Small and medium-sized enterprises in Barbados now have another avenue in which to obtain finance to expand and remodel their businesses, through the provision of credit guarantees to commercial banks and other finance companies.
A Trust Deed for an Enhanced Credit Guarantee Fund was signed today by Minister of Finance, Christopher Sinckler, on behalf of the Government of Barbados; and Governor of the Central Bank, DeLisle Worrell, at Government Headquarters.
The Central Bank will be executing the fund, which was financed with capital of BDD $70 million, provided by the Inter-American Development Bank and the China Co-financing Fund for Latin America and the Caribbean.
Underscoring the importance of the Fund, Mr. Sinckler said it would allow businesses to breathe a little easier because of the additional access to capital, thereby expanding and diversifying their enterprises and contributing to the country???s gross domestic product.
He continued: ???I am extremely happy to sign the Trust Deed that really gives the legal life to this particular operation, knowing that the technocrats have done an extremely good job in designing this???
One of the most critical things that they have been looking at and they will continue to look at is learning from the experience of previous schemes to ensure there is the necessary flexibility in the design of the scheme to allow the people to get access to it.
???That has been one of the constraining elements about guarantee schemes over the years; that they have been in some instances a bit too complicated for some businesses to access and that has been a major complaint.???
Mr. Sinckler stressed that the fund was transparent, flexible and accessible to those who wanted to access it. ???We are confident we have put another spoke in that wheel that we have been developing over the last few years to move us towards achieving sustainable [economic] growth,??? he stated.
He noted that the Government of Barbados had borrowed the $70 million; the amortization period was 25 years; and the disbursement period was five years.
Dr. Worrell said the credit facility was one of several initiatives in the Central Bank???s ongoing efforts to improve access to finance. He noted that in the Global Competitiveness Report, 15 per cent of respondents indicated that access to finance was a problematic factor for doing business here.
???This means that the problem is not universal; of every seven respondents, six reported they had no problem. However, the firms experiencing problems are often those on the frontier in sectors that are priority for the growth and diversification of our economy.
???What is more, there is no shortage of loanable funds in the financial sector. Banks have an excess of liquid funds, and are actively searching out viable business opportunities where they can lend with acceptable levels of risk.
The problem, we know from experience, is that the available financial instruments often do not fit the needs of small and medium enterprises, firms involved in innovative activities, and other similar enterprises,??? he remarked.
Acting Deputy Director of the Foreign Exchange & Export Credits Department, Ian Collymore, said businesses with annual sales or assets of up to BDD $20 million and less than 200 employees would be eligible to participate in the fund. He added that guarantees would be provided for loans up to BDD $2 million per project; however, a business could have total loans of up to BDD $6 million guaranteed under the programme.