est. 2007

Barbados Underground

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Fund Access for Success

  The quantum of deposits that you see in Credit Unions and Commercial banks are not capital. They may at best be described as savings, maybe money, BUT NOT CAPITAL. These institutions are Financial Intermediaries, that may, according to their risk preference, transform them into loan capital. I note that one other high profile commentator…

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Screenshot 2019-07-28 at 13.39.43.png
This can be seen on Fund Access website

 

The quantum of deposits that you see in Credit Unions and Commercial banks are not capital. They may at best be described as savings, maybe money, BUT NOT CAPITAL. These institutions are Financial Intermediaries, that may, according to their risk preference, transform them into loan capital. I note that one other high profile commentator makes the same mistake

– Vincent Condrigton

Understandably the government’s public relations machinery is working overtime. Any iota of information is being shared with the citizenry that will cloak positively the government. The role of propaganda should not be underestimated how it controls the narrative and by extension the minds of a people.   It gives the blogmaster no pleasure to remind the BU family propaganda was used to good effect by the Nazi Party with Hitler appointing a minister of propaganda. This is an extreme example to emphasize the importance governments will place on the function of controlling and ‘sanitizing’ information.  It is left to an informed citizenry to promulgate a countervailing view.

The quote above reminded the blogmaster of a feel good message Minister of Small Business, Entrepreneurship and Commerce, Dwight Sutherland has been repeating without challenge in recent months. To quote a media report:-

Our Government, we have started talks with non-governmental entities, international agencies, whether the loans will be secured or non-secured we recognised that Fund Access has a number of clients who are knocking on the door. In 21 years of operations, Fund Access has approved over $64 million to 1,500 clients (Blogmaster’s emphasis).

The minister’s message was supported in the same media report by Chairman of Fund Access David Simpson:-

We have also approved an additional 138 loans, and refinanced a further 266, all accounting for job creation of just below 2,400 jobs. He also pointed out that they had surpassed $6 million in disbursements for the calendar year 2018, having approved and disbursed in excess of $5.9 million in loans and created 144 jobs.Up to June 30, the Fund has disbursed $2.4 million to 51 clients and created 68 jobs in 2019. Is is only the blogmaster waiting for more relevant information? How about breaking out the loans by sector, size, date loan given linked to the date same business was established. Important is the failure rate i.e. number of businesses receiving loans and whether they are still in business. What is the rate of delinquency etc etc etc. Some of us prefer our leaders to share a level of analyses with the public that will inform about how our tax money is working or not for that matter.

Relevant link:

‘More money’ for Fund Access

If the small business or what is commonly referred to as the SME sector is regarded as important, those leading the sector must up the game. We see the same tired faces, have to listen to the same tired narratives and expect that miraculously the sector will emerge to save us from ourselves.

52 responses to “Fund Access for Success”

  1. John A Avatar
    John A

    @David

    I would like to share with you the words of one of the most successful bankers of the early 1900s, a fellow called J.P. Morgan. Below was what he said in 1901.

    ” For a bank to grow and prosper it must be able to convert one man’s savings into another man’s capital.”

    Some would argue there was no man better at doing this than him. His point remains today. To have loads of money in a banking system without putting it to work is pointless for all involved.

    To argue about savings vs capital to me is not worth it. After all does not the saver view his savings as capital he has placed on the bank to work for him? Is the ability for the bank to pay the saver a decent rate of return not dependant on them lending his savings(capital) to another entity to in turn put it to work for them?

    Also at what point does savings(personal capital) become more of a problem than an asset to all involved? Are we not there now with inflation way in excess of the savings rate?

    As the young people say don’t get tie up in the window dressing strip it away and look deeper.

  2. David Avatar
    David

    @John A

    Is this the takeaway from the article for you?

  3. John A Avatar
    John A

    To me its the misunderstanding of the function of the banking sector. Along the way they have lost the purpose they were intended to serve, which was to act as a facilitator. To in other words marry capital to economic growth. The days of visionaries like Morgan are no longer present. What we have is people who make clients fill out forms and provide tons of paper without seeing the idea as being viable. We have basically turned bankers into accountants in other words.

    In the process tons of viable projects never got off the ground and there is no real arm present that could be deemed a true development bank. The bankers come from the same pool of persons as the public, hence they themselves are risk adverse.

    That is partly why we are here today. As I was told once ” A banker gives you an umbrella when the sun is out and takes it away at the first sign of rain.”

  4. David Avatar
    David

    @John A

    The focus is on Fund Access, a government agency setup to assist the SME sector.

  5. John A Avatar
    John A

    @ David.

    Yes and why do you think fund access exist?

    It exist because without them many small businesses would never get noticed by the bank. I for one support fund access in what they are doing, but they are there as a result of a banking sector that has failed small business.

    Do you honestly think if the banks wanted the business of those going to fund access they would need to exist?

    The banking sector has failed the small business man and so fund access had to step in. In other words fund access is a plaster for a much larger problem that needs addressing. The problem started when banks began looking at people savings as a bother, instead of their capital that they needed to act as intermediate for.

    I would like us to view fund access in why they are needed and the bigger picture that surrounds them.

  6. David Avatar
    David

    @John A

    These agencies exist to fill a need not serviced by the financial system.

  7. John A Avatar
    John A

    @ David.

    I see it differently. To me they exist because of the failure in the banking sector.

    Let’s say a business starts with fund access finances and then grows, will it not have to eventually go back to the financial sector?

    Why should fund access have to start and nurture a business by taking the initial start up risk, to then pass it on to a commercial bank when it reaches a certain size?

    I appreciate and support the work fund access does, they however exist because of a failed banking sector that ignores small business. We address that and we fix the problem at its core.

  8. David Avatar
    David

    @John A

    You are aware financial companies will have a different risk appetite as fortyacresandamule has often stated?

  9. John A Avatar
    John A

    @David.

    Yes and forty is correct and that’s part of the problem here. None of the banks here offer venture capital financing and none deviate from their long list of rules. They also don’t want start up risk but will take the companies after they have established a record.

    When a bank here can tell people to bring $50000 and deposit and they will give you an overdraft of $50000 says it all. I am not making this up either as I know several people who have been to asked to deposit the amount they are requesting an overdraft for.

    I feel it should be legislated that an agreed percentage of banks portfolio must be dedicated to small business and entrepreneur development. Why should we allow banks to make fund access take all the risk and then tell them thanks for the client when they reach a certain size?

    The banks here want a dam guarantee on every loan they make with the highest bank charges and the lowest exposure. Mind you I don’t blame them, I blame us for not legislating different.

  10. John A Avatar
    John A

    @ David

    Let me give you an example of the foolishness banks get away with.

    Business A goes to a bank with a good idea and ask for some financing, they are rejected as the bank feels they are not viable.

    A THEN takes the same idea to fund access and gets start up capital. They start and their business grows and is profitable.

    A THEN has a sizeable turnover and to expand further he goes back to the same bank that refused him 2 years ago with the same business and is welcomed with open arms, as he now has a record and financials to confirm it.

    So fund access take the risk, gets the client on their feet and then the same bank just picks them up now they are established without so much as a thank you to fund access.

    You don’t see something seriously wrong with the above scenario?

  11. Heather Avatar
    Heather

    @ David, the fund Access Program should also be in the Secondary Schools if it is to really become an agent of change. That means that there must be a shift in the focus of education with entrepreneurship being included in the curriculum.

    Along time ago there was the Junior Achievement program. It can be used to instil confidence in budding entrepreneurs.

    I agree that the Minister just threw some numbers out there. No one knows the age of his numbers. If it is from inception, the program has been wasting it’s time and the tax payers money. $43,000 is the average of the $64 Million but no one is any wiser regarding who got what amount or for what business venture. For all we know several persons could have received $5,000.00 each and some millions.

    Govt can assist by giving entrepreneurs incentives to focus on areas that through research it has identified as growth areas.

  12. David Avatar
    David

    @Heather

    There is a program in the schools offered by Miller Publishing if the memory is working to selected classes, children are given $20.00 to invest in a project with the expectation to show a profit. They are expected to do a business plan, P&L etc.

  13. David Avatar
    David

    @John A

    On what basis would a bank or credit union offer venture financing?

  14. John A Avatar
    John A

    @DAVID.

    A bank will do it when they are legislated to do so. The same way Sinkler legislated that they had to hold more government paper.

    What is to stop us from legislating that a percentage of their portfolio be designated for small business financing even if a cap is put on it?

    Fund access is a patch not a solution.

  15. David Avatar
    David

    @John A

    Will leave that matter for Vincent or some another who is competent. Not sure how the government can legislate how a financial institution can lend. Although there was a period in the Tom Adams era when he did something similar but that was a different time.

  16. Heather Avatar
    Heather

    Besides loans to individual members, what can credit unions do in terms of national development projects?

  17. John A Avatar
    John A

    @ David.

    Research what the Australia Government did to get banks to finance small business.

    If you Google an article in The West Australia written by Nick Evans in November 2018 you will see how one country dealt with this.

  18. John A Avatar
    John A

    @ David

    You can also research the article in The South China Morning Post of March 2019 where Beijing demanded a 30% increase in lending to small business by banks.

    They are many other countries that have addressed this but Australia and China are 2 that come to mind.

  19. William Skinner Avatar
    William Skinner

    @ Heather

    Absolutely brilliant re: putting progressive programs in schools.
    There are schools now where the actual classrooms are designed like offices etc. and students are being directed toward commerce and the entire business environment.
    We need to make a quantum leap into the future of education and producing students to lead this country for the next half century.

  20. Hants Avatar
    Hants

    https://www.cnbc.com/2019/01/25/cyber-calamity-forecaster-career-counselor-and-solar-engineer–here-are-the-fastest-growing-jobs-of-the-future.html

  21. David Avatar
    David

    @John A

    Is this the article you mentioned? If yes this is a case where the government made the financing available to the small business sector.

    https://thewest.com.au/business/small-business/2b-package-from-federal-government-to-boost-small-business-loans-ng-b881020449z

  22. David Avatar
    David

    @John A

    Read the article, here is the link. You realise this is China with a central system of government? A government with large state owned financial institutions?

    https://www.scmp.com/news/china/diplomacy/article/3020107/china-companies-pour-resources-research-global-economy-cracks

  23. NorthernObserver Avatar
    NorthernObserver

    Possibly the Minister should consult his Cabinet colleague Minister Straughn. I have searched but cannot find an Annual report past 2011 (submitted in 2014)
    https://www.barbadosparliament.com/uploads/sittings/attachments/3ee3b0ae731376c93977aba58132b61e.pdf
    one needs more recent info than simply loans, total amounts and forecasted employment?
    The Accountant General is also behind on submitted annual reports, but his mentions on Fund Access are brief
    https://treasury.gov.bb/content/accountant-general-financial-statements
    It seems one known blogger was once a Director.

  24. Piece the Legend Avatar
    Piece the Legend

    It would be more useful instead of shouting the praises of Fun Access to

    Get a report of the businesses they funded.
    The revenues and employment levels of these businesses
    The real performance of (Let us have ) Fun (with the tax payers money) Access portfolio
    The level of self sufficiency of Fund Access and the annual contributions by government

    Please TRY NOT TO DRINK THE COOLAID!!!

  25. John A Avatar
    John A

    @David.

    What Australia did was made some funds available to commercial banks with certain conditions attached. They had to lend it to small business and prove the funds were used for that purpose. It was not just a matter of the banks getting a cheque and not being held accountable for how the funds were used.

    So instead of passing the money to the small businesses through an entity like fund access, to then have fund access hand them back to the banking system as the business matured, they got them into the banking system from day 1.

    What they did was forced the banking system to work by putting in some capital which the banks used to then soften their demands on the small business owner. They in so doing removed the need for a middle man like fund access from the game and left financing to those in that business.

    In the China case of China we are looking at how a government can use legislation to increase lending to small business. The same way Sinkler passed legislation forcing the banks to hold more government paper in a previous budget this too can be done.

    All that is needed is the desire for change and then the excuses for not changing will disappear.

  26. Wily Coyote Avatar
    Wily Coyote

    Mute arguments, banks will LOAN FUNDS if they determine the risks are acceptable and their is a reasonable expectation of making a profit. TURD WORLD BARBADOS POLITICAL MANAGEMENT basically has put the country in a position that these basic expectations are unattainable, therefore lenders withhold thier LOANS. Get the country operating with a fundamental sound financial management and banks will again provide the required funds, in the meantime it’s a FAILED STATE.

  27. John A Avatar
    John A

    Even in good times small businesses found financing from banks difficult to get. The fact that they were allowed to avoid this sector and get away with it for so long, is the fault of consecutive governments allowing it to continue.

  28. Vincent Codrington Avatar
    Vincent Codrington

    @ John A at 8 : 44 AM

    Pray, tell me how can you seriously argue for development of a capitalist mode of development and require GoB to force commercial banks to finance small businesses against their evaluation that they will be putting small savers deposits at risk?

  29. Vincent Codrington Avatar
    Vincent Codrington

    @ John A

    Perhaps you are not old enough to know but your arguments and suggestions on financing small businesses in Barbados have been tried and failed. If you doubt me ask Wiley.

  30. Vincent Codrington Avatar
    Vincent Codrington

    @ John A

    Take also to heart Piece of the Legend advice at 1 :46 AM. It will pay huge dividends. We like you real bad so we do not want you to reinvent the wheel.

  31. Hal Austin Avatar
    Hal Austin

    @ Vincent

    It was also a policy of the Heath/Wilson governments in the early 1970s. I am trying to remember what it was called. Basically the loans were government money managed by the banks. It failed.

  32. William Skinner Avatar
    William Skinner

    @ Vincent Codrington

    We want to change everything but want to keep the status quo intact. Until we make the quantum leap into reality, it’s going to be the same cold soup warmed over.
    Case in point: Some transport board ex workers want buses to operate as independents. They can’t get financing. In the meantime we are reading about an enterprise fund. One would have thought that such a fund would have been chasing them down to lend them the money.
    Anybody who has read a text book on Commerce knows that the movement of goods and services( transportation) is usually in the very first paragraph.

  33. David Avatar
    David

    @Vincent

    Like you the blogmaster is unable to follow John A. We know he means well.

  34. John A Avatar
    John A

    My point is quite clear if you follow what Australia did, I really don’t see what difficulty you are having understanding it.

    The same way we are taking tax payers money and giving it to fund access, we could take the same funds and give to commercial banks under strick guidelines for its use and guaranteed disbursement to small business.

    We just need to put the relevant legislation in place as Australia did. The $2B they made available to commercial banks had to be accounted for with records showing it was disbursed to the small business community

    Doing it that way removed the need for creating another government entity to do what banks do daily.

    I think the banks had to match the government money given for this purpose with 20 cents on the dollar, but Can’t swear to that amount. By doing this the liability to the banks for start up ventures was greatly reduced and once the entity got on its feet using this approach, the same bank then dealt with it from there as they would any other commercial client.

  35. John A Avatar
    John A

    Let me share this with you to show nobody ain t reinventing no wheel or trying the impossible. We want change well then the system must be changed its that simple.

    Taken from an article in Caixin a few days ago on 25.6.19 written by Peng Qinpin. I going just share the first paragraph with you all hard headed people. Lol

    ” End of May 2019 China’s 5 largest banks have expanded loans to small business by 23.7% from last year.”

    Yes it’s China and not Bim but don’t try to dismiss it by saying it can’t work. Also go back to the Australia example and see the growth in the small business sector since they took their decision as well.

    We always can fine reasons why things can’t work here, but at the same time we want change to occur.

  36. Hal Austin Avatar
    Hal Austin

    Banks are reluctant to lend to start-ups because, on average, 70 per cent fail within the first three years.

  37. John A Avatar
    John A

    Hal yes and that is why when Australia pumped $2b into the system to be used exclusively for financing small business, they asked the banks only to carry the risk for 20 cents out of every dollAr loaned.

    Their view was even if 7 out of 10 fail 3 can succeed and deserve a chance to do so

  38. Hal Austin Avatar
    Hal Austin

    @ John A

    I agree. But you must not ignore the fact that the government (all post independence governments) has failed to create an investment environment favourable to collective investments, venture capital and other instruments. This can be (and is done) through fiscal tools. We have mismanaged our political power.
    I will give you an idea: let us call the new instruments personal investment plans (PIPs). Individuals will invest taxed income, it will grow tax free and withdrawals will be tax free, provided the investment is for three years or more.
    Can you see the problem? Our civil servants and politicians do not like the idea of people getting money tax free. Do the same for people in the Diaspora: taxed investments of Bds$10000, tax free growth, tax free withdrawals, with 50 per cent of the Diaspora fund going to investments in start-ups and SMEs.

  39. David Avatar
    David

    @John A

    Why not forget the banks and have your small business association and other affiliate entities lobby the same government to partner with the credit unions or other private financial companies in the market? The banks will not take on you or government and you know it. Blowing spit in the air.

  40. John A Avatar
    John A

    @ Hal.

    I agree with you 100 percent that our leaders have failed us in this area too. They want to play a part in a game they don’t understand. What you have suggested with your PIPS Is also a very viable approach and basically will give us the same end result. That way the people’s money can be put to work directly to finance small start ups, with the investor getting a return on their savings and the small business having access to finance. As you say they are many ways this can be done. The banks if competition or legislation was brought, would be fools to sit back and watch this business slip away from them. The thing is they know that there is no viable alternative now so they can afford to play the ass with small business financing. Only a pro active government like Australia’s will change that by forcing them to participate by removing the excuses.

    I am not concerned for me as I at the stage now where I only batting for singles, my days of swiping for boundaries are past thankfully. But it annoys me that this and past governments have not addressed this matter. We will give foreign investors millions in waivers but we refuse to help our own who simply want a little help to start a venture.

    You remember in the early days what banks charged for car loans? Then Consolidated Finance and Globe Finance came along and changed the game. The banks had to adapt or that business would of left them.

  41. Piece the Legend Avatar
    Piece the Legend

    @ John A

    De ole man was not gine say nuffin about your concept

    Cause de ole man noticed dat Wly Coyote and Mr. Vincent Codrington were stoically quiet about your tried and trated idea.

    But de ole man cant tek I no more!

    Dere is a facility at de Central Bank of Barbados called de Central Bank Guarantee.

    Go onto the Central Bank site and read up pun um and then come back and speak here about this subject

    De ole man would say more but…

  42. John A Avatar
    John A

    @ David

    You still need the banks as they are the ones who can sell foreign exchange to the businesses to pay for their imports. To have the facility directly with them makes it a one stop for the small businessman. Also if the small guy deals with the bank from their inception, the bank can see deposit trends and growth signs which In turn will help them to offer the client a facility.

    The answer is not to bypass the banking sector but force them to participate in the growth of small business. They should not be allowed to come here and make millions and not have to give back to those they profitted from.

    Government if it was proactive, could even offer the banks a tax credit based on the amount of new business they finance. So for every 10 million dollars say in small businesses finance they did, they could receive a tax credit of $100,000. Just using numbers as I haven’t studied the balance sheets of the finance institutions in a consolidate manner, to post actual figures.

    They are too many ways this can be fixed for us to sit back and let those we elected fool us better can’t be done, sorry refuse to drink that Koolaid too!!

    Hals idea of a PIP is just another way a deviation from the norm could occur. The road I suggested of start up capital being made available to the banks under strict conditions of use and application is another. The tax credit to banks I outlined above for committing finance to the sector is a third.

    It’s time to explore options and stop saying this is how it was always done. Even if government go down that road we as a people can do better.

  43. John A Avatar
    John A

    @ pieces.

    I am familiar with it but what I am sure you picked up on is the fact that I am trying to remove this activity from government all together.

    Let them act as a facilitator and then remove themselves from the equation. That way no one can say Tom Jones get a loan from fund access cause he did handing out flyers elections day. Not that this happened just saying.

    Like me I know you would have similar concerns here, so I am simply offering alternatives to yet another government entity being set up to do what the banking sector does already. That way we not back to begging for annual financials and supporting a whole other entity to do what others have been and are already doing.

    All government must do is legislate and like Australia supply start up capital to the small businesses with strict guidelines for use and application by the banking sector. They can then tell the banks “ok wunna put in 20 cents on the dollar, we putting in 80 cents so finance the blasted people now!”

    One thing is for sure the system now is not working. We must therefore decide if we going leave it so and try to patch it, or tackle it truly addressing change.

  44. David Avatar
    David

    @John A

    You point is understood by the blogmaster, good luck.

  45. John A Avatar
    John A

    @ David.

    To be honest I doubt we will get anywhere with this for one main reason. Right now government have a tool in fund access to use as they see fit.

    Both my approach and Hals will take that tool away from them. It brings us back to the same old tired question. Are we in fact a nation that claims to want change only as long as nothing changes?

    Whether it is this topic, public transport or reform of the indirect taxation system, are you not seeing one glaring common denominator yet?

    We are encourage to talk, but when it comes to acting and implementation, we better set up 3 committees and take 2 years to study change first. Meanwhile the economic clock goes tick rock, tick tock!

  46. John A Avatar
    John A

    David I will leave one final piece of data with you on the results of the decision taken by the Australian Government, as results are always the best guide to measure any policy. The following was taken from the Australian Bureau of Statistics so I ain t make it up. It was a media release from them in February 2019.

    ” Luisa Ryan director of business registry stated new businesses grew in 2018 by 15.8 percent topping 2017s rate of 15.1 percent, resulting in the fifth consecutive year of continuous growth.”

    See the difference between proactive now and ” lotta long talk”?

    I hereby rest my case and retire to the viewers gallery.

  47. David Avatar
    David

    @John A

    Would you say the main problem affecting growth in the small business sector is lack of financing?

  48. John A Avatar
    John A

    @David.

    Yes without a doubt it is right up there in the top 2. The other is trying to convince loans officers to see outside the list of guidelines they have been given from head office. It actually has gotten worst in latter years when alot of the banks management had the decision making taken from then locally and sent to their regional head office for final approval.

    The price of progress some would say.

  49. David Avatar
    David

    @John A

    You neglected to highlight this extract from the article about the 2 bullion made available by the Australian government for lending.

    Rather than lend directly to companies, the new fund aims to help smaller lenders through the securitisation market — in which loans are bundled up and sold on to investors, including groups such as superannuation funds — spreading the risk of loans to individual small business, traditionally considered high-risk, across a bigger pool.

  50. John A Avatar
    John A

    @ David.

    It is The policy and its success that is of interst to me not the mechanics of how they chose to package it.

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