In an earlier piece I compared the business environment which exists in the Caribbean to that in more developed countries such as the UK and US. Among the key differences were the availability of adequate resources and functioning Business Support Organisations (BSO’s) such as the Small Business Administration service, Chambers of Commerce, Business Link, and charitable organisations such as the Prince’s Trust. Add to that the regular hosting of competitions to encourage the creation of businesses.
However, beyond the support services/networks there needs to be a flexible and dynamic financial market, something St. Kitts-Nevis and the OECS at least lacks big time. I was staggered by the lack of financial support and options available as far as banking or saving and investing was concerned. There were two types of customer/product offering; “savings” in so much as you could call it that, the best rates available are 5% or perhaps 6% if you’re prepared to lock large sums of money away. And “borrowing” if you call a security backed loan at 12-15% a loan and not extortion. This sorry situation still exists today!
My question 10 years ago to bankers was, if I have the $5000 needed as security for a $5000 loan, why do I need your $5000? Today the question remains unanswered. But moreover, consider that the same Canadian banks that are offering unsecured loans at 8% in Canada are offering secured loans here at 12%+!
The deficiencies of the banking/financial sector in the Eastern Caribbean have been open secret since Columbus discovered people had already beaten him to the islands. In fact I found some information from a workshop I attended in 2004, which chronicled the challenges business owners faced in accessing affordable financing and support.
The inadequacies of the financial sector led the Eastern Caribbean Central Bank (ECCB) to consider some form of intervention. In July 2004, a presentation was given on the Eastern Caribbean Enterprise Fund (ECEF) to address what the ECCB saw as:
• The lack of capacity exhibited by the existing financial institutions to adequately support Small Medium-Sized Enterprises (SMEs) or business, period.
• The acute aversion to risk, which was choking off the life of small business.
The ECCB identified the need to form this entity to support SME’s in the Eastern Caribbean Currency Union (ECCU), and to strengthen regional businesses, so as to better withstand the challenges of Globalisation.
My concern is as always, the speed – or lack of it – with which the wheels turn, well in everything give thanks, at least they’re turning. Almost a decade later the private sector is yet to see the ECEF evolve into something that’s able to help us, however, during that time, we have seen the:
• Economic Partnership Agreement with the European Union come to pass and similar trade deals Canada and the US likely to be signed soon.
• Another global depression or recession, which is disproportionately affecting our nationals in the UK & US. It has recently been established that more than half of all black men under 24 are unemployed in the UK. This in turn will affect remittances, which in spite of all the talk about the importance of tourism, is the biggest contributor to many Caribbean economies.
• The introduction and increase in tax on flights to the Caribbean from the UK, is adding more pressure on tourism which is already in a critical condition if not in intensive care.
These factors underscore the need for more decisive and urgent action to be taken by our institutions and leaders if we’re to see growth in economic activity and if we’re going to see indigenous businesses not only survive but thrive and compete on a sound footing with foreign investors who are arriving not only with access to cheaper financing but a different set of skills and outlook.