Limited access to bank financing

LIMITED access to bank financing is one of the main financial barriers to the growth of micro, small and medium enterprises (MSMEs) when there is absence or insufficient credit information systems.

Another is the weak protection of creditors’ rights, particularly with loan financing legal frameworks, security laws, and insolvency laws.

Coupled with those are the inadequate product offer — mainly focused on short term loans, and insufficient or unavailable equity financing.

International Council for Small Business immediate past chair and head of capital markets at Genaesis Dr Winslow Sargeant noted these financial barriers while addressing some 210 delegates at the recent inaugural MSME Conference in Suva.

The sixth chief counsel for advocacy in the Obama administration noted the World Bank’s report revealing the credit gap of around $US306billion ($F686b).

“We need to close that gap,” Dr Sargeant said.

“For us to be at our best, for our economies to function, we need to make sure that we lower those barriers. They get that even battlefield so that women can get the capital they need; men grow areas to get access to capital so they can grow because it does take money many times to make money.”

Dr Sargeant recommended concrete programs like the establishment of a credit bureau that could be a centralised data repository to provide both positive and negative credit information on borrowers, be it individuals or SMEs.

“We can establish a credit bureau, make sure that MSMEs have access to credit decisions.”

This concept, he added, could be a strong contribution towards the objective to remove financial barriers via the creation of appropriate infrastructure.

Dr Sargeant also recommended setting up a risk sharing facility — “market-oriented guarantee mechanisms aimed at reducing the risk of private-sector lending to specific sectors”.

He said this can be a very effective tool to boost bank lending to specific sectors, reduce the price of loans, and unlock sectors’ credit potential.

The inaugural MSME conference was organised by Business Assistance Fiji (BAF).

For us to be at our best, for our economies to function, we need to make sure that we lower those barriers – Dr Winslow Sargeant