Saturday, September 12, 2009

Small Business Development Council stymied by funding headaches

Small Business Development Council stymied by funding headaches

Posted By Stabroek staff On September 11, 2009

More than $500m needed for creation of fund

More than three years after the establishment of the Guyana Small Business Council (GSBC) under the Small Business Act of 2004, the Council is yet to accomplish even a small measure of the functions for which it was set up and which are regarded as crucial to the charting of a course for the country’s small business sector.
Guyana Small Business Council Chairman Keith Evelyn [1]

Guyana Small Business Council Chairman Keith Evelyn

What makes the protracted underperformance of the GSBC worrying is the fact that it is charged with creating a framework for enhancing the efficiency and effectiveness of the small and medium-sized business entities that comprise an estimated thirty per cent of businesses operating in Guyana. Signs of mounting frustration over the frustratingly slow pace of the substantive implementation of the Small Business Act are evidenced in unending complaints by small and medium-sized entrepreneurs about official neglect. Head of the Guyana Small Business Association (GSBA) and serving member of the Council, Patrick Zephyr told Stabroek Business in an invited comment that the available evidence suggests that in countries where small businesses have been successful there has always been evidence of a strong input from government towards the creation of an enabling environment.

Council Chairman Keith Evelyn agrees, pointing out that moving the Council beyond the stage of its mere existence has become an urgent priority given what he says is the challenge which the Government of Guyana has set itself “of seeking innovative ways of stimulating indigenous entrepreneurs to become more vibrant and to build a modern economy.” Evelyn says an improved business environment, technical assistance and capacity-building, access to capital and access to information – are the four critical factors necessary for the growth and development of small and medium-sized enterprises. As it happens, however, the fashioning of these tools for the strengthening of the sector depends crucially on kick-starting the GSBC.

Funding, Evelyn says, is a critical problem. Financing the work of the Council is the responsibility of the Government of Guyana and the simple fact is that government has been unable to come up with the cash. A source close to the Council said that the body received less than $3m in state subventions during the first two years of its existence. “The situation was so absurd that at one stage the Council stopped meeting altogether,” the source said.

The broad range of its responsibilities set out under the Small Business Act requires that the Council receive considerable levels of financing if it is to be effective. Critical to the transformation of the small business sector is the setting up by the Council of an operational arm, the Small Business Bureau, the functions of which will include serving as an advocate for small business issues, coordinating programmes for small business development, monitoring the implementation of the Act and preparing an annual report on its activities. “All of these functions,” Evelyn says, “require a considerable financial outlay for the creation of an administrative structure and the recruitment of technical staff to perform the various functions.”

The financial challenges that continue to impact the effective implementation of a regime of mechanisms designed to provide meaningful support for the growth of the small business sector go beyond the costs associated with the setting up of the Bureau. The Small Business Act also makes provision for the creation of a Small Business Development Fund that helps provide access to financing for small business, finances productivity and competitiveness initiatives for SME’s, provides institutional support for organizations representing, promoting, supporting and strengthening small businesses and financing the cost of running the Bureau. An estimated $600m is required for the initial setting up of the Fund and financing its establishment is the responsibility of government.

The fact that financing for the Fund has not been forthcoming up to this time has hobbled the Council‘s pursuit of key aspects of its mandate. On paper the Bureau has listed a range of support services which it intends to offer registered small businesses including a research library, internet access, conference facilities, training rooms and display and exhibition facilities apart from its key functions of providing loan guarantees, technical and financial assistance to the small business sector and training. All of these remain unmet.

The recommended approach of identifying ten sub-sectors in the small business sector for significantly enhanced support led last November to a decision that a consultant be recruited to identify those sectors as well as their strengths in order to provide data that would inform the treatment of those sectors. Delayed by several months as a result of funding, the study, Stabroek Business understands is now underway. We learnt too that agro-processing, art and craft and aquaculture are three sub-sectors that are likely to be identified in the study for focused attention.

Despite the challenges, particularly the financial constraints, Evelyn says he remains optimistic that the Small Business Act can serve as an effective framework for the development of the small business sector in Guyana. Last year the Council set itself a number of short-term objectives including the establishment and full staffing of the Bureau and the setting up of the Fund.

Other short-term objectives included the incorporation of a central Small Business Development Centre with access points throughout the country that would provide various support services for the small business sector including advisory and technical assistance services the preparation of a policy paper for the sector; the implementation of a public relations programme on the benefits of the Small Business Act and the completion of a data base on the sector and an assessment of the size and scope of the sector embracing its capitalization needs and an assessment of the potential of the various sub-sectors with the sector.

Most of these objectives remain unmet up to this time and Evelyn says that he is acutely aware of the importance of them being accomplished as part of the process of establishing the credentials of the Council. Among the more challenging of these tasks is the assessment of the size and scope of the various enterprises that comprise the small business sector. There are few if any existing data bases to support the assessment exercise and to accomplish its goal of creating an effective small business data base, the Council will have to depend heavily on organizations like the Institute for Private Enterprise Development (IPED) whose role as a small business lending agency and training incubator for small and medium-sized enterprises has provided it with both considerable expertise and data on the sector.

While Evelyn says that he believes that an enabling environment for the growth and development of the small business sector is definitely a ‘front burner issue” for government, he concedes that hastening the pace of progress in setting up key structures under the Small Business Act is ‘highly desirable.” He says that in the period ahead government support for the functioning of the Council will be critical in a number of areas including the creation of a Secretariat with which both the Council and the Bureau can function, which secretariat should include a Small Business Centre and providing the Council with regular access to key state agencies and officials.

Up until now the handful of goals that have been realized by the Council include a limited analysis of the needs of the small business sector and an incomplete review of the Act. Additionally, some work has also been done on the collection of data on the number and nature of local small businesses.

Unlocking funding for the work of the Council has become a critical priority and Evelyn says that hopes for progress now depend heavily on the work of the high-profile National Competitiveness Council (NCC) through which the Small Business Council now has greater access to high level decision-makers.

Other sub-sectors in the small business sector including art and craft and agro-processing have gradually come to more focused national attention and have secured support and incentives from government that have created greater opportunities for their development. In the art and craft industry, particularly, Evelyn says that marrying opportunity with potential can provide a breakthrough for the sector. “There is, in my view, a market for as much indigenous craft as we can produce. What we need are the support mechanisms that can help to properly organize the industry and these are the very mechanisms which the Small Business Council and the various other attendant institutions are seeking to deliver.”

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