Economist wants innovative financing for small business

Senior economist Dr Justin Ram is calling for the establishment of a small business resilience unit trust fund that would allow micro, small and medium enterprises (MSMEs) to have access to “innovative financing”.

He was the keynote speaker during the virtually held Small Business Association’s state of the sector conference, which forms part of Small Business Week 2020. The theme was The Era of Digital Disruption – Thinking Beyond the Box.

Pointing to a variety of trends and challenges, he said small businesses had a role to play in building resilience and being more innovative to deal with the challenges they face.

Ram identified a dip in the average income of Caribbean countries, below the global average, as one trend that if continued would make the region “among the poorest countries by 2050”.

He also pointed to intensifying climate change impact on livelihoods, macroeconomic challenges, obstacles to productivity and performance, youth unemployment and other human development and environmental challenges, which he said if left unchecked could cause severe problems.

The economic advisor stressed that in order for the MSME sector to become more sustainable, and for the region to build resilience against these challenges, “we need innovative financing”.

It is against that background that he suggested there was a need for a resilience trust fund that would see “the significant amount of savings we have that we are not earning enough returns on” being put to use.

“Let us try to structure that in a way so that we can have micro units so that even the small person can buy, let us say, $100 worth of that, funding our own development,” Ram said.

“I would like to say to the Government, this is the way of the future, this is the way of decentralised finance and I think there is a role for us to play,” he added, suggesting that the SBA could take the lead in setting up such a fund.

“Could we set up a resilience trust fund whereby members can now invest in this trust fund and that trust fund then goes about investing in initiatives that actually build resilience across Barbados and maybe even across the region?”

Explaining how the fund could work, Ram said it would mirror that of a unit trust where small business operators would “buy units”. It would be managed by a trustee and fund managers who decide where the monies are invested based on what the small businesses want.

“This is what I believe we can do. Once we have pooled our resources together we start investing in areas . . . [such as] debt relief, resilience building, growth reforms and of course we can also invest in ourselves, that some of these resources can go towards providing the type of finance that small businesses also need,” said Ram.

He said the small business operators could use a locally developed application to invest and monitor their investment activity.

“We don’t have to simply wait on angel investors or venture capitalists to come around. We can do this ourselves,” he said.

Ram, who is the co-founder of the security digitisation platform firm GSec, also called on the Barbados Stock Exchange to play a greater role in helping small businesses get the type of financing they need for their operations by offering “a proper functioning Junior Stock Exchange Market”.

“We need to have that now. I implore you to please, let us get that going. I think that is absolutely critical because here in the Caribbean we have a lot of finance sitting down in the banks and financial institutions, maybe in excess of US$50 billion, and we need to find some way to channel those resources into product activity,” Ram pleaded.

Stating that there were significant opportunities amidst the challenges facing the region and its MSME sector, the economist also called for a “citizen assembly”.

He explained that this would allow for a group of small business operators to discuss a particular topic over the period of a month and come up with a plan of action and present it to the Ministry of Energy, Small Business and Entrepreneurship so that an enabling environment could be created for the plan/reforms to be implemented.

He also outlined the need for an eight-step plan to help the MSME sector achieve what is needed for its members.

Those steps, he said, would include identifying and setting priority areas, formation of planning labs, open days, a roadmap, identifying key performance indices, implementing identified projects/reforms, having external audits and presenting an annual report.

“So maybe by 2025 we know what we are trying to achieve based on the targets we have put forward,” said Ram.
marlonmadden@barbadostoday.bb