Government is committed to supporting initiatives that will improve access to financing to the micro, small and medium-sized enterprises (MSME) sector, while contributing to a robust financial system.
Minister of State in Foreign Trade and Business, Sandra Husbands, stressed this commitment today at the launch of the project – Promoting Access to Equity Financing to Small and Medium-Sized Enterprises through the Innovation and Growth Market of the Barbados Stock Exchange.
The project is a collaborative effort among the Ministry of Energy and Business, the Caribbean Development Bank (CDB), the Barbados Stock Exchange (BSE), and the Small Business Association (SBA) of Barbados. It will have a duration of 24 months and will be executed by the Ministry of Energy and Business.
Ms. Husbands told those gathered in the Warrens Office Complex that the International Finance Corporation estimates that 65 million firms, or 40 per cent of formal MSMEs in developing countries, have an unmet financing need of $5.2 trillion per year, which is equivalent to 1.4 times the current level of the global MSME lending.
“Latin America and the Caribbean have an estimated financing gap of 23 per cent, and what we are doing today is an effort to help close that gap. So, it is critical that as a Government we begin to unlock access to credit and to offer to Barbadians new and innovative financial products and services. The process to widen access to finance away from the traditional sources has commenced with today’s launch,” she indicated.
Ms. Husbands explained that the intent of the project was to demonstrate to small and medium enterprises (SMEs) that equity financing could become another viable option to secure and obtain vital capital.
“It is my view that this initiative can play a pivotal role in providing the supportive framework to small and medium sized businesses to attract and secure investment in the form of equity and that SMEs can be successfully positioned to raise cost-effective capital by being able to list on the capital market through the Innovation and Growth Market, or a Junior Stock Exchange,” she said.
The objective of the project is to provide training and capacity-building support to SMEs by February 2024, and specific technical assistance to 20 enterprises, enabling them to list on the Barbados Stock Exchange. The three phases of the project are: sensitisation and education; diagnostic and capacity building, and raising capital and listing.
The total cost of the project is US$579,000, with CDB funding 60 per cent, and the Ministry of Energy and Business, BSE and SBA putting in 22 per cent, and the businesses which are to list funding the remaining 18 per cent.
Acting Head of the Private Sector Development Division of CDB, Lisa Harding, said MSMEs in Barbados and the region continue to face several market gaps that hinder their competitiveness. She highlighted limited access to affordable finance, both for working capital and investment, as one of the binding constraints.
Describing the project as innovative, Ms. Harding continued: “We not only look forward to the results which would be derived from the training and capacity-building components of the project – particularly the enhancement of corporate governance practices in SMEs, but to the successful qualification of at least 20 firms on the Innovation and Growth Market.
“We also look ahead with anticipation to a cultural shift by Barbadians towards this non-traditional way of raising capital and catalysing investment, not only by the MSMEs themselves but also by private investors.”
Chief Executive Officer of the SBA, Dr. Lynette Holder, said the project would help close the gap in the provision of alternative sources of financing for the sector, and, in particular, help the public to appreciate the importance of developing an equity market for Barbados.
Dr. Holder stressed the importance of citizens investing in locally-owned firms. She stated: “The governments in our small island developing states cannot be the only financier for the small business community…. We cannot rely on governments alone and therefore it is time, I believe, that we are able to really develop the equity market, primarily for the small and medium enterprises….”
Managing Director of the Barbados Stock Exchange, Marlon Yarde, said through education, the BSE intends to foster an environment of confidence and trust in the activities of the capital markets, so all Barbadians would participate in the trading of financial instruments.