CDB preparing SMEs for listing on stock market

The Caribbean Development Bank’s (CDB) Micro, Small and Medium-Sized Enterprises (MSME) Unit has joined forces with the Barbados Small Business Association (SBA), the Barbados Stock Exchange (BSE), and the Ministry of Energy, Small Business and Entrepreneurship to support one of the most ambitious projects the Unit has backed to date.

The project in a nutshell, aims to take select small businesses through an intensive incubator programme that eventually delivers small enterprises that are investment ready and can be listed on the stock exchange.

Among the key deliverables are increased access to finance for participating MSMEs through their listing on the BSE; improved competitiveness of participating enterprises through the employment of good business practices; and the development of an incubator programme that can be duplicated in the sector regionally.

Conceptualised by Dr Lynette Holder, Chief Executive Officer (CEO) of the SBA and Marlon Yarde, the CEO of the BSE, the two experienced executives assessed that such an undertaking would not only strengthen the SME sector by expanding avenues for financing, but it would also increase the BSE listings and produce more options for investors.

To assist in rolling out the project, the BSE and SBA elicited the partnership of the Ministry of Energy, Small Business and Entrepreneurship as an experienced executing entity.

Providing some background, Marlon Yarde noted: “In 2019 when the BSE rebranded the Junior Market to become the Innovation and Growth Market, we saw SMEs as one of the planks of growth for the Stock Exchange to achieve more listings.

“Following a series of meetings with Dr Holder to develop a framework for the ecosystem, we got the support of the Ministry through former Minister Dwight Sutherland, who immediately got the ball rolling.”

Meanwhile, Dr Holder described the CDB’s support of the project and substantial funding of US$350 000 which it put at the disposal of project managers for the 30-month programme, as extremely critical.

The SBA head remarked how the initiative comes at a time when access to capital continues to be a significant deterrent to SME growth, but ironically, also when the financial system in Barbados is highly liquid.

“The BSE’s Innovation and Growth Market will help to address the issue of expanding access to capital beyond traditional debt financing to modernising the market through the introduction of equity financing,” she stated.

CogniSant of the project’s groundbreaking nature, Katrina Bradshaw, chief economist with the Ministry of Energy, Small Business and Entrepreneurship, explained that one of the key components was education and sensitisation of the SME sector and the investing public about opportunities of the initiative.

To this, Yarde said several small business owners were keen to be participants, adding: “During the education phase, companies with an interest in listing on the Exchange will undergo gap analyses to identify their current state and where they needed to be before the capacity building process commences.”

He also emphasised that during the capacity building phase of the programme, participating companies will be assisted in strengthening their processes, ramping up resources and the skillset of employees and management.

“We also want to have built-in good corporate governance practices and internal control, and to ensure that the SMEs have adequate management structures,” Yarde stressed.

Moreover, Yarde assured small business owners who might be hesitant that the process for launching an initial public offering (IPO) and maintaining a listing on the BSE’s Innovation and Growth Market were not onerous undertakings.

“If you go to the public to raise capital, there must be some level of accountability. Part of that accountability is in the filing of financial statements on a quarterly basis with the BSE, which are made available to the public. And if there is any material change or material fact that occurs in the company, the investing public is made aware of it,” the Stock Exchange head stressed.

Commenting on the significance of this ground-breaking CDB-funded project was Zamani Moodie, Operations Officer (MSME).

“The project supports the ongoing CDB strategy and initiatives to strengthen the capacity of MSMEs in the region, kindle greater competitiveness, and contribute to national economic growth.  Additionally, it supports the commitment of CDB and its CTCS Network programme to develop viable and sustainable enterprises in the Caribbean by improving access to finance.”

According to Moodie, the fact that this project includes strategic partners such as the SBA, BSA and the Ministry of Energy, Small Business and Entrepreneurship (now the Ministry of Energy and Business Development) who have a track record of effectively managing projects and “successfully spearheading the country’s private sector development mandate, provides even more confidence that this initiative will not only be a success but a model for other such programmes around the region”.

Asked how much of a gamechanger could the project become for the small business sector in Barbados and the region, Moodie stated: “The fact that this project brings together key players in Barbados’
MSME ecosystem to ensure complementarity of efforts, and efficiency with execution, provides a model for other regional economies.”

He emphasised the project’s aim to also ensure that MSMEs employ good business practices in the early stages which will ensure increased competitiveness, sustained growth, and improved access to finance.

Commenting on how the success of this pioneering project will be gauged, Yarde, the Barbados Stock Exchange CEO, said there will be a graduation process that filters the very best enterprises for the stock market.

“We want to make sure that these companies are truly ready . . . and that there is no compromising of confidence in the market as a whole,” he added.

For companies that do not successfully transition to listing on the BSE, the processes and benefits of the programme will substantially improve their operations and expose owners to the possibilities of equity financing for their businesses. (IMC1)