RISK FINANCING IN THE CARIBBEAN: TIME TO ACT!
RISK FINANCING IN THE CARIBBEAN: TIME TO ACT! – BASIL SPRINGER COLUMN WHICH APPEARS IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON MARCH 24, 2014
“There are many plans in a man’s heart, nevertheless the LORD’s counsel – that will stand.” – Proverbs 19:21
Caribbean countries continue to grapple with the twin challenges of refinancing government debt and growing the economy. The refinancing of government debt is the responsibility of the parliament which has to debate and approve traditional sources of borrowing and innovative sources of funding which are likely to provide an effective long term solution. Growing the economy is primarily a private sector responsibility but can only thrive in a supportive enabling environment provided by the government.
In terms of growing an economy, three important issues are: selection of entrepreneurs and business enterprises which have the potential to grow the economy quickly; shepherding (life coaching for the entrepreneurs and business mentoring for the enterprises) to enhance business success; and access to appropriate investment finance to propel the enterprises on the journey to sustainable success.
There is no shortage of innovative enterprises which can be developed into viable export businesses. We have access to life coaches, management consultants and retired businessmen who will facilitate the shepherding process. The major factor impeding the path of progress, even though there is no shortage of money in the private sector, is the access to this money.
Here are 12 instruments which may constitute a solution to the problem either individually or in combination: (1) corporate social responsibility grants; (2) sponsorship in return for publicity (3) crowd funding; (4) asset-based lending; (5) factoring of receivables; (6) retail bond markets; (7) public equity markets (local or foreign); (8) angel investors; (9) traditional venture capitalists; (10) benevolent seed/equity capitalist entities which allow the enterprise to buy-back the investors shares and regain ownership as close to 100% as is desired; (11) demand loans from friends and family who believe in the entrepreneurs and/or the enterprise; and (12) profits from “cash cow” subsidiaries of the primary enterprise activity. There may be other instruments.
Mostly in the last year, I participated in six well organised conference/seminar events, in Barbados and Trinidad, designed to have an impact on the challenges of economic development.
The first was the First Caribbean Competitiveness Forum hosted by the UWI, St. Augustine Caribbean Centre for Competitiveness on the theme “A Solutions Agenda to Key Competitiveness Challenges”, in November 2012 in Trinidad.
The second was a strategic regional Dialogue on Private Sector Development in the Caribbean and the Compete Caribbean Regional Consultative Forum hosted by Compete Caribbean (a partnership between IDB, UK Aid and Canadian Aid) on the theme “Institutional Strategies”, in April 2013 at the Cave Hill School of Business in Barbados.
The third was the 14th Annual Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) Conference on the theme “Towards A New Development Paradigm for the Caribbean: The Next 50 Years”, in April 2013 in Barbados.
The fourth was the 5th Biennial International Business, Banking and Finance Conference hosted by the UWI St. Augustine Campus, the Central Bank of Trinidad and Tobago, the Department of Management Studies, SALISES, Caribbean Centre for Money and Finance (CCMF), in May 2013 on the theme “Re-Engineering Growth: Doing Business in the New Global Environment” with a special panel on “Pushing the Boundaries of Entrepreneurship”, in May 2013 in Trinidad.
The fifth was a Business Showcase hosted by the Lok Jack Graduate School of Business in collaboration with the Ministry of Labour and Small and Micro Enterprise Development and the National Integrated Business Incubator System (IBIS), in May 2013 in Trinidad. This included a session on business models where there were presentations from IBIS and BizBooster (Trinidad and Tobago), Branston Centre for Entrepreneurship (Jamaica) and the CBET Shepherding Modelâ„¢ (St. Lucia and Barbados), all with models geared at facilitating enterprise development.
The sixth event I attended was a workshop, last Thursday, designed to bring together key policy makers and financiers to examine and collaborate on the viable solutions needed to improve the environment for small business funding in Barbados. This was hosted by the Small Business Association in collaboration with the Central Bank of Barbados on the theme “Access to Finance – Debunking the Myths, Developing the Solutions”. After hearing all the presentations and comments from the floor, one participant concluded that there is much information among the participants present which can contribute to developing solutions but it is clear that the elements of leadership and coordination are missing.
A seventh event, to which I have been invited to participate, is the 3rd Caribbean Business Executives Seminar (CBES 2014) hosted by the CCMF – www.ccmfuwi.org – together with its partners on the theme “Venture Capital Financing – Its Relevance for the Economic Transformation Agenda”. It is scheduled to take place on Friday April 4, 2014 at the Hyatt Regency in Port of Spain.
CBES 2014 is an interactive forum, which brings together investors, entrepreneurial companies, industry practitioners and other interest groups to discuss issues which impact the development of regional business activity. The event supports the mandate of the CCMF for a developed financial sector within the English-speaking Caribbean. It seeks to provide the impetus for an active private equity/venture capital market, increase the mix of financial products available and the flow of capital to entrepreneurial businesses so as to strengthen the region’s competitive capacity.
CBES 2014 is aimed at aligning the challenges faced by the region, the products and services developed or created in response to the challenges, and the mix of funding required for the entrepreneurial firms desirous of capitalizing on the opportunities.
It is hoped that an institutional framework for meaningful leadership and collaboration will emerge from the CBES 2014 discussions.
(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business Enterprise Trust Inc. – CBET. Columns are archived at www.cbetmodel.org and www.nothingbeatsbusiness.com).