ISBN: 978-976-95695-1-5 - Caribbean …

1 Caribbean development bank , 2016 isbn : 978-976- 95695 -1-5 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electric or mechani-cal, including photocopyiing, recording or otherwise without the permission of the by: Caribbean development BankThe views expressed in this book, as well as any errors of commission, or omission, are the sole responsibility of the authors, and do not necessarily reflect the opinion of the Caribbean development development BANKPURPOSE The purpose of the bank shall be to contribute to the harmonious economic growth and development of the member countries of the Caribbean (hereinafter called the Region) and to promote economic cooperation and integration among them, having special and urgent regard to the less developed members of the Region .Article 1 - Agreement establishing the Caribbean development BankMISSION STATEMENTCDB s Mission is to be the leading catalyst in the reduction of poverty through the inclusive and sustainable development of our BMCs by mobilising development resources in an efficient, responsive and collaborative manner with accountability, integrity and excellence.

2 | Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier117 IntroductionApproach 17 Definition and Data Challenges 1713 Executive SummaryBackground 13 Synopsis of the Study 13 Main Findings 13 Recommendations 14 CONTENTS6 Foreword7 Acknowledgements8 Acronyms4 List of Figures and TablesMicro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier - | 2191. Regional MSME Sector Global Economic Trends and Effects on Caribbean Countries MSMEs and Macro Economic development The Regional MSME Sector 26 Review of MSME Sector Challenges The Competitiveness Challenge 30 Optimal development Path for the Regional MSME Sector 31322. MSME Access to SME Access to Finance Globally 33 Life Cycle System MSME Access to Finance in the Caribbean 42 Financing Challenges Facing the MSME sector Financial Literacy of SMEs Regional Collaboration to Improve Financing Options 61633.

3 Regional Policy and Regulatory Gap Analysis of the Adequacy of the Enabling Framework 65 Review of Regional Best Practice Policy and Regulatory Frameworks Further Enhancing MSME Frameworks in the Caribbean 74 CONTENTS804. Adequacy of the Institutional Support Public Sector Institutional Framework 81 Recommendations 86 Institutional Capacity - Private Sector Business Support Organisations 87 Examples of Private Sector BSOs 88 Recommendations 91 | Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier3 CONTENTSD ollars ($) throughout refer to United States dollars (USD) unless otherwise Bibliography 1172. a. Template - Information Requests Interview Questions 120 b. Financial Information Request 1233. List of Persons Consulted/ Interviewed 1254.

4 Analysis of SME Access to Finance in Eight BMCs 1305. Country & Donor Definitions of MSMES by Parameters 1421086. Synthesis of Major Findings and Overview 121 Optional development Paths for the MSME Sector 121 Findings and Recommendations 121955. Nurturing Innovation in the MSME What is Innovation? 96 Best Practices in MSME Innovation The MSME Innovation Landscape in the Caribbean 100 Missing Links in the Approach to MSME Innovation 110 Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier - | 4 Figures Figure : Average Real GDP Growth, 2007-2014 9 Figure : Total Public Debt, 2011 10 Figure : MSME Density 12 Figure : MSME Density by Region 13 Figure : MSME Growth Rates Regionally 13 Figure : MSME Growth by Income Groups 13 Figure : Six Most Commonly Cited Obstacles by Firms in 98 Countries 14 Figure : Indicators Used Among International, Regional and Local Sources 15 Figure : Pyramid Distribution of Private Sector Businesses 16 Figure : 2016 Ease of Doing Business Rankings: BMCs vs.

5 Top Five Countries 19 Figure : Ratio of Domestic Credit to GDP Globally 21 Figure : Formal SMEs in GDP 22 Figure : Informal SMEs in GDP 22 Figure : Finance Coverage over SME Life Cycle 25 Figure : Interest Rates in Eight BMCs, 1974 - 2014 35 Figure : Value of Collateral as a Percentage of Loan Values 36 Figure : Loan Analysis Procedures Used by Banks and % of bank Usage 45 Figure : Guidelines for Adopting Innovative Processes at Organisational Level 85 Figure : Methodology Used to Establish Rankings on the GII 86 Figure : Technological Readiness 91 Figure : Caribbean Firm Capacity for Innovation in Six Countries 98 LIST OF FIgURES & TABLES | Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier5 TablesTable : Policy Measures to Improve SME Access to Credit in OECS Countries 23 Table : MSME Life Cycle Financing in Eight Caribbean Countries 28 Table : Micro Entrepreneur Profiles from a Survey of 656 Enterprises in Four Countries 30 Table : Institutions Usage by Borrowers and Savers 32 Table : Estimates of the Market for Micro Credit Loans 32 Table : Average GDP Growth and Average L&A Growth in Eight BMCs 33 Table : Gaps in Policy Measures to Improve MSME Access to Credit OECD vs.

6 BMCs 38 Table : The Policy, Legislative and Regulatory Framework for MSMEs and Supporting Lead Institutions in Eight CDB Borrowing Member Countries 53 Table : Policy and Regulatory Framework - Belize 58 Table Strategic Initiatives - Belize 59 Table Jamaica MSME Policy Objectives and Strategic Actions 61 Table : Eight CDB BMCs MSME Enabling Policy and Institutions Matrix 72 Table : Ranking of Selective Caribbean Countries on World Innovation Index, 2015 87 Table : Comparative Innovation and Technology Status for Guyana 94 Table : Options for Framework for Service Innovation Policies 103 Table : Five Examples of Service Innovation Policies 105 LIST OF FIgURES & TABLESM icro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier - | 6 FOREwORDThe Micro, Small and Medium Enterprises (MSME) sector is a substantial contributor to economic and social development in the Caribbean , accounting for more than 50% of regional enterprises, and over 50% of Gross Domestic Product.

7 Despite these significant contributions, MSMEs face a number of major constraints, including inadequate access to financial resources for investment and working capital; gaps in training in business skills; high cost of infrastructure services; inadequate physical infrastructure support (for example, warehousing, factory and commercial space, industrial parks, etc.); low levels of technology usage to improve productivity and; and lack of competitiveness. Given the important role of the sector, the major challenge facing policy-makers today is to ensure that MSMEs receive adequate support needed to enhance competitiveness; maximise growth potential; and generate employment while contributing to gender equality, and poverty this end, the thematic study on MSMEs in the Caribbean adds significant value to the body of research on the sector; and will expand knowledge and understanding of MSMEs in our Region.

8 The study tables a number of innovations, including the adoption of a more holistic three-tiered approach to sector development based on its successful implementation in Singapore, Korea, Western Europe, and Costa Rica over the past two decades. These proposals, I hope, will open the door for healthy debates among policy-makers, academics, and students and provide the platform for the long-term transformation and sustainable development of the MSME sector. Wm Warren Smith, development bank | Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier7 This publication was commissioned by the Economics Department of the Caribbean development bank (CDB) and prepared by two consultants, Michael Julien and Melvin Edwards. CDB acknowledges with gratitude the work done by the consultants and all those in the selected countries, that were the focus of the study, who assisted in any way in making its completion internal team comprising Dr.

9 Patrick Kendall, Dr. Justin Ram, Ian Durant, Lisa Harding, Kari Grenade and Jason Cotton, was responsible for the technical supervision of the process. The team acknowledges with deep appreciation the useful comments and insights offered by many CDB Goodman and Linda Cordeaux provided the legal services required of the project; Andria Murrell saw to the end to end Administrative support while Klao Bell-Lewis oversaw the design and finish of the is our hope that policymakers and other stakeholders will find much value in this study in charting the development of the regional MSME Justin RamDirector, Economics DepartmentCaribbean development BankACKNOwLEDgEMENTS Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier - | 8 ABIA Antigua and Barbuda Investment AgencyACCA Association of Chartered Certified Accountants ADB Asian development BankADE Agency for the development of EnterprisesAFI Approved Financial InstitutionBDS Business development ServicesBELTRAIDE Belize Trade, Investment and development AgencyBEST Belize Enterprise for Sustainable TechnologyBMC Borrowing Member CountryBNTF Basic Needs Trust FundBSA Business Support AgencyBSE Barbados Stock ExchangeBSO Business Support OrganisationB2B Business to BusinessBUSOS Business Support Services.

10 SurinameCAIC Caribbean Association of Industry and CommerceCAIPO Companies and Intellectual Property OfficeCARDI The Caribbean Agricultural Research and development InstituteCARIB-CAP Caribbean Micro Finance Capacity Building ProjectCARIRI The Caribbean Industrial Research InstituteCCI Culture and Creative IndustriesCCMF Caribbean Centre for Money and Finance CDB Caribbean development BankCDF Caribbean development FundCOSTAATT The College of Science, Technology and Applied Arts of Trinidad and TobagoCPEC Caribbean Programme for Economic CompetitivenessDFC development Finance CorporationACRONyMS | Micro, Small & Medium Enterprise development in the Caribbean : Towards A New Frontier9 ECA Export Credit AgencyECCB Eastern Caribbean Central BankECCU Eastern Caribbean Currency UnionECGS Enhanced Credit Guarantee SchemeECSE Eastern Caribbean Securities ExchangeEDU Enterprise development UnitEIB European Investment BankERMFP Enterprise Risk Management and Financing ProgrammeEXIM bank Export Import BankFAO Food and Agriculture Organisation of the United NationsFG Forward GuidanceFIT Foundation for International Training (Toronto)