have been established yet.
Table 5.3 Options for Framework for Service Innovation Policies cont’d.
Policies Horizontal Approach Vertical Approach Systemic Approach
Innovation 1. Increase accessibility of existing 1. Introduce courses in services 1. Ensure that business
policies Innovation support schemes to innovation management at support services also
Service SMEs Higher Education Institutions support Services innovation
2. Innovation management (HEIs) 2. Use Knowledge Intensive
training and practices also 2. Develop and activate Business Services (KIBS)
geared toward Service sector awareness campaigns on 3. Increase transparency in
firms services innovation KIBS markets
3. Mobility schemes (aimed 3. Identify services innovation role 4. Develop insight into int’l
at scientists and engineers) models competitiveness of Service
become inclusive of Service 4. Develop innovation policies functions
expertise specific to priority service 5. Cluster/network strategies
sectors (tourism, offshore that include Services
finance, BPO) 6. Govt. procurement to
5. Promote innovation in include Service innovation
offshoring services
Non- 1. Increase coverage of Services 1. Use deliberate polices for 1. Use regulation and
Innovation in regular and R&D and fostering R&D and innovation in standardization to support
policies Innovation statistics Services innovation
2. Use regulations that might 2. Modify financial and credit
trigger Services innovation systems to acknowledge
3. Analyse offshoring in Services intangible assets
conditions 3. Support policies aimed at
increased entrepreneurship
Source: Adapted from Rubalcaba, L., “Innovation and the New Service Economy in Latin America and the Caribbean,” June 2013
Table 5.4 below provides a synopsis of examples of Service Innovation Policies in five successfully developed
and developing countries.
Table 5.4 Five Examples of Service Innovation Policies
Type of Economy Country Main Innovation Policy Characteristics
Developed Finland Leading country in service innovation policies. Very innovative and dynamic policy.
Economies Specific programmes since 2001. SERVE programmes focus on promising service
companies and pioneers on the markets; “Pioneers of Service Business 2006-2013,
224mil. Euros). Key areas from 2011: natural resources and sustainable economy;
vitality of people; intelligent environments; business in global value networks, added
value by solution-based services and intangible concepts, renewing services and
production by digital means.
Germany Policy addressed to services, mainly linked to manufacturing industries. Export

orientation. Specific programmes for service innovation. Huge support from industries.
2008 Programme “Innovation in Services,” 15 m per year. Current focus on ICT
related services, knowledge-intensive services, biotechnology, nanotechnology,
hybrid services, utilizing technology and innovative service elements
Developing Countries China Decision to go for services and service innovation. 12th Five-Year Plan on S&T
Innovation for Supporting Service Sector Development. Focusing on technological
support, S&T innovation support, and industrialization of achievement of S&T
for modern services. Priorities on producer services, emerging services, S&T
services. Wide set of policies for supply and demand. Policy experimentation. First
experimental actions related to tax deductions.
Korea Service R&D Promotion Plan developed in 2010. Service innovation mainly
promoted through services R&D specific programmes:
• Education R&D Programme (5 billion KRW, 1 Euro =1500 KRW)
• Healthcare & Welfare Service R&D Programme (9 billion KRW (2012))
• Tourism & Contents Service R&D Programme (6 billion KRW (2012))
• Business Service R&D Programme (55 billion KRW (2012)
• SME Service R&D Programme (20 billion KRW (2012))
• Public Service R&D Programme (5 billion KRW (2012)
In this plan, the new growth high-value service industries were selected as target
investment service areas.
Jordan Modernization of services sector programme: three years (2009-2011) with

a budget of €16 million. Comprehensive policy development plan for services.
Beneficiaries of the programme are private service sector enterprises—SMEs—
relevant business associations, and public sector bodies. To assist Jordan to fully
benefit from the opportunities of trade liberalization of services in the context of
the GATS and the economic integration objectives of the Istanbul Protocol. Private
Services Sector Development: Support to SMEs and Business Associations in the
Services Sector (grant schemes for start-ups, loan guarantee, export credit guarantees
and venture capital, risk capital fund, clusters). Institutional capacity building. Service
policy building. All services are included but particular attention to knowledge-
intensive services, creative and cultural services, tourism, engineering services and
health travel.
Source: Adapted from Rubalcaba, L., “Innovation and the New Service Economy in Latin America and the Caribbean,” June 2013
5.4.4 Conclusions about A policy framework has to be developed and

the Caribbean’s Innovation innovation in services has to be deliberately
Framework for MSMEs promoted and rewarded at national levels.
The preceding findings on innovation in the Therefore, considerable work has to be done in
Caribbean can be summarised as follows: communications and education to successfully
restructure national innovation efforts towards
1. Generally, the larger and/or more developed Services.
countries are aware of the importance of
innovation to future economic growth. However, Notwithstanding these observations, there are
basic support structures are incomplete and are promising signs of a growing enthusiasm in the private
not as well organized as they could be in terms sector – especially among younger entrepreneurs–
of their comprehensiveness in supporting MSME for promoting their innovative ideas as sustainable
innovation initiatives. In particular, Caribbean business models. For instance, the innovative Ignite
countries do not have the equivalent of the Bayh- Project in Jamaica recently received more than
Dole Act, which fosters collaborative research 300 MSME responses to a Call for Proposals for
between educational institutions and MSMEs in creative and unique projects in Jamaica. But the re-
the United States. thinking of Innovation Policy priorities, especially in
support of MSME initiatives in Services, will require
2. For the most part, Caribbean countries’ considerable technical assistance from international
innovation programmes are mis-aligned with and regional donors, given the limited knowledge
regional economic trends, and development of that is “on the ground” on this subject in the Region.
innovation is seen much more as an industrial
rather than a service sector initiative. Commercial progress is also being made at the
business level. The Caribbean is experiencing
3. The importance of directing innovation support growth in CCIs, in offshore education and in BPO
to Services cannot be over-emphasised. services. There are also promising signs at the
Although Services is the leading economic sector digital level. Bitt, the Barbados-based digital asset
in the Region, its low productivity is depressing exchange/remittance channel/merchant-processing
overall productivity and competitiveness, which gateway, is the front-runner in the Caribbean’s
ultimately affect GDP growth. Therefore, crypto-currency eco-system. It received USD1.5 mn
innovation frameworks that are directed at this from Avatar Capital, a Caribbean investment group
sector are exceedingly important mechanisms based in Trinidad and Tobago. The Bitt Exchange
for addressing competitiveness and growth in is a cornerstone project for digital finance in the
the Region. Caribbean. It facilitates trade between traditional
and digital currency markets. According to Gabriel
4. There is no coherent roadmap for re-aligning Abel, Bitt’s CEO, “the company is creating the
Innovation policy towards Services Innovation. platform for very low cost international commerce
Essentially the Region is almost at “ground and remittances between the people who need it
zero” in terms of the establishment of a policy most – the millions of unbanked and under banked
framework to support Services Innovation citizens of the Caribbean”.
Policies.
Admittedly, similar initiatives that arise in other
5. Services Innovation is not going to emerge countries tend to be one-off success stories and are
or happen simply because Services is the not yet representative of the outputs of cohesive
dominant sector in the Caribbean. national innovation systems.
Moreover, the Caribbean needs to pursue more the strongest opportunities for innovation in
vigorously the MSME opportunities that are linked the Caribbean, for example: 1) Culture and
to Offshore Education and to BPO services. In that Creative Industries; 2) Offshore Education; 3)
regard, strong active policies need to be articulated Business Process Outsourcing.
to realise that goal (see Tables 5.3 and 5.4 above).
There are numerous issues still to be addressed.
5.4.5 Advancing and Re-thinking the These include fiscal incentives to invest in
approach to Innovation training services and in creative education;
access to financial resources; the introduction of
Three groups of recommendations emerge from this international standards for training institutions;
discussion on Nurturing Innovation in the MSME international certification systems for firms and
sector in the Caribbean. employees; increased infrastructure capacity,
such as Business Parks and broadband
1. Firstly, countries that are committed to capacity; and ICT literacy for MSMEs. Such
innovation should complete the establishment initiatives all need to be substantially expanded
of national innovation systems (NISs) and on a national basis. The implementation of
institutionalise those systems by integrating them such eco-systems will “signal” that the Region’s
into national development plans; national and support for innovative initiatives in the foregoing
sector strategies; and support programmes. sectors has been solidified and that MSMEs are
The “tipping point” countries are Trinidad being encouraged to orient their businesses
and Tobago and Jamaica. In that regard, it is in those growth areas. As noted earlier,
critical that Caribbean countries consider the the introduction of such policies needs to be
introduction of the equivalent of a Bayh-Dole effectively communicated to the MSME sector,
Act – which would encourage local universities to ensure that they are aware of the support that
to engage in joint research initiatives with Governments are prepared to provide to their
MSME investors and to retain or share title to investments in the three sectors.
the resulting inventions with the private sector.
Based on the contents of the various Framework
2. Secondly, the Caribbean should re-think options presented in this study, it seems that the
its innovation orientations from an R&D vertical approach in Table 5.3 would be the most
manufacturing/industrial focus to one that is relevant approach/framework option for many
primarily driven by or linked to Services. This Caribbean countries – on the proviso that SMEs are
would include cultural and creative industries increasingly exposed to/made eligible for support
such as music entertainment, craft and service under deliberately designed innovation Support
and product design. Jamaica, and to some Schemes for the Services sector.
extent Trinidad and Tobago, are both doing
this – but without clear Services Innovation Also, on the basis of the profiles proffered in Table
Policies or NISs. In other words, innovation in 5.4 above, it could also be concluded that the most
the Services sector needs to be highlighted as a appropriate model to investigate would be Jordan’s
national priority by the Caribbean governments because: 1) it includes the entire set of “starter”
and confirmed via deliberate articulation of programme elements associated with a focus on
service sector innovation policies. Service Innovation in the Caribbean; and 2) the
Caribbean has the institutional infrastructure in both
3. Thirdly, operational frameworks for supporting the public and private sectors to develop a similar
innovation should articulate clearer support Services Innovation initiative.
for MSME investment in sectors that offer
CHAPTER 6:
synthesisof major findings &

recommendations
CHAPTER 6: 6.3 Findings and

SYNTHESIS OF MAJOR Recommendations
FINDINGS AND Chapter 1: Optimal Development Path for
the MSME sector:
RECOMMENDATIONS
6.1.1 Use of a three-tiered approach
to MSME development strategy. It was
recommended that the MSME Development Strategy
6.1 Overview should adopt the three-tiered approach effectively

implemented in Singapore, Korea, Western Europe,
Costa Rica and other successful countries during the
Chapter 6 provides a summary of the major findings
past two decades:
and recommendations emerging from the research
carried out in Chapters 1 through 5. This synthesis • First Floor: support at the first floor, focusing on
includes the main issues emerging from: 1) the productivity and product quality enhancements
MSME sector profile, 2) access to finance, 3) the among MSMEs to strengthen competitiveness,
regulatory and policy framework, 4) the institutional job creation and GDP.
support framework, and 5) nurturing innovation in • Second Floor: strengthen and modernise the
the MSME sector. efficiency and effectiveness of organisations
and other intermediary structures providing
Each group of findings and recommendations is developmental and other services to the sector.
provided in sub-sections 6.2 to 6.6 below. • Third Floor: formulating enabling policies,
legislation and strategies thereby improving the
6.2 Optimal business friendly environment for MSMEs.
Development Path 6.1.2 Adoption of a standard definition and
for the MSME classification for MSMEs. A uniform typology

for MSMEs across the Region will greatly facilitate
sector consistency in the registration and analysis of MSMEs
as a distinct growth sector. The recommendation is
Chapter 1, Regional MSME Sector Profile, provided that microenterprises be classified as those with 1–5
a cascading overview of the regional MSME sector employees; small enterprises as those with 6–15
– beginning with a summary of global economic employees; and medium enterprises as those with
trends and their impacts on Caribbean economies, 16–50 employees.
followed by a general overview of the MSME sector
globally. These findings were used to chart an 6.1.3 Extension of the information
optimal development path for the sector over the gathered /coverage of business registries.
next decade. A regionally interconnected Registration Network
of Intellectual Property and Companies with the
capacity for accepting online registrations should
be established to accelerate the pace of MSME
formalisation; with a wider set of indicators (for
example, amount and source of capital, targeted
markets, amount of employees and gender, etc.) to developmental and other resources to MSMEs), in
inform policy at the national and regional levels; to many cases performing valuable work. However,
enable regional initiatives for sector development; they face substantial constraints such as limited
and to improve the region’s ‘Global Competitiveness’ financial resources, weak internal capacity and
and ‘Doing Business’ rankings. resistance to organisational change.
6.1.4 Engagement in more in-depth MSME 6.1.8 Need for enhanced focus on
research and development. A specialised innovation and enhanced productivity
unit should be established within the state agency (First Floor issues), especially in the
or ministry responsible for MSME development to services sector and those subsectors with
conduct on-going sector research. The unit should good export prospects such as creative
interface with the registry and help provide reliable industries, offshore education, health
and current statistical and anecdotal data on the tourism, etc.
MSME sector to inform policy makers, planners and
financiers. Chapter 2: Improving MSME Access to
Finance
6.1.5 Analysis of expenditure by MSMEs.
CDB’s BMCs should attempt to estimate annually the 6.2.1 Develop training programmes
contribution of the MSME sector to GDP, specific aimed at enhancing the capacity of
sectors, employment, foreign exchange earnings, MSMEs to improve financial management
etc. This will allow the Region to establish the of their operations in line with financiers’
economic impacts and benefits of the MSME sector information needs. This is the main challenge
and to inform both new and modified approaches that MSMEs face −the capacity to demonstrate
to MSME policy. that management of their businesses and resources
are “information based” and that they have
6.1.6 Establish a new policy direction. institutionalised such approaches to running their
Government resources should concentrate on operations on a day-to-day basis.
sector research geared towards enhanced policy
formulation and implementation; quality standards 6.2.2. Expand the range of financial
enforcement; agency and programme coordination; products available to MSMEs. Governments
performance monitoring and information should expand the range of financial products
dissemination; and liaison with donor agencies. In offered to MSMEs in the BMCs along similar lines to
addition to promoting entrepreneurship development those offered to MSMEs by OECD countries53. This
through a more equitable fiscal incentives regime can be achieved by accessing and re-deploying
and other initiatives, the new policy initiatives should under-tapped institutional funds such as the NIS and
embrace the shift towards concentration on “first the proposed Dormant Account Scheme in Jamaica.
floor” results (enhanced innovation, productivity, The most important mechanism is the creation/
competitiveness). expansion of Credit Guarantee Schemes. Apart
from inadequate financial management literacy,
6.1.7 Explore avenues to strengthen BSO MSMEs have limited collateral. This is another of the
delivery capacity. Numerous BSOs, both public major reasons they experience difficulty in accessing
and private, occupy the Second Floor (provision of loans from the financial system.
53
The Small Business Bureau (SBB) in Guyana, supported by IDB funding, is an example of how a credit guarantee system can
work for very small MSMEs in that country.
6.2.3 Introduce tax reforms that allow access” mechanisms to facilitate greater
formal MSMEs to retain a larger share of business intelligence with respect to
their profits and cash flows. Increased cash external markets. An excellent example of
flows will improve MSME attractiveness to local information access is T&T’s “Made-in-TnT” portal,
financiers. Admittedly, such reforms may be more which promotes more than 400 products in 19
difficult in some countries than in others, partly product categories online. Overall, both measures
because of the stringent fiscal conditions that many are likely to increase the growth and income
Caribbean countries currently face. generating prospects for MSMEs operating in an
expanded global market place. This should improve
6.2.4 Increase the adoption of tax reforms the bankability of (export-oriented) MSME projects
that shift the burden of taxation away to local financiers.
from direct taxes to indirect taxes. This
would improve MSME “formality” and reduce 6.2.9 Introduce regulatory reforms
administrative inefficiency of the tax system generally. that would allow Accredited Financial
Institutions (AFIs) and Microfinance
6.2.5 Introduce labour reforms that allow Institutions (MFIs) to take deposits and
MSMEs to be more flexible in terms of offer an expanded range of financial
hiring and firing labour. Apart from taxation, products to their MSME clients. This would
this is the second most important reason informality strengthen such institutions and allow them to be
thrives in the Caribbean private sector. more creative in providing access to finance.
6.2.6 Create stronger tax incentives to 6.2.10 Increase the inclusiveness of Credit
increase financial intermediation and Unions by granting them access to SME
encourage MSMEs to seek out alternative financial programmes as Development
forms of investment funds (other than bank Finance Institutions (DFI) recipients −
loans) via such mechanisms as the Junior Stock including funding, credit guarantees and technical
Exchange in Jamaica. This would strengthen the assistance in risk management.
Finance Life Cycle for MSMEs.
6.2.11 Put in place legislation that would
6.2.7 Improve the enabling environment allow each Caribbean country to adopt
for access to credit by: a) introducing Credit Mobile Banking solutions at every level. Like
Bureaus; b) opening up credit bureau information MPESA in Kenya, this should contribute substantially
access to foreign financiers so that alternative to improved MSME productivity.
funding sources such as crowdsourcing, angel
investments and P2P investments can become more 6.2.12 Examine the feasibility of
available to Caribbean MSMEs; and c) upgrading establishing Mutual Guarantee Schemes in
Bankruptcy laws to allow insolvent companies to the larger Caribbean countries. Such schemes have
return to the financial systems more quickly than is worked reasonably well in European countries that
currently possible under outdated Bankruptcy laws. have a high proportion of SMEs (e.g. Spain and
All three initiatives will improve the bankability of Italy). Their potential viability should be examined in
MSME project proposals in the region. the Caribbean Region.
6.2.8 Overcome the limitations of domestic 6.2.13 Create incentives to encourage

markets by: a) promoting and fiscally the informal sector to formalise their
favouring export growth of MSMEs; and businesses. Attractive incentives through very
b) increasing the use of ICT “information good, well thought out policy can make a significant
difference. These can include low cost and readily 6.3.3 Focus on private sector funding of
available ICT-designed or app-based training innovation initiatives. Government support and
programmes; fiscal incentives to access training funding for innovation policy is generally low in the
from BSOs; simplified and lower tax rates (noted Caribbean, and thus, international donors fund most
above); access to government contracts etc. innovation and competitiveness strategies. Ideally,
funding should come from the private sector also,
The preceding recommendations are mostly policy- which is more efficient in stimulating applicable
based. The reason is that such an approach would innovation (also see recommendations under
afford more comprehensive coverage in addressing Chapter 5, below).
the “access to finance” challenge in the Caribbean.
The following two recommendations (i.e. improving 6.3.4 Improve worker productivity. Hands-
MSME financial literacy and expanding Credit on training and in-factory counselling are vital
Guarantee Schemes) are the ones that are likely to support services required by MSMEs, especially
have the greatest impact on improving Access to those producing for international markets.
Finance. These include assessing and improving working
conditions; workplace co-operation; quality
Regional Collaboration management; occupational safety and health; time
and cost management; customer care; and service
An effective way to establish regional collaboration excellence.
on improving access to finance is to establish
a benchmarking system that allows access to 6.3.5 Increase ICT usage by MSMEs.
information on MSME-related developments in the Encourage and facilitate ICT training as an important
financial sector across the BMCs. enabler of enhanced productivity, increased
domestic and external market penetration etc.
Chapter 3: Regional Policy and Regulatory Towards this end, several policy areas must receive
Frameworks attention for ICTs to become a sustained enabler of
MSME economic growth and development. These
6.3.1 Refocus MSME Policy. The BMCs should priority areas are: a) appropriateness of the legal
refocus the regulatory and policy frameworks to and regulatory infrastructure for ICT development
promote greater efficiency and effectiveness in (modernisation of the Telecommunications Acts
facilitating expansion of a strengthened and more and regulations in particular where necessary);
sustainable, productive and competitive MSME strong regulatory frameworks that can lead to the
sector. establishment and maintenance of competitiveness
within the sector and thereby maximise access
6.3.2 Pursue the Establishment of a to ICT services; and c) enhanced private sector
business-friendly environment as a top investment, particularly in broadband infrastructure.
priority. The consensus vision for a business-
friendly environment must be premised on the 6.3.6 Grow Entrepreneurship Culture
overriding priority of developing and growing a through Education Reform. A new
competitive MSME sector by international standards. Entrepreneurial Studies syllabus should include
In this way, the sector can contribute to the creation modules on ICT, Financial Literacy, Marketing,
of quality employment, boost productivity levels, and Management, Accounting and Innovation.
improve the quality and range of goods and services The shift to Business Management should address
available to domestic and overseas consumers and also the skills gaps in Tourism and Hospitality,
processors. Agricultural Science, Financial Services and
Co-operatives at the supervisory, technical and
managerial levels. Renewed emphasis on attracting reporting to the Central Ministry; and i) inclusion
more students to the vocational trades is also vital in of risk analysis, risk management and mitigation
view of the shortage of these skills in the Construction strategies.
and other Industries. Among repeated suggestions
for increasing knowledge transfers, stakeholders 6.3.9 Articulate an MSME Development
also recommended a regional initiative to digitise Strategy. The strategy should focus on
the delivery of MSME Training and Education (e.g. strengthening at least the following activities towards
online, video-training, Webinars). improved business performance: a) promotion of
market access and competitiveness of MSMEs; b)
6.3.7 Improved trade facilitation. Trade enabling MSMEs to access the resources needed
policy priorities that will bring value to MSMEs to respond to economic opportunities; c) ensuring
include the removal of inefficiencies in the trading increased use of social media to promote enterprise
system; building national and regional trading culture and best practices; d) dissemination of
capacities; establishing harmonised regulatory programmes that encourage widespread public
frameworks to increase market access; building awareness of the definition, policies, laws and
capacity in the productive sectors and the adoption strategy; and e) encouraging innovation in domestic
of harmonised standards and practices. companies as a path to accelerated expansion.
6.3.8 Develop a Model MSME Policy as a Chapter 4: Strengthening Institutional

Guide for the Region. Support Frameworks
The policy should include but not be limited to: a)
clarification of the different roles of government 6.4.1 Promote technical cooperation
institutions (for example, identification of a single among Registries. Technical cooperation
Ministry with overall responsibility for MSMEs), among the Registries in all CDB Member States
of private sector financiers and other non-state is needed to improve the quality and currency of
actors; b) identification of strategies for MSME business data made available to researchers and
capacity building and formalisation of the sector, planners. A computerised, all-inclusive Regional
including fiscal initiatives, eligibility for government Business Register connecting the national registries
procurement contracts etc.; c) formulation of is crucial for collecting and synthesising and
strategies for improved MSME Access to Finance; researching reliable data on business registration
d) institutional strengthening initiatives for public within and across the CSME member countries.
and private sector BSOs; e) establishment of a
division within central government ministries to 6.4.2 Disseminate information with
address specific needs of MSMEs including use of respect to policy, legislative and
a registration “Super form”; f) facilitating increased regulatory frameworks within the Region.
access by more entrepreneurs (especially women The governance and operations of all support
and youths) to online, web-based training; g) organisations and agencies require supervision.
entrepreneurship training provided throughout the Conducted regionally and utilising globally accepted
formal education system etc.;54 h) establishment of criteria, emphasis should be placed on performance
a set of Key Progress Indicators (KPI) by which to monitoring, ranking and on disseminating quality
evaluate progress on the sector initiatives and for information on a predictable frequency in respect of:
54
For a full list of the contents or areas of coverage see section 3.3.7 MSME Model Policies.
a) ministries and lead agencies in transforming their screening and post loans assistance performed by
policy, legislative and regulatory framework; b) non- competent staff in the BSOs and BDAs, the credit
financial service providers in delivering training and unions can be assisted in setting up special desks or
technical assistance; and c) financial institutions and units that specialise in MSME loans.
related mechanisms in enhancing access to finance.
6.4.5 Develop regional online training
6.4.3 Improve private, public sector programmes for MSME development.
collaboration and enhance institutional A regional or international development
strengthening for Capacity Development: institution can lead an initiative aimed at fostering
The regional business development policy should the development of an online facility aimed specifically
deliberately encourage Public-Private Partnerships at MSME training for business development. The
(PPPs) and more private sector service providers objective of this online facility would be to provide
(professionals, firms and associations/BSOs) to instant access to MSMEs, via mobile technology, of
sell affordable capacity building services to a business training, toolkits and operating guidelines,
larger proportion of businesses. Shared resources especially in business management and financial
and services, amalgamations and mergers, where literacy. Access to training information can be
suitable, with other like-minded but strategic provided via a combination of apps and online
organisations, will increase their sustainability. videos that allow entrepreneurs to obtain needed
Additionally, institutional strengthening and information electronically.
certification possibly through donor investments
can lead to a stronger network of viable BSOs Chapter 5: Nurturing Innovation in the
specialised as efficient, streamlined and effective MSME sector
providers of core services in the areas of Training,
Technical Assistance/Coaching, Business Plan 6.5.1 Countries committed to innovation
Development and other development services to should complete the establishment of
increase MSME productivity. Towards this end, national innovation systems (NISs), and
technical interventions by a regional or international institutionalise those systems by integrating them into
development agency can prove cost-effective, national development plans, national and sector
especially by making maximum use of regional strategies and support programmes. In this regard,
and international best practices. A combination of it is critical that Caribbean countries consider the
private, public and donor investments in training, introduction of the equivalent of a Bayh-Dole Act –
marketing and enhanced production processes will which would encourage local universities to engage
lead to higher productivity levels within an increased in joint research initiatives with MSME investors and
number of MSMEs. to retain or share title to the resulting inventions with
the private sector.
6.4.4 A public-private partnership (PPP)
network should be explored between 6.5.2 The Caribbean should re-think its
selected Microfinance Institutions, innovation orientations from an R&D
Business Development Agencies (BDAs) manufacturing industry focus to one
and BSOs to facilitate a larger flow of that is primarily driven by or linked to
domestic resources into MSME growth and Services. This would include cultural and creative
expansion. Using Barbados and Belize as pilots, industries such as music entertainment, craft and
cooperation between 3-4 large credit unions and service and product design. Jamaica, and to some
Fund Access in Barbados and likewise between extent Trinidad and Tobago, are both doing this
the 4 largest Credit Unions in Belize, BEST, DFC – but without clear Services Innovation Policies or
and BELTRAIDE is envisaged. With competent pre- National Innovation Systems (NISs).
Innovation in the Services sector needs to be The roadmap should include: a) the reconciliation of
highlighted as a national priority by Caribbean innovation priorities with the national development
governments and confirmed via deliberate planning system; b) the mapping of the current status
articulation of service sector innovation policies. of country-specific innovation eco-systems; c) the
defining of the National Innovation System and d)
6.5.3 Operational frameworks for assignment of institutional responsibility for leading
supporting innovation should articulate the development of the innovation eco-system.
clearer support for MSME investment
in the export sectors that offer strong The roadmap should also lead to: a) the defining of
opportunities for innovation, for example: sector level innovation priorities; b) the realignment
a) Culture and Creative Industries, b) Offshore of innovation support programmes in line with sector
Education, and c) Business Process Outsourcing. The innovation policy; c) the establishment of a strong
issues to be addressed include fiscal incentives to communications strategy and work plan that would
invest in training services and in creative education; ensure that government, the private sector and civil
access to financial resources; the introduction of society are on the same “innovation focussed”
international standards for training institutions; page in terms of national and sector priorities; d)
international certification systems for firms and comprehensive promotion of Innovation Awards;
employees; increased infrastructure capacity such and e) the establishment and implementation of a
as Business Parks and broadband capacity and ICT Monitoring and Evaluation (M&E) system to monitor
literacy for MSMEs. Such initiatives all need to be progress in NIS implementation.
substantially expanded at the national level. The
implementation of such eco-systems will “signal” the
Region’s support for innovation in the three sectors.
6.5.4. A roadmap to support the

development of an innovation eco-system
should be developed – primarily because none
of the BMCs reviewed in this study yet has National
Innovation systems.
appendix
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APPENDIX 2A: TEMPLATE - INFORMATION REQUESTS

3A - Interview questions
Section 1: Introduction
1. How do you define MSME Development?
2. Do you believe that MSME is a priority here?
3. If “no”. Why?
4. If “yes”, why do you think MSME development is a national priority?
5. How has the development of MSMEs in (COUNTRY) evolved?
6. Do you believe that informal (unregistered) businesses should be formalised? Please explain.
7. a) What are the pros and cons of MSME development as it relates to entrepreneurship?
7. b) What are the pros and cons of MSME development as it relates to social justice?
7. c) What are the pros and cons of MSME development as it relates to Economic Growth and Development?
7. d) What are the pros and cons of SME development as it relates to Global Competitiveness?
8. Are you aware of, or are involved in, donor funding or government subsidies for MSMEs?
8. a) If yes, what are the benefits and the downsides? In what ways would you say that these public sector and donor
interventions have helped to impact MSME growth, development and/or expansion?
Section 2: MSME Sector Profile
9. How do you define and classify MSMEs in (COUNTRY)?
NOTE: For this Study, we classify MSMEs as follows:
Micro : 1-5 employees;
Small : 6-15 employees;
Medium: 16-50 employees.
10. Should this definition and classification extend/apply to the wider Caribbean?
11. Allow me to share the latest Performance Statistics for Small Businesses in (COUNTRY).
Would you agree that the specific economic indicators required to measure performance in a MSME should be:
• Profitability – net profit margin
• Liquidity – current ratio - assets/liabilities
• Debt – accounts payable
• Asset turnover – operating expense ratios
• Employees - Number and levels.
12. Would you suggest any other major economic indicators of performance from global observations?
13. What, in your opinion are the strengths of the MSME sector?
14. What are the weaknesses?
15. What opportunities are available for MSMEs here?
16. What are the threats to this sector?
Please share your opinion on how the following factors affect MSME development in (COUNTRY) and in the wider Caribbean.

3A - Interview questions cont’d.
17. Please share your opinion on how the following factors affect MSME development in (COUNTRY) and in the wider
Caribbean.
Internal Factors:
17. a) Growth in consumption by customers (so growth in demand)
17. b) Scale of operations
17. c) Ease of Entry into production, markets
External Factors:
17. d) Enabling legislation/policy
17. e) Structure of business concessions, incentives
17. f) Support agencies and advocates
17. g) Unfriendly government bureaucracy
17. h) Obstruction from big business (land, space, input prices, utilities)
17. i) Labour market environment (permits, social security, filling vacancies, trade unions)
17. j) Information technology
17. k) Intellectual Property
17. l) Business Plans
17. m) Equity Investment/capitalisation
17. n) Collateral-based financing
Quality of programmes to address the following among MSME owners& operators:
17. o) Low education levels
17. p) Weak management capacity
17. q) Poor skills mix in service, marketing and finance?
17. r) Lack of continuity: failure of donor-funded MSME development projects to become institutionalised?
18. What is your vision of the MSME sector in 10–20 years, if the appropriate reforms are implemented?
19. In your view, does Government operate on a clear and integrated policy concept of its optimal role in the development
of MSMEs?
20. Should government be the main driver of financial and non-financial support to MSMEs?
21. Does the current approach coincide with/support the need to build economic competitiveness?
22. What roles do you ascribe to non-government and private sector Business Support Organisations (BSOs)? Why?
23. On a scale of 1 (low)-10 (high), how would you rank (COUNTRY) in respect of the adequacy of access by the majority
of MSMEs to financing?
24. Please share your opinion on what improvements are desirable in the following areas where MSMEs are concerned:

3A - Interview questions cont’d.
24. a) Collateral requirements?
24. b) Risk-based lending?
24. c) Savings- based lending
24. d) Additional financial products desired?
24. e) Success rates of Government funded Revolving Credit Programmes?
24. f) Success rates of For-Profit Microfinanciers?
25. Generally, why do you think MSMEs experience difficulty in accessing finance?
26. Rank on a scale of 1 (low) -10 (high) the relative importance of the eight factors below in reducing/eliminating typical
financial challenges:
26. a) Enlightened Bankers and other Financiers keen to grow MSMEs
26. b) Strong MSME management capacity
26. c) Growth-sensitive Tax systems
26. d) High interest rates & fees
26. e) Incentive regimes
26. f) Business Plans
26. g) Seed capital
26. h) Reliable technical coaching
27. Can you share with me examples of unique self-sustaining development finance initiatives that can be linked or
replicated or adapted regionally?
28. Please share any planned or enacted Legislation and Policies in your country or elsewhere in the region that would
encourage improved access to financing for MSMEs.
29. What role can regional bodies like the CDB play in improving the policy and legislative framework for same?
30. Are there any new and noteworthy MSME legislation, capacity developments, champions in your country for a stronger
network of institutions supporting this sector? If yes, please share.
31. Please identify organizations/agencies that provide technical assistance to MSMEs, e.g.:
• Adoption of International Standards,
• Best Practice Manuals,
• Technology upgrades,
• Quality Testing & Monitoring,
• Worker Training and Certification,
• Other ____________________

3A - Interview questions
32. Mindful that such services often present sustainability challenges, what national and regional institutional arrangements
do you think, can be attempted to improve cost effectiveness?
33. What importance do you attach to stimulating innovation in order to strengthen this component of the Business
Community?
34. How will information sharing help in this respect?
35. What other entrepreneurial approaches, do you believe, can impact future MSME development?
36. ANY OTHER COMMENTS appreciated.
APPENDIX 2B: FINANCIAL INFORMATION REQUEST
NAME OF INSTITUTION:
COUNTRY
A. Lending Policies:
I. Does your Financial Institution have in place a II. If yes, can you share a copy of this document
specific policy and procedures document for with us?
Business Loans? ☐ Yes
☐ Yes ☐ No
☐ No
If yes, can you share a copy of this document with
us?
☐ Yes
☐ No
B. Statistics on Customer/ Member Products and Accounts:
1. Do you offer the following products/ services?

Please provide information as at December 2015, if possible.
FACILITY YES NO
# of Clients
Cheques
Credit Cards
Debit Cards
ATM
Bill Payment
Remittances
Loan Protection Insurance
Life Savings Insurance
Funeral Insurance
APPENDIX 2B: FINANCIAL INFORMATION REQUEST
II. Business Loans Portfolio Size & Quality (in US$):

Please provide information for years ending December 2014 & 2015, if possible.
a) Total number of Business accounts →

Percentage of Total Number of Client Accounts →
Number of *Non-Performing Business Accounts →
Percentage of total number of Business accounts →
*Payments in default 90 days and over.
b) Total value of Business accounts →

Percentage of Total Loan Portfolio value →
Value of Non-Performing Business Accounts →
Percentage of Business Sub-Portfolio value →
III. Business Savings & Deposit Accounts (in US$):

a) Value of all Savings Accounts held by Businesses →
Value of Total Savings Accounts held →
b) Value of all Fixed Term Deposit Accounts held by Businesses →

Value of Total Fixed Term Deposit Accounts held →
C. Pricing & Requirements for Business Loans:
Rates Range: _________

Applicable Fees: _________
Minimum Deposit: _________
Any other details/conditionalities: _________
APPENDIX 3: LIST OF PERSONS CONSULTED/INTERVIEWED
COUNTRY NAME ORGANISATION
Andrea Joseph - Senior Lending Officer Antigua and Barbuda Development Bank
Andre Marshal - Lending Officer
Acres Stowe National Development Fund
Rohan W. Anthony – Statistician Statistics Division
Aba Scotland - Statistician
ANTIGUA Hon. E.P. Chet Greene – Minister Ministry of Trade, Commerce & Industry
Sandra Joseph – Permanent Secretary
(13 Persons) Karl Spencer – General Manager Community First Cooperative Credit union
Jamilla Gregory – Business Development Antigua and Barbuda Chamber of

Officer Commerce
Ricki Camacho - Registrar Intellectual Property Office
Jacqueline Yearwood - Enterprise Antigua and Barbuda Investment Authority

Development Director
Julianne Jarvis - Project Implementation Coalition of Service Industries
& Dev’t Officer
Nasel Phillip-Samuel – Project Officer Ministry of Trade, Commerce & Industry
LeVere Catlyn – Financial Controller Barbados Public Workers Co-operative

Judith Sarjeant - Business Innovation & Credit Union
Facilitation
Misha Clarke - Project Manager Barbados Coalition of Services Industries
Aubrey Browne - Director Barbados Statistics Service
Trevor David – Deputy Director
Patrick Kendall – Economist Consultant Caribbean Development Bank
BARBADOS Damie Sinanan - Senior Advisor Trade and Caribbean Export Development Agency
Export Development
Steve Belle – CEO City of Bridgetown Credit Union
(26 Persons) Norman Belgrave – Financial Controller
Algernon Yearwood – Chief Operations
Officer
Joseph Holder – Loans Manager
Kevin Hunte - Deputy Registrar, Companies Companies and Business Registry
Corporate Affairs and Intellectual Property
Office (CAIPO)
Tara Lisa Persaud - Business Climate Inter-American Development Bank -
Reforms Coordinator Compete Caribbean
Celene Cleland-Gomez – Coordinator,
Enterprise Innovation Challenge Fund (CIF)
Wayne Elliott, Project Development Officer
Hamilton Roach – General Manager The Barbados Agency for Micro Enterprise
Michael Callendar - Credit & Project Manager Development Ltd. (FundAccess)
Gerald Amos, Information Systems Manager
Egbert Irving – Programme Manager UWI Cave Hill School of Business
Hon. Donville Inniss – Minister Ministry of Industry, International

Philmore Best – Permanent Secretary Business, Commerce and Small Business
Anderson Cumberbatch – Director, Business Development
Development Unit
Jenson Sylvester – Director, Managed Services C&W Business
Jonathan Sylvester – Sales Engineering
Manager
Marina Taitt - Director Export and Business Barbados Industrial Development
Dev’t Corporation
Dr. Marcia Brandon Caribbean Centre of Excellence for
Sustainable Livelihoods
Natalie Goff – General Manager Development Finance Corporation (DFC)
Renan Gongora –Credit Delivery Manager
Judith Leslie – Credit Administration and Loans
Recovery Manager
Yvonne Hyde - CEO Ministry of Economic Development
Ruby Pascascio – Senior Projects Officer SBDC BELIZE

Nilda Sosa-Riverol - Manager
BELIZE Dennis Jones – Managing Director Belize Enterprise for Sustainable Technology
(BEST)
(17 Persons) Patricia Rodriguez Belize Companies and Corporate Affairs
Hugo Moguel - President Coalition of Service Industries
Melanie Eiley - Admin/Accounting Officer
Kim Aikman - CEO Belize Chamber of Commerce & Industry
Corine Fuller - Manager Belize Credit Union League

Deanna Gomez - Business Dev’t Officer
Daisy Dawson - Manager St. John’s Credit Union
Earl Arthurs - Accountant
Yadele Urbina - General Manager La Immaculada Credit Union

Clement Usher – General Manager Holy Redeemer Credit Union
David Marquez – General Manager City of Port of Spain (COPOS) Credit Union
Michelle Wallace - Finance Manager
Yola Charles - Loans Manager
Joy Francis – Manager Business Dev’t Trinidad and Tobago Manufacturers

Association (TTMA)
TRINIDAD & Julian Henry – CEO National Entrepreneurship Development
TOBAGO Curtis Mayers - Corporate Business Analyst Company (NEDCO)
Trinidad and Tobago Export-Import (EXIM)
(13 persons) Brian C. Awang – CEO BANK
Francis Sandy - Deputy Registrar Registry of Companies
Denise Dickson-Cunningham - Manager, New Trinidad and Tobago Agriculture
Business & Product Dev’t Development Bank (TTADB)
Valerie Jack - Monitoring Officer
Kelvin Sargeant - Regional Specialist, International Labour Organisation (ILO)
Sustainable Enterprise Development & Jobs
Creation
Sharon Mark - General Manager Eastern Co-operative Credit Union
Sherry McDonald - Financial Controller
Hon. Emma Hippolyte – Minister Ministry of Commerce, Business
ST. LUCIA Alison Plummer - Permanent Secretary Development, Investment and Consumer
Affairs
(14 Persons) Emmanuel Gerald – Director, C& I Department of Trade and Commerce
Junia Emmanuel-Belizaire - C&I Officer
Barbara Innocent - Director, Small Business Small Business Development Centre (SBDC)
Development
Edwin St. Catherine - Director of Statistics Department of Statistics
Gayle Devaux-Segovia – Director NATMED Herbals
Brian Louisy - Executive Director Chamber of Commerce, Industry &
Agriculture
Paula James - Executive Director St. Lucia Manufacturers Association
Yvonne Agard - Executive Director St. Lucia Coalition of Service Industries
National Research and Development
Ronald Charles - Executive Director Foundation
Gordon Charles – President OECS Business Council
Levi Serieux - Business Lending Officer Bank of Nova Scotia

Priscillius Simeon - General Manager Mon Repos Credit Union
Donovan Wignal - CEO MSME Alliance
Hon. Anthony Hylton - Minister Ministry of Industry, Investment and Commerce
Andrene Collings - MSME Director
Gillian Hyde – CEO Jamaica National Small Business Loans
JAMAICA Company
Hugh Johnson - President Small Business Association of Jamaica
(15 persons) Orville Plummer - Project Manager Heart Trust NTA
Sandra Glasgow - CEO Jamaica Exporters Association
Jackie Mighty – CEO City of Kingston Sodality Cooperative Credit
Union
Marjorie Straw - Project Manager JAMPRO
Valarie Viera – CEO Jamaica Business Development Corporation
Judith Ramlogan Companies Office of Jamaica
Edward Chin-Mook, President Caribbean Association of Small and Medium
Enterprises
Martin Blackwood - General Manager Portland Co-operative Credit Union
Fitz Gerald Rowe - General Manager St. Elizabeth Co-operative Credit Union Ltd.
Terrence Cooper - CEO CRIF-NM Credit Assure Ltd.
Adrian Thompson – CEO Credit Union Fund Management Company
Nicole Prince Runuka - Registrar Guyana Deeds Registry
GUYANA Abu Zaman - Branch Manager Bank of Nova Scotia
Ms. Roxanne Sumner – Senior Investment GOINVEST
(17 Persons) Facilitation Officer
Clement Duncan – Director Guyana Manufacturers Association
Yonette Jeffers – Director
Lance Hinds – President Georgetown Chamber of Commerce
Ivor Coates – Statistician Central Bureau of Statistics
Ramesh Persaud - CEO Institute of Private Enterprise Development

IPED
Reshma Ramratan - Research Officer Central Bank of Guyana
Jason Allicock - Economist II
Collin Dejouge - Corporate Manager Republic Bank
Michelle Johnson - Marketing Manager
Ian Grant - Senior Credit Officer
Deborah Young - Senior SME Officer
Gillian Edwards - Manager Small Business Bureau
Evadnie Enniss - Director Guyana Bureau of Standards
Manjula Brijmohan - Executive Director Guyana Small Business Trust
DOMINICA Mr. Sobers Esprit - Business Dev’t Officer, OECS Export Development Unit
Creative Industries
(2 Persons) Mr. Marlon Marie - Business Dev’t Officer,
ICT & E-Business
ST. KITTS Daniel Arthurton - Advisor Eastern Caribbean Central Bank
NEVIS
(1 Person)
Wonnie Boedhoe - Managing Director NOB (National Development Bank)
Rathan Kalka - Coordinator, Business Suriname Business Forum
Support Services and Coalition of
SURINAME Services Industries
Anil Pardairt - Chairman KKF (Chamber of Commerce and Industry)
(15 Persons) Prija Soechitram - Legal Officer
Guilliano Koornaar - Manager, Economic ABS (General Bureau of Statistics
Division
Selvyn Bishop - Staff Member, Research
and Planning
Edwin Watson - Chairman GODO Credit Union
Wigo Bilkerdjk - President ASFA (Association of Surinamese
Manufacturers)
Montague McLeod - Director, Corporate Republic Bank, Suriname
Banking
Maureen Badjoeri – CEO Trustbank (MSME financier)
Clarence Tokromo - Micro Credit
Coordinator
Rocky Samidin - Business Banking
Kenneth Foe-A-Man - Director Suriname Competitiveness Unit
Amit Chanderangsingh - CUS
Coordinator
Hon. Sieglien Burlerson - Minister Ministry of Trade and Industry
APPENDIX 4: ANALYSIS OF SME ACCESS TO FINANCE IN EIGHT BMCS
This appendix offers an analysis of SME access to finance in eight BMCs: Antigua and Barbuda, Barbados,
Belize, Guyana, Jamaica, St. Lucia, Suriname and Trinidad and Tobago. It is based on a combination of:
1) original research and 2) findings summarised in the IDB’s Private Sector Assessment Reports (PSARs).
The OECS: Antigua and Barbuda and St. Lucia
Table A1 below, shows loans advances and overdrafts for Antigua and Barbuda and St. Lucia, recorded
by the Eastern Caribbean Central Bank over the period 2009 to 201355. The data reveal that loans,
advances and overdrafts (LAO) contracted in Antigua and Barbuda by 8.4% during the five-year period.
This contrasts with a 12.5% overall growth in St. Lucia over the same timeframe. The diverging numbers
are understandable since Antigua and Barbuda was one of the hardest-hit high tourism economies during
the global financial crisis of 2008, when its GDP registered, on average 1% negative growth per year
from 2008 to 2014. In comparison, St. Lucia experienced modest gains of 0.10% per year in GDP over
the same period.
55
Data adjusted by deducting loans and advances to 1) financial institutions and 2) government services .
APPENDIX 4: ANALYSIS OF SME ACCESS TO FINANCE IN EIGHT BMCs
Table A1: % Changes in Loans and Advances in Antigua/Barbuda and St. Lucia, 2009 -2013

Overall
Country 2009 2010 2011 2012 2013 Change
Antigua and Barbuda 0.17% -3.3% -3.22% -2.27% -8.40%
St. Lucia 3.27% 2.65% 6.62% -0.45% 12.50%
Source: Eastern Caribbean Central Bank Financial Statistics Yearbook, 2014
According to the Private Sector Assessment Report (PSAR) of 2014, Antigua and Barbuda was ranked
130th (out of 189 countries) in the World Bank’s 2014 Doing Business (DB) report in the “getting credit”
category. Addtionally, the local credit market is relatively inefficient when measured by the spread between
lending and deposit rates. Given the important role played by finance in the development process, the
country’s poor DB ranking in terms of access to credit represents a significant constraint to private sector
development and growth.
Antigua and Barbuda is served by seven commercial banks and six non-bank financial institutions; however,
at roughly 8 percentage points, it has one of the widest interest-rate spreads among its comparator group of
countries, although the Seychelles, Guyana, Jamaica and Haiti have significantly wider spreads. Antigua
and Barbuda has attempted to fill the credit void through the establishment of a national development
bank, but the credit needs of the private sector significantly outstrip those available resources. Key policy
interventions that are required include setting up a public credit registry and support for the establishment
of a private credit bureau56. The lack of information on borrowers means that risks are perceived as higher
than they might otherwise be, and banks therefore demand higher interest rates and greater collateral.
Legislative changes are also required to provide greater protection for creditors.
The St. Lucia 2014 PSAR generated similar perspectives on that country’s “getting credit” status. St. Lucia
has a number of finance providers, including public-sector institutions such as the St. Lucia Development
Bank (SLDB), whose mission is to facilitate enterprise and sustainable socio-economic development by
providing accessible and affordable financial, technical and advisory services. However, according to
the World Bank’s Enterprise Survey (2010), 35% of businesses interviewed cited access to finance as the
biggest obstacle to doing business in St. Lucia. Private sector stakeholders interviewed stated that finance
was either difficult to obtain because of collateral requirements or too costly in terms of interest rates.
56
There is a regional Credit Rating Agency, CariCRIS, but it rates regional debt markets and does not provide/cover individual
credit ratings.
At the end of 2010, bank deposits stood at over 92% of annual GDP and the ratio of bank credit to
deposits was 122%, the highest in any of the comparator countries. Despite this high conversion ratio, the
island was still ranked relatively low, at 130th (out of 189 countries), for ease of accessing credit, and only
24% of businesses had either a loan or line-of-credit services.
Business finance on the supply side has the perceived (higher) risk associated with providing loans to the
small-business sector, while on the demand side, many entrepreneurs and small businesses lack the ability
(in terms of record-keeping, constructing business plans and so on to access available lending facilities.
Moreover, St. Lucia’s credit market is fairly inefficient when measured by the spread between lending and
deposit rates relative to those in other Caribbean countries. At roughly 8 percentage points, the island has
one of the higher interest-rate spreads of any of the comparator countries. Importantly it should, be noted
that the reserve requirement level is set by the Eastern Caribbean Central Bank (ECCB) which suggests that
the total funds available for lending are less than the amounts deposited. However, in 2015 the ECCB
opted to reduce the minimum deposit rate from 3% to 2%, a policy that could lead to gradual reductions in
loan rates in ECCB member countries.
Barbados
Table A2 below illustrates the growth in loans, advances and overdrafts in Barbados between 2009 and
2013.
Table A2: % Changes in Loans and Advances in Barbados, 2009 - 2013

Overall
Country 2009 2010 2011 2012 2013 Change
Barbados -1.34% 1.46% 6.31% -2.57% 3.69%
Source: Central Bank of Barbados online statistics, 2016
The growth rates in loans, advances and overdrafts in Barbados appear to be just as anaemic as those
experienced in Antigua and Barbuda over the same period. Barbados, like Antigua and Barbuda, is also
heavily dependent on tourism, a sector that, prior to 2014, had been performing quite poorly, especially
in terms of stay-over visitors and the average spending levels by visitors over the same period. Between
2009 and 2013, loans and advances grew by an average rate of 0.89% per year, a sub-optimal growth
rate for both the private sector and the local banking sector.
The 2014 Private Sector Assessment Report (PSAR) on Barbados observed that, since 1981, the interest-
rate spread has generally widened, indicating a possible deterioration in credit market efficiency. Between
2009 and 2011, the spread increased sharply, as banks reacted to the initial deterioration in economic
conditions, subsequently narrowing as the slump became more protracted. It is possible that the spread will
contract further because of an April 2015 Central Bank policy decision to eliminate the minimum saving
rate and to allow the market to determine both deposit and lending rates in the future.
Domestic savings play a key role in the availability of credit. At the end of 2009, bank deposits stood at
over 90% of GDP, and rose to 105% in 2012, one of the highest ratios among the group of comparator
countries. However, bank credit as a proportion of bank deposits stood at just under 50% in 2009, and
70% in 2013, among the lowest ratios in the Caribbean. This suggests that businesses in Barbados—
and particularly small businesses, which lack the access to international credit markets that some larger
firms enjoy—find it difficult to access credit, despite the availability of funds in the financial system. As
highlighted under sub-section 2.3.3 Bank Liquidity and SME demand, business finance is both a supply
and a demand problem. On the supply side, there is the perceived risk associated with providing loans
to small businesses. On the demand side, entrepreneurs and small businesses may not be aware of the
lending facilities that are available.
Both the private and public sectors have attempted to address these constraints on finance. Commercial
banks are the main credit providers to both small and large companies, offering various types of facilities,
such as traditional loans, overdrafts, leases, etc. Most commercial banks offer dedicated credit products
aimed at small businesses. In addition to banks, there are a number of specialist institutions and funds that
offer financing to specific target groups. Credit unions are highly active in the small business sector, and
are particularly so in the informal sector. Although the regulations governing credit unions prohibit lending
to companies, since many small businesses are not incorporated, credit unions can structure such lending
as personal loans. This makes credit unions an important source of lending to small businesses.
The government has established a number of funds aimed at providing capital, in the form of loans or
equity financing, to specific sectors. As noted elsewhere in this report, in 2002, the government enacted
the Small Business Development Act, which provides a framework of activities aimed at supporting micro
and small enterprises through incentives (fiscal and others) and technical support.
The Government of Barbados (GOB) has also developed a dedicated institutional framework to spur SMEs
entrepreneurship through the Ministry of Industry, International Business, Commerce and Small Business
Development. Section 4.3.5 of the “Barbados Growth and Development Strategy Document for 2013-
2020” is dedicated to Micro, Small and Medium Sized Enterprise (MSME) Development. It highlights the
government’s commitment to provide greater access to capital for MSMEs, and to further promote their
growth, productivity and revenue generation, and underscores the role that financial institutions play in
promoting investments.
To this end, the GOB has initiated a number of dedicated funding initiatives, amounting to approximately
USD80 mn , comprising: 1) the Enterprise Growth Fund Limited created in January 1998; 2) the Caribbean
Financial Services Corporation; and 3) the Youth Entrepreneurship Scheme. Each entity has a specific sector
allocation, such as tourism and small hotels investment, agricultural development, industrial investment and
employment. Through the Central Bank of Barbados (CBB), the government also offers financing and
guarantee schemes to support credit and export promotion. There are different types of schemes provided
by the CBB, with the most important mechanism being the Enhanced Credit Guarantee Scheme (ECGS)
and the Trade Receivables Liquidity Facility (TRLF).
However, these schemes have had limited effectiveness in addressing SME financing needs, for the following
reasons. First, their eligibility criteria have been sector or niche based, which is too narrow to support the
comprehensive needs of SME financing. Second, their terms and conditions have not been sufficiently
attractive for retail financial institutions to participate robustly. Third, their non-standardised requirements
from one scheme to another, have created a perception with retail financial institutions, that applying for a
guarantee is cumbersome. Fourth, there has been limited outreach with financial institutions and potential
beneficiaries to develop a sustained pipeline. Finally, the practice of filing claims has created a perception
with financial institutions that these can only be submitted once the company has been liquidated, a
potentially contentious justification57. Moreover, in spite of the availability of various lending windows for
tourism as well as for enterprises in the agricultural sector more than 30% of firms surveyed by the IDB for
the 2014 PSAR indicated that access to finance was a “major” or “very major” obstacle to doing business.
Overall, there is a perception among interviewees that traditional financial institutions do not provide
financing for start-ups or R&D investments, unless collateral is made available (for example in the form of
vehicles, land or houses). There are many government-owned financing enterprises, including FundAccess
and the Enterprise Growth Fund, that have arisen to fill the gap. However, owing to a lack of capital, these
institutions often focus on small-scale finance. Consequently, their coverage of the total SME sector is often
well below 20%, at best. Barbados, unlike other surveyed countries, such as Trinidad and Tobago and
Jamaica, does not have a development bank or a credit bureau, and some interviewees pointed out that
these were major deficiencies in the domestic financial system.
Jamaica
Jamaica, according the IDB 2014 PSAR, was ranked 12th (out of 189 countries) in the World Bank’s
2015 Doing Business report for ease of getting credit. However, around 30% of firms identified access to
finance as a major constraint, according to a 2013 countrywide, firm-level survey, funded by the Compete
Caribbean Programme. The interest-rate spread of Jamaican banks in 2010 was the second highest
among the comparator countries, being exceeded only by Haiti. Since peaking during the crisis and
immediate post-crisis periods, spreads have been trending downwards.
The below-average performance of Jamaican financial institutions in mobilising and intermediating domestic
savings, increases the importance of the availability of international funding. At 79%, Jamaica has a high
ratio of international debt issues to GDP, compared with other countries in the Region, suggesting that
international bond issues are relatively heavily relied on as a source of financing by the country. However,
only large private institutions use such financing instruments. MSMEs do not rely on international bond
issues as a source of financing. Such firms are also less likely to receive credit from overseas banks.
57
IDB, “Lessons learned for the Barbados SME Guarantee Fund”.
Institutions that serve to reduce information asymmetries, such as credit bureaus, are relatively new in
Jamaica. With assistance provided under the Jamaica Competitiveness Enhancement Programme, the
Credit Reporting Act was passed in October 2010, and the Credit Reporting Regulations that operationalize
the Act were approved by parliament in January 2011. To date, Bank of Jamaica (the central bank) has
licensed two credit bureaus to operate and both are now operational. In the absence of good credit
information, banks and other financial institutions protect themselves through high collateral requirements.
For MSMEs, the difficulty of gaining access to credit is compounded by a shortage of collateral. Only
27% of Jamaican firms had a bank loan in 2010. Among the comparator countries, only Namibia and St.
Lucia had smaller proportions of firms accessing credit from banks. If Jamaican firms had easier access to
international sources of credit, or to other domestic funding sources, this would not be a major constraint.
In 2013, Jamaica passed a law governing the creation of security interests in personal property, as one of
several new pieces of legislation introduced to satisfy structural benchmarks under the four-year Extended
Fund Facility approved for the country by the IMF58. Since the law was passed, both a public and a private
moveable-collateral registry have been launched, with strong uptake from individuals and financial sector
firms. It is expected that these registries will help to expand credit to micro-level firms, and will extend
services to both lenders and borrowers, nationally and regionally. Table A3 below illustrates the growth in
loans and advances in Jamaica between 2009 and 2014.
Table A3: % Changes in Loans and Advances in Jamaica, 2009 - 2014

Overall
Country 2009 2010 2011 2012 2013 2014 Change
Jamaica -24.71% -1.11% -17.26% 24.70% 26.20% -3.05%
Source: Bank of Jamaica online statistics, 2016
The table shows that loans and advances by commercial banks to the private sector plummeted by almost
25% between 2009 and 2010, and by a further 17% in 2012, and then returned to growth of 24.7% in
2013 and 26.2% in 201459. Such significant swings validate the private sector’s identification of Access
to Finance as a major constraint to development in that country. The overall growth rate in loans and
advances between 2009 and 2014 was -3.05%. However, the more positive growth trends in loans and
advances in 2013 and 2014 would suggest that Jamaica is “right-sizing” again as it begins the process
of returning to economic growth following the negative consequences of the global financial crisis and the
IMF Structural Adjustment Programme, which was still on-going at the time of this study.
58
The need for secured transaction reform was reinforced under a GOJ Letter of Intent, Memorandum of Economic and Financial
Policies (MEFP) and Technical Memorandum of Understanding (MOU) with the International Monetary Fund (IMF), of April 17th
2013. In that Memorandum and under its Growth Strategy, the GOJ committed to an initial phase of reforms to improve some Doing
Business indicators of which a secured transaction framework was a key part. | 59 Most recent data on Loans and Advances to the
private sector, from Bank of Jamaica statistics, is for 31 October 2014.
Guyana
For Guyana, the 2014 IDB PSAR pointed out that Access to Finance is an issue that was frequently
mentioned as having a significant impact on private sector expansion. The most common criticism made
by private sector leaders was that the banking sector was too liquid and did not provide enough lending
to new businesses, thereby limiting investment and economic growth.
The banking sector’s response to this criticism has been to argue that banks assess risk and the availability
of collateral (consisting exclusively of real estate) to make all their business-lending decisions, and that the
result of this is that the portfolio of loans to the private sector is growing faster than the economy. The end
result is that lending is expanding, but is not doing so quickly enough to satisfy demand for loans. Structural
barriers such as the lack of availability of registries of movable property, legal frameworks regulating the
use of financial instruments, and limited property rights for miners and farmers, impose restrictions on
lending to some clients.
But is this actually the case? As of May 2013, commercial banks held reserves 33% in excess of the level
required by the Bank of Guyana (the central bank), which is currently set at 12%. As the economy has
expanded and the banking sector has grown, excess reserves have increased, growing from 15% in 2011
to 22% in 2012. So the banks may be lending more to MSMEs, but the proportion of their deposits that
is being invested in much lower interest-bearing government securities is increasing, suggesting that, on the
demand side, the growth in bankable projects has not been in line with (commercial) bank criteria.
According to bankers interviewed, the traditional characteristics of the banks and their clients limit the
expansion of credit to the private sector. In particular, they note that large and well-established businesses,
especially in the services sector but also in manufacturing, are banks’ preferred clients due to long-term
established relationships.
A long-standing problem in Guyana, partly resulting from the economy’s small size, is the concentration of
loans to a few businesses—at the end of the first quarter of 2013, the exposure to the top 20 borrowers
accounted for 15.9% of the total loan portfolio of the banking sector. New businesses find it difficult to
borrow, in part because of the current structure of the banking system (which is small and is focused on
lending to large companies), but also because in many cases such businesses lack appropriate collateral.
Commercial banks require up to 150% collateral, and have cumbersome loan-application processes. This
acts as a major constraint for small and medium-sized enterprises (SMEs). The (banking) regulatory system
is biased towards the exclusive use of real estate as collateral, and the banking system offers only a limited
supply of financial products such as leasing, factoring and the use of movable property as collateral.
Moreover, property rights over land are insecure in the most promising sectors of the economy, namely mining
and agriculture, making it difficult for traditional commercial banks to lend to these sectors. Meanwhile,
farmers lease land but cannot sell it, and a large proportion of land is subleased without a contract
(illegally, as this is explicitly prohibited). Farmers cannot access bank finance under these conditions. So
how supportive have commercial banks been in lending to the Guyana private sector? Table A4 below
illustrates the growth in loans and advances in Guyana between 2009 and 2014.
Table A4: % Changes in Loans and Advances in Guyana, 2009 – 2014

Overall
Country 2009 2010 2011 2012 2013 2014 Change
Guyana 18.01% 23.10% 21.71% 14.19% 8.55% 119.15%
Source: Bank of Guyana, 2016
As the table reveals, the growth in loans and advances to the private sector has been consistently higher
than that of the other seven countries surveyed in this study. Moreover, according to Bank of Guyana
data, total commercial bank loans grew, on average between 2006 and 2015, at a rate of 14.5%, while
commercial bank credit to the private sector, which is a sub-set of total commercial bank loans, grew at
17.1% on average over the same period. This suggests that the banks have been building out their private
sector loan portfolios in line with their general growth rates in overall loans.
What is also revealing is that by 2014, the total loans and advances to the private sector has more than
doubled since 2009. While the data do not specifically stratify “loans to the private sector” from “loans
to SMEs”, it is quite possible that SMEs have had reasonable access to bank credit over the 2009–2014
period given that, apart from 20 larger firms, most of commercial bank lending in Guyana is to SMEs. To
a significant extent, the growth in bank loans is reflective of Guyana’s above average GDP growth rates
over the same period.
Belize
In Belize, the IDB 2014 PSAR pointed out that “the financial system is characterized as comparatively
underdeveloped and also high-cost. The undeveloped and oligopolistic structure of the industry has led to
significant challenges for businesses in terms of their access to finance”.
As in many developing countries, bank credit is the main source of financing for large businesses, while
credit unions and moneylenders in the informal sector tend to finance smaller investments and micro, small
and medium-sized enterprises (MSMEs). The analysis in this section is based mainly on bank credit, given
that loans for credit unions to business are usually classified as personal loans. The main issues emerging
from consultations with stakeholders are access to finance and affordability of capital. Loans to businesses
are available at high interest rates, with a collateral requirement that generally can exceed 175% of the
value of the loan (see Table 2.13 under sub-section 2.3.3 Bank liquidity and SME demand, below). As
is the case in other parts of the Caribbean – and generally in the developing world, micro and small
businesses often lack appropriate collateral to back their financing needs, and are therefore more credit-
constrained than large businesses. Such conditions strongly suggest that the institutional remedies are
that Government should give more consideration to establishing and/or significantly expanding Credit
Guarantee Schemes to address the shortfall in MSME collateral capacity.
So how well did the commercial banks support the private sector in Belize – in terms of loans and advances
to them between 2009 and 2014?
Table A5 below illustrates the growth in loans and advances in Belize between 2009 and 2014.
Table A5: % Changes in Loans and Advances in Belize, 2009 – 2014

Overall
Country 2009 2010 2011 2012 2013 2014 Change
Belize -2.31% -0.24% 2.61% 2.43% 4.53% 7.07%
Source: Central Bank of Belize Statistical Digest, 2014
As the table shows, there has been relatively insignificant growth in private sector borrowing from
commercial banks in Belize over the five-year period. Loans and advances contracted slightly in 2010
and 2011 and returned to positive growth thereafter. However, on average, loans and advances grew by
less than 2% annually, a metric that perhaps supports the private sector’s claim of limited access to finance
in that country.
Suriname
In Suriname, according to that country’s 2014 PSAR, access to finance is an important bottleneck to private
sector development, and is recognised as such in the 2013-14 Global Competitiveness Report compiled
by the World Economic Forum (WEF), and also by the World Bank in its Doing Business report (ranked
170th out of 189 countries for ease of getting credit). The financial sector is very small consisting of nine
commercial banks, with a large concentration of lending and deposits at the three largest banks, RBTT
Suriname (now Republic Bank), DSB and Hakrinbank. Both DSB and Hakrinbank are fully or partially
owned by the government.
Credit to the private sector, at about 33% of GDP as at the end of 2012, is low by regional standards.
Lending interest rates have remained relatively stable since 2008, averaging 11.8% between 2008 and
2013. Meanwhile, inflation fluctuated drastically in the same period, and so too did real interest rates.
Indeed, real lending rates stood at negative 2.5% in 2008, then rose to 11.8% in 2009, before posting a
negative rate again in 2011 (at 6%). The real lending rate stood at 10.1% in 2013.
Anecdotal evidence collected in April 2012 indicates the pervasive practice of lending using real estate
as collateral, as well as the limited availability of factoring. Additional financial instruments that would
deepen financial intermediation are not available. Such instruments might include the expansion of the
market for government bonds, thereby promoting saving and investment by individuals and firms; leasing;
secured transactions; and the revitalization of the stock exchange. The Suriname Stock Exchange (SSE)
functions sporadically – trading only twice per month with only 11 listed companies and without a Securities
Exchange Act. Also since the SSE is private, only brokers who are admitted by the Board are allowed
to participate on the exchange on behalf of their clients. So how well has the banking sector done in
providing credit to the private sector? Table 2.11 below illustrates the growth in credit to the private sector
between the fiveyear period 2011 to 2015:
Table A6: % Credit to the Private Sector in Suriname, 2011 – 2015

Overall
Country 2011 2012 2013 2014 2015 Change
Suriname 15.4% 17.38 8.94% 16.28% 71.79%
Source: Centrale Bank van Suriname. Selected Macroeconomic Indicators, 2011–2015
The table suggests that loans to the private sector have been relatively robust over the 2011–2015 period,
with an average growth rate of approximately 14.5% annually. However, this trend is not aligned with
the progressive contraction in GDP growth – which declined from 5.3% in 2011 to an estimated 1.5% in
201560. But given that the economy is natural resource dependent, the growth in credit could be reflecting
an increase in the level of investments in key sectors such as mining and agriculture61.
Trinidad and Tobago
Findings from the 2014 Private Sector Assessment Report (PSAR) suggest that access to finance in Trinidad
and Tobago for all companies, but especially for small and medium-sized ones in the non-energy sector, is
limited. According to the Central Bank of Trinidad and Tobago, banking sector liquidity, measured as the
ratio of liquid assets to total assets, stood at about 25% in 2011. However, the total stock of credit to the
private sector is low, at only 29% of GDP in 2012 – which is close to a similar level in Belize.
60
Centrale Bank van Suriname, Selected Macroeconomic Indicators 2011-2015 | 61 Similar findings were generated in Ajodhia,
W. et al. “Are Banks in Suriname Conservative in Providing Access to Finance to Surinamese Companies?” Research Presentation
by MBA Students in Suriname, 2012.
These indicators reflect two facts regarding the country’s financial institutions. First, although liquidity is high,
there is little appetite for risk-taking on the part of banks in terms of lending to private sector companies.
Second, levels of financial intermediation are low, as banks prefer to keep their liquidity levels high rather
than lending to firms that may face repayment difficulties for reasons beyond their control. Generally,
banks consider it risky to lend to companies outside the energy sector, as such firms may find themselves
unable to repay loans when external conditions change. Rather than being a problem arising from the
management approach at individual banks or firms, this is a systemic issue, related to the existence in
Trinidad and Tobago of an incentive framework for lending that does not facilitate financial intermediation.
For instance, a presentation on “Moving Beyond Collateralized Financing” by Ram Ramesh at the 1st
Caribbean Competitiveness Forum in Trinidad and Tobago noted that there was limited intermediation for
venture capital, angel funding, IPO funding and government subsidies62. Nevertheless, interest rates in the
country are low. In June 2014, the basic prime lending rate stood at 7.5%.
As noted in section 2.2 Life Cycle System and Table 2.2: MSME Life Cycle Financing in eight Caribbean
countries, Trinidad and Tobago offers a relatively robust financial system that could bolster the progressive
development of SMEs. The main weaknesses in the system are: 1) the contraction of venture capital
availability, the high non-performing loans (NPLs) of the National Enterprise Development Company
(NEDCO), and the absence of an active junior stock exchange. The completeness of the Life Cycle
financing system would be notably enhanced if the first mechanism (i.e. venture capital) is re-activated and
the second (i.e. the junior stock exchange) becomes fully operational. The idea of the junior stock exchange
had been strongly promoted by the Chamber of Industry and Commerce in recent years. To encourage
SMEs to list, the T&T Government has legislated a 10% corporate tax rate, which is 40% of the normal
rate of 25% for the first five years to SMEs listed on this market. They are required to raise capital on the
exchange through IPOs with a minimum of 25 shareholders holding at least 30% of the company’s share
capital. To date, however, there have been no listings (yet) on the exchange, but this was the same pattern
that the Junior Exchange exhibited in its first year in Jamaica.
Another major player in the financial sector is the EXIM Bank of Trinidad and Tobago, which offers a wide
range of financial products to support exporters including post shipment financing (the equivalent of the
factoring of receivables), pre-shipment financing (the equivalent of working capital financing), demand
loan financing (for equipment upgrades), and export credit insurance (risk protection to exporters against
payment default by foreign buyers). The EXIM Bank is owned by the Government of Trinidad and Tobago
(GoTT) and facilitates export development, which is seen as a top priority by GoTT. According to its 2014
Audited Financial Statements, loans and other financial assets were USD 66.5 mn and accounted for 88%
of total assets. Over time, the loan portfolio has therefore experienced consistent growth from USD 12 mn
in 1975.
How well has Trinidad and Tobago done in facilitating SME access to finance in recent years? Table A7
below summarised the allocations of loans and advances to the private sector over the six-year period
2009 to 2014.
62
Ramesh, R., “Moving Beyond Collateralized Financing: Alternative Models based on Case Studies for the Regional Private Financial
Sector”
Table A7: % Loans and Advances (L&A) to the Private Sector in T&T, 2009–2014

Overall
Country 2009 2010 2011 2012 2013 2014 Change
Trinidad and Tobago -3.18% 5.11% 5.32% 3.72% 7.18% 19.16%
Source: Trinidad and Tobago Central Bank online statistics, 2016
On average, commercial bank lending to the private sector grew by 3.83% per year for the five-year period.
Although L&As showed a strong increase in 2014, it is unlikely that this trend will continue into 2016,
especially given the dramatic contraction in global oil prices – which is having negative consequences for
the Trinidad and Tobago economy. Nonetheless, loans to the private sector have been growing at a faster
rate than T&T’s lacklustre economic performance. In terms of GDP, the country has failed to achieve more
than an average of 1% GDP growth between 2007 and 201463.
63
Chapter 1, Regional MSME Sector Profile, Chart 1, Caribbean GDP Growth between 2007 and 2014
APPENDIX 5: COUNTRY & DONOR DEFINITIONS OF MSMES BY PARAMETERS
1. CARIBBEAN COUNTRIES EMPLOYEES ASSETS (US$) ANNUAL TURNOVER NOTES

& Source document (US$)
ANGUILLA N/A N/A N/A No Current Definition
ANTIGUA & BARBUDA Small/Micro: Small: Small: ≤ $740,740 The majority of small
Small Business Dev’t Act No. ≤ 25 ≤ $1,111,110 and micro businesses
24 of 2007 are owned by citizens
of Antigua & Barbuda.
No formal definitions
for micro and medium
businesses.
ARUBA Medium: < 50 Info not available Info not available Info not available
Central Bureau of Statistics Small: < 10
Micro: < 2
BARBADOS Small: ≤ 36 Small: ≤ $250,000 Small: ≤ $380,000

Investment & Dev’t Corporation
BARBADOS Small: ≤ 25 Small: ≤ $500,000 Small: ≤ $1,000,000

Manufacturers’ Association
Small Business Association
BARBADOS Small: ≤ 25 Small: ≤ $500,000 Small: ≤ $1,000,000 No formal definitions for

Small Business Dev’t Act 1999 (paid-up capital) medium businesses. An
enterprise is considered
either small or large.
Financial institutions
have their own
definitions.
BELIZE Medium: < 50 Medium: ≤ $250,000 Medium: ≤ $750,000 Micro enterprises must
MSME Policy & Strategy, 2012 Small: < 20 Small: ≤ $75,000 Small: ≤ $250,000 be owner managed
Micro: < 5 Micro: ≤ $25,000 Micro: ≤ $50,000 The majority of
companies are SMEs.
BONAIRE Medium/Small: Medium/Small - ≤
≤ 100 $55,865
(private equity)

BRITISH VIRGIN ISLANDS Medium: ≤ 20 Medium: ≤ $200,000

(BVI) Small: ≤ 10
Small: ≤ $125,000
Micro: ≤ 5
Micro: ≤ $25,000
CAYMAN ISLANDS Small: < 13 Small: ≤ $914,630 Medium sized business is

Micro: < 5 Micro: ≤ $340,870 not defined
* Medium: *SME Definition

CURACAO
≤ 249 proposed by the UN
Small: ≤ 49 (2005). There is no
Micro: ≤ 9 consensus in Curacao
Medium: ≤ 50 Medium: ≤ $370,370 Medium: < $740,740 Borrowing Needs:

GRENADA
Small: ≤ 20 Small: ≤ $185,185 Medium: < $185,185
Small Business Policy, 2010 Small: < $185,185
Micro: ≤ 5 Micro: ≤ $37,040 Small: < $92,600
Micro: < $37,040
Micro: < $18,520
GRENADA Micro: < $18,500 Micro: < $36,000 no formal definition

National Small Enterprise Dev’t of “micro” & “small
Advisory Committee. business”
GUYANA Small: ≤ 25 Small: ≤ $9,036 Small: ≤ $39,000 Informal definition

Micro: ≤ 5 Micro: ≤ $3,012 Micro: ≤ $37,030 - discussions with
(equipment investment) shareholders revealed
this consensus view
GUYANA Small: ≤ 25 Small: ≤ $96,570 Small: ≤ $289,570 Is a registered

Small Business Act, 2004 Cooperative Society
under the Coop Societies
Act
JAMAICA Medium: ≤ 50 Medium: ≤ $1,250,000
MSME & Entrepreneurship Small: ≤ 20

Small: ≤ $416,670
Policy, 2013 Micro: ≤ 5
Micro: ≤ $83,333
JAMAICA Micro: < 10 Micro: < $5,480

Micro & Small Enterprise (initial capital investment)
Survey, 1996
JAMAICA Small: < $82,192

Government’s Industrial Policy (capital investment - excl
land/building)

JAMAICA Micro: < $16,340

Micro Investment Dev’t Agency (excluding land/build-
(MIDA) ing)
MONTSERRAT Small - $185,185 or less Small - $370,370 or less

Micro & Small Business Bill Micro - $27,780 or less Micro - $37,040 or less
2013
No Current Definition.
SABA
Most businesses are
small.
Small: < $400,000 No formal definitions for
SAINT LUCIA Small: ≤ 50
medium businesses.
‘98 Income Tax Act # 11
An enterprise is
considered either small
or large.
SAINT LUCIA Small: ≤ 50 Small: ≤ $185,185 Small: ≤ $37,037,000 The majority of firms
Micro & Small Scale Micro: ≤ 5 Micro: ≤ $27,780 in St. Lucia are micro-
Micro: ≤ $37,030
Business Enterprise Act 19, businesses.
1998 (amended 2001, 2009)
SAINT LUCIA Small: ≤ 40 Small: < $200,000 Small: < $400,000 No formal definitions for
Small Enterprise Dev’t Unit medium businesses. An
enterprise is considered
either small or large.
SAINT MAARTEN Many enterprises

Medium: ≤ $674,150
have fewer than five
Small: ≤ $337,000
employees and little
or less; Micro: ≤
capital. SMEs are
$100,800 or less therefore classified
based on gross turnover.
ST. BARTHELEMY Medium/Small: Medium/Small: < Medium/Small: <

2008 Act < 250 $48,310,900 $59,190,500
No Current Definition.
ST. EUSTATIUS Most businesses are smal

ST. KITTS NEVIS Small: ≤ 25 Small: < $370,370 Small: < $740,740 The composition of the
SKN SB Policy and Act - circa board of directors is not
May 2010 controlled by a large
company or subsidiary
of a larger group
Medium: < $740,740 Borrowing Needs:

ST. VINCENT Medium: ≤ 50 Medium: < $370,370
Medium: < $185,185
Small Enterprise Policy and Small: ≤ 20 Small: < $185,185 Small: < $185,185
Small: < $92,600
Draft Small Enterprise Bill Micro:- ≤ 5 Micro: < $37,040 Micro: < $37,040 Micro: < $18,520
TRINIDAD & TOBAGO Medium: ≤ 150 Medium: $240,000 - Small: $20,000 - *Suggested Definition
*Manufacturers’ Association Small: ≤ 50 $800,000 $1,000,000
Small: $20,000 -
Medium:$1,000,000 -
$240,000
$2,400,000
(excludes Real Estate)
TRINIDAD & TOBAGO Small - ≤ 25 Small - ≤ $230,770 Small - ≤ $769,230

MSE Dev’t Policy (2014-2016) Micro - ≤ 5 Micro - ≤ $38,460
Micro - ≤ $38,460
TRINIDAD & TOBAGO

Section 1 8A - Corporation Tax Small: ≤ $230,770
Act Chapter 75:02
TRINIDAD & TOBAGO Medium: ≤ 50 Medium: $50,001 - Medium: $120,001 -

Small Business Dev’t Co. Small: ≤ 25 $240,000 $1,000,000
Small: $15,000 -
Small: $20,000 -
$50,000
$120,000
(excludes Real Estate)
TURKS AND CAICOS Medium: ≤ 25 Medium: ≤ Medium: ≤ $2,500,000 Other Parameters:

MSME Development Ordinance, Small: ≤ 19 $2,500,000 Medium: In operation for
Small: ≤ $1,000,000
2015 Micro:- ≤ 5 dd Small: ≤ $1,000,000 at least 10 years
Micro: < $250,000
Micro: ≤ $500,000 Small: < $92,600
Micro: < $18,520
CARIBBEAN DEVELOPMENT BANK
P.O. BOX 408, WILDEY, ST. MICHAEL
BARBADOS BB11000
T: (246) 431-1600
F: (246) 426-7269
www.caribank.org

Micro Small and Medium Enterprise Development

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© Caribbean Development Bank, 2016

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Published by: Caribbean Development Bank

Article 1 - Agreement establishing the Caribbean Development Bank

1.1 Global Economic Trends 2.1 SME Access to Finance

3.1 Gap Analysis of the Adequacy 4.1 Public Sector Institutional

5.1 What is Innovation? 96 6.1 Overview 121

List of figures & tables

Figure 1.1: Average Real GDP Growth, 2007-2014 9

Figure 1.2: Total Public Debt, 2011 10

Figure 1.3: MSME Density 12

Figure 1.4: MSME Density by Region 13

Figure 1.5: MSME Growth Rates Regionally 13

Figure 1.6: MSME Growth by Income Groups 13

Figure 1.7: Six Most Commonly Cited Obstacles by Firms in 98 Countries 14

Figure 1.9: Pyramid Distribution of Private Sector Businesses 16

Figure 2.1: Ratio of Domestic Credit to GDP Globally 21

Figure 2.2: Formal SMEs in GDP 22

Figure 2.3: Informal SMEs in GDP 22

Figure 2.4: Finance Coverage over SME Life Cycle 25

Figure 2.5: Interest Rates in Eight BMCs, 1974 - 2014 35

Figure 2.6: Value of Collateral as a Percentage of Loan Values 36

Figure 5.1: Guidelines for Adopting Innovative Processes at Organisational Level 85

Figure 5.2: Methodology Used to Establish Rankings on the GII 86

Figure 5.3: Technological Readiness 91

Figure 5.4: Caribbean Firm Capacity for Innovation in Six Countries 98

List of figures & tables

Table 2.2: MSME Life Cycle Financing in Eight Caribbean Countries 28

Table 2.4: Institutions’ Usage by Borrowers and Savers 32

Table 2.5: Estimates of the Market for Micro Credit Loans 32

Lead Institutions in Eight CDB Borrowing Member Countries 53

Table 3.2: Policy and Regulatory Framework - Belize 58

Table 3.3 Strategic Initiatives - Belize 59

Table 3.4 Jamaica MSME Policy Objectives and Strategic Actions 61

Table 5.2: Comparative Innovation and Technology Status for Guyana 94

Table 5.4: Five Examples of Service Innovation Policies 105

Given the important role of the sector, the major

ABIA Antigua and Barbuda Investment Agency

ACCA Association of Chartered Certified Accountants

ADB Asian Development Bank

ADE Agency for the Development of Enterprises

AFI Approved Financial Institution

BDS Business Development Services

BELTRAIDE Belize Trade, Investment and Development Agency

BEST Belize Enterprise for Sustainable Technology

BMC Borrowing Member Country

BNTF Basic Needs Trust Fund

BSA Business Support Agency

BSE Barbados Stock Exchange

BSO Business Support Organisation

B2B Business to Business

BUSOS Business Support Services, Suriname

CAIC Caribbean Association of Industry and Commerce

CAIPO Companies and Intellectual Property Office

CARDI The Caribbean Agricultural Research and Development Institute

CARIB-CAP Caribbean Micro Finance Capacity Building Project

CARIRI The Caribbean Industrial Research Institute

CCI Culture and Creative Industries