Business

Jamaica worst at innovation, credit?

Wednesday, March 26, 2014    

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JAMAICA scored worst in terms of access to credit and third worst in terms of innovation among nearly 60 developing nations, according to a recently released World Bank study on entrepreneurship.

The island under-performed the rest of the Caribbean, Latin America, Eastern Europe and Central Asia in the study entitled "Latin American Entrepreneurs, Many Firms Little Innovation".

"The Latin American economies... tend to be above the median and in most cases near or above their predicted shares," stated the report. "Some notable exceptions are several small Caribbean economies plus Jamaica and Mexico."

Less than 10 per cent of Jamaican firms under five years old have "actual and benchmarked access to credit", compared to 50 per cent in Trinidad & Tobago, according to the study's tables.

The region, however, still under-performs that of Eastern Europe and Central Asia.

"Much of the gap appears to be explained by Latin America and the Caribbean's (LAC) turbulent macro and financial history and by a shortage of promising productive projects (that is, a shortage of innovation) rather than by credit rationing and credit supply-side constraint per se," said the report.

Less than 20 per cent of Jamaican firms "introduced a new product to the market over a five-year period", according to the study. Only St Lucia and Dominica earned lower scores among a group of 57 nations within and outside the region.

Trinidad and Guyana scored nearly double that of Jamaica while the Dominican Republic scored some 50 per cent. Belarus scored highest in this category.

"On average firms in the region are 20 per cent less likley to have introduced a new product than in middle-income countries in the (Eastern Europe and Central Asia) -- and the picture appears even grimmer for most of the Caribbean where the likelihood of introducing a new product drops to half that of firms in the Europe and Asia," stated the study.

In recent years, a number of Jamaican-based mico-finance outfits have emerged to offer flexible credit to small businesses. The Government aims to introduce legislation to regulate the micro-finance sector whilst increasing its awareness of credit union activity.

In a separate micro-finance survey released by the Economist Intelligence Unit last year, Jamaica ranked 42 among 55 countries. The country suffered from lack of regulation and a focus on pay-day loans rather than small business financing, according to the report entitled "Global Microscope on the Microfinance Business Environment 2013."

The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist.

- BO

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