First Heritage to invest $20M in venture capital fund by mid-2015
FIRST Heritage Co-operative Credit Union (FHCCU) is looking to invest up to $20 million in Jamaica's first venture capital fund.
The fund, set to be launched in the second quarter of 2015, is aimed at removing barriers for small businesses wanting to access funds for investment without the burden of borrowing or experiencing trouble securing bank loans.
"The credit union is seeking other routes to capitalise the businesses of its micro and small entrepreneurs," said Basil Naar, chief executive officer at FHCCU. "Today we do it by lending to them, but what we would like to do is take the equity in their business and use that to assist them in developing their businesses."
The fund was initially set for launch in January, but the legal framework for udertaking venture capital investments proved to be much more complex than envisaged by management.
FHCCU now sees no impediments to the launch in 2015.
The venture capital fund will target members of the credit union wanting to expand or start up their business as a part of its lending offerings.
In disbursing funds, FHCCU will first assess the viability and capital needs of the business and decide how much of its capital needs they will provide in exchange for a suitable equity stake in the business, according to Naar.
FHCCU will invest in a business for at least five years before exiting the deal. At that time, the credit union will first offer its portion of shares in the business to the owners as a way of making profit.
If that's not successful, FHCCU will then have the option of doing an initial public offering (IPO) of the firm.
"We expect that our equity in the business will improve over time and will accrete with a certain value that when it is sold, we will make a return from it that will be re-investable funds for future business people who would like the same invest." Naar said.
While funding will be a centralised operation at the credit union's head office in Kingston, members will be able to access the fund at all branches.
FHCCU was formed through the merger of Churches Co-operative Credit Union and GSB Co-Operative Credit Union in August 2012.
The credit union now has eight branches across Jamaica and offers loans, savings and investment services, insurance and remittances services.