RELAX LENDING REGULATORY CONTRAINTS FOR SMES

NEIL HARTNELL INTERVIEWED MARK A.TURNQUEST

MAY 2012

#Tribune Business Editor

#The Bahamian authorities have been urged to relax legal and regulatory constraints to provide small businesses with “vital” access to international capital, a leading consultant telling Tribune Business the sector was currently “in ruins”.

#Mark Turnquest, head of Mark A. Turnquest Consulting, called on both the Government and Central Bank of the Bahamas to ease National Investment Policy and exchange control regulations, respectively, so that Bahamian companies and entrepreneurs could partner with international investors and gain access to much-needed investment capital that would sustain their efforts.

#He also told Tribune Business there needed to be better collaboration and co-ordination between the various government agencies, such as the Bahamas Development Bank and Bahamas Entrepreneurial Venture Fund, that are involved in small business financing and assistance, describing the current situation as too fragmented and involving numerous ‘overlaps’.

#And, calling for better business services and support networks to underpin initiatives such as the former Ingraham administration’s Jump Start programme, Mr Turnquest said “motivating” risk-taking in the small business sector was critical to the Bahamas’ economic recovery.

#Arguing that a $4.356 billion national debt and expanding fiscal deficit made it virtually impossible for the Government to provide the required financing, Mr Turnquest said: “The Central Bank needs to relax how we source our funding, so foreign investors can invest in small local industries and partner with young Bahamians who have talent and want to expand.”

#Describing such a move as “so vital” to the expansion of Bahamian business ownership through a thriving small business sector, he added: “The international market is willing to invest in local manufacturing and innovative industries in the Bahamas, but due to constraints and too much red tape it’s difficult for the small businessman to access this funding.”

#While the Government’s National Investment Policy mandates that certain industries and economic sectors are reserved for 100 per cent Bahamian ownership only, Mr Turnquest said that joint ventures/financing from international investors could be structured so there was no change in equity ownership. Preference shares and other debt instruments, he added, were possibilities.

#Asked by Tribune Business as to whether any international ‘angel’ investors or venture capitalists would be interested in financing Bahamian small businesses and entrepreneurs, Mr Turnquest said an article he previously wrote in the Bahamas Investor magazine had generated numerous inquiries.

#“People were calling me as to what the climate is here for investment,” he recalled. “I got a lot of positive feedback, because it exposed the business community to the international marketplace.”

#Again calling for the creation of a $15-$20 million Small and Medium-Sized Enterprise Fund, which would draw its original capital from a combination of commercial banks and other sources, and be run by the private sector, Mr Turnquest said the former Ingraham administration had failed to “invest in business support services” to support its small business lending activities.

#“The most they had with Self Starters was six successful businesses out of 100,” he added. “The Jump Start programme had no business support agency, so it will not be long before those people find financial difficulty.

#“My recommendation was always to establish a collaboration between the Bahamas Entrepreneurial Venture Fund, BAIC, Bahamas Development Bank and Self-Starter programme to set up some kind of Small Business Development Agency that could pool resources and come up with one national vision for small business development,” Mr Turnquest told Tribune Business. “You could then set the base for those kinds of business.”

#The Ingraham administration left in place legislation largely along the lines of Mr Turnquest’s thinking, a Small and Medium-Sized Enterprises Development Bill, which had as its centrepiece a Small and Medium-Sized Business Development Agency (SMEDA). It remains to be seen what the new government does with this.

#As for the current condition of the Bahamian small business sector, Mr Turnquest estimated that prior to the New Providence Road Improvement Project going full force, the recession had been claiming five victims per month.

#Projecting that at least 200-300 companies had gone out of business since 2007, he added: “The roadworks itself took about 115 between Robinson Road, Market Street, Blue Hills and Prince Charles Drive. What the recession started, the roadworks finished.... The small business sector is presently in ruins.”

#But, calling on Bahamian small businesses and entrepreneurs to take responsibility for their own fates, Mr Turnquest told Tribune Business: “We cannot rely on the Government.

#“The only way we can try and develop this economy is to get the small businessman mentally motivated to want to take that risk. Everyone has to be more accountable and responsible, get their accounting records straight, develop a marketing strategy and a creative business mindset that thinks about exceptional goods and services. Customer service has to be at a high level.

#“Products must be innovative, and you have to manage your costs and expenses. You have to know everything you sell will not produce a profit. Monitor your expenses and put accounting controls in place. We need to be extra creative now for the economy to move on.”