Several governments and relevant agencies across the Caribbean have teamed up with regional stock exchanges to improve the capacity of the small and medium enterprise (SME) businesses in a bid to further fuel economic growth.

The Jamaica Stock Exchange (JSE) has the most vibrant capital markets in the region which has been largely driven in recent years by the Junior Market (JM) which was started in April 2009.

Companies that aim to list on the JSE’s junior market must raise between $50 and $500 million in an initial public offering (IPO) and have at least 25 participating shareholders owning no less than 20 per cent of the fully paid, subscribed voting share capital after the offer. Once they aren’t suspended, comply with the rules and remain listed for 15 years, they benefit from a tax holiday for the first five years and 50 per cent off the normal tax rate for the remaining five years. Every company also must have a mentor during its time as a listed company unless the JSE gives the company an exemption to not have a mentor. Mentors are approved by the JSE mentor registration committee and can serve multiple companies.

The formation of the JSE’s junior market pushed the Trinidad and Tobago Stock Exchange (TTSE) to form the SME market as then finance minister Winston Dookeran had taken note of Jamaica’s success and wanted to develop a similar market for a similar purpose. The SME was initially formed in 2012 with companies listing on that market benefiting from a reduction in the corporate tax rate charged being 10 per cent instead of the typical 25 per cent with this benefit being applicable for only 5 years. Companies aiming to list on the market would raise TT$5 million to TT$50 million and require at least 30 per cent of the shares to be held by at least 25 shareholders.

Despite the best intentions, the SME only saw its first listing with Cinema One in November 2018 for TT$14.4 million, less than half of the TT$30.89 million targeted. Endeavour Holdings Limited listed in December 2019 and garnered TT$11.06 million, below the TT$18 million target. These are the only two companies listed to date with the SME Index down by seven per cent year to date with a market capitalization of TT$268.52 million.

In a bid to improve the number of listings and capacity of SMEs, the T&T government amended the tax incentive to mirror the JSE’s junior market set-up with companies exemptions on corporation tax, business levy and the green fund levy remaining. The amendments took effect at the start of the year.

Also, the Ministry of Finance, is to provide assistance to the TTSE to operationalise and integrate the SME mentorship programme into the broader set of services currently provided to SMEs by various government agencies. The TTSE will also be amending its rules to include the requirement for a mentor for SME companies which must be approved by the TTSE before they are confirmed as a mentor to a company. The TTSE has requested the T&T Securities and Exchange Commission to review the Statement of Substance and Purpose to insert the new rule 400 (2).

The Barbados Stock Exchange (BSE) is also undergoing a similar collaboration with the Caribbean Development Bank’s (CDB) micro, small and medium-sized enterprises (MSME) Unit, Barbados Small Business Association (SBA) and the Ministry of Energy, Small Business and Entrepreneurship to improve the listings on the BSE’s innovation and growth market (IGM). While the IGM has been around since October 1999, it was rebranded from the BSE Junior Market in 2019 when it was relaunched after the incentives were removed in 2018.

The BSE has only seen three listings on that market as at December 2010 with a market capitalization of BB$15.1 million. It allows with BB$500,000 in gross assets excluding goodwill and equity capital of BB$200,000 to list on the IGM compared to the Main Market which has a requirement of BB$5 million in gross assets to be listed. The CDB is providing US$350,000 to support the 30-month programme.

The Eastern Caribbean Securities and Exchange and the Guyana Stock Exchange don’t have any special markets created for SME’s at the moment. However, with the oil boom in Guyana, more companies are expected to grow in the improving economic environment. NCB Capital Markets Limited formed a Guyanese subsidiary in its 2021 financial year (FY) and has subsidiaries in Barbados and T&T. JMMB Group and The Bank of Nova Scotia have a presence in T&T, Jamaica, and the Dominican Republic.

The total amount raised since the the JSE’s junior market inception in April 2009 stands at $17.9 billion with 45 actively listed companies, three graduated to the Main Market and one delisting. The JSE saw its fourth JM listing this year on June 15 in the form of Dolla Financial Services Limited which saw its $500 million combined initial public offering attracting $4.762 billion with 14,981 shareholders.

Access Financial Services Limited (AFS) was the first company to list on the junior market in October 2009. The company raised $100.69 million at $1.83 per share, had an asset base of $608.48 million and paid $18.75 million in income taxes on $84.75 million in profit before tax (PBT). In its 2010 financial year, AFS earned $147.21 million in PBT and had a tax remission of $51.45 million. In their 2022 financial year, AFS had an asset base of $5.49 billion and paid $143.47 million in income taxes on $650.15 million in PBT. Its share price also closed at $23.24 which gave it a market capitalisation of $6.38 sbillion.

Thus, while AFS has benefited from hundreds of millions in remitted taxes, the company is currently paying nearly three times in taxes than what was remitted in the 2010 financial year and nearly half of what it raised as taxes. It also paid $0.30 or $83.35 million in dividends on July 15 along with the original shareholders earning 1,167 per cent in capital gains since listing.

Even recently, the JSE signed a memorandum of understanding with the Jamaica Manufacturers and Exporters Association to work closer with its members to assist them in listing on the junior market and push the number of companies on that market to more than 100. 20 companies under the Jamaica Business Development Corporation’s (JBDC) accelerator programme are at the ready stage of listing, according to CEO Valerie Veira at a recent panel discussion.

“With this MOU, we are expecting that in short order we should have over 100 companies listed on the Junior Market. This will be exciting times for the markets. Please bear in mind that all companies that have come to market have been oversubscribed. This means that there is liquidity in the market and therefore now is the best time for any company that wants to list to come. There is no better person to give testament to the Junior Market than the current president of JMEA and that is why we are excited about this MOU,” stated JSE Managing Director Marlene Street Forrest.