JBDC helping MSMEs to access finance
...promotes equity financing, aims for JSE listing
CEO of the Jamaica Business Development Corporation Valerie Veira (centre) speaks to reporters at the Jamaica Observer Business Forum on Wednesday, July 27, 2021, while flanked by Deputy CEO Harold Davis and manager, business advisory services, Melissa Bennett. (Photo: Norman Thomas)

As part of its thrust to create an enabling environment for Jamaican micro, small and medium-sized enterprises (MSMEs), the Jamaica Business Development Corporation (JBDC) has as one of its strategic goals "providing access to adequate and appropriate financing" for the businesses in that sector.

The JBDC is Jamaica's premier business support organisation that helps local MSMEs through technical services, business advisory services, marketing, and research and project management.

CEO of JBDC Valerie Veira told reporters at the Jamaica Observer Business Forum last week that the organisation "national network broker" for small businesses as it provides linkages with the financial sector. As such, she said, the JBDC remains committed to helping MSMEs access adequate and appropriate financing, recognising that financing for MSMEs is an "important ingredient" to their development.

"We have been on a journey with the financial support systems to make sure that we're in the conversation with the clients, who have to understand it's not a charity thing. They have to be prepared to accept grants and financing and where required, to be able to pay it back," she said.

In the case of grants, the JBDC works along with businesses to prepare for the requirements that come with accessing that type of financing and at the same guarantee benefactor that they have made "good investment".

"So we work very seriously with the clients [MSMEs] to ensure they are prepared for the conversation but we also speak with the other part of the partnership, which is the financial support system and how we train and prepare members of the financial sector to understand better the needs and the language of the MSMEs," Veira outlined.

Part of the JBDC's work with financial institutions is to train front line staff, especially business development officer who vet loan applications, to understand how to communicate with MSMEs. Veira pointed out that in some cases, entrepreneurs are from the creative industries and as such may not have the financial literacy to understand the requirements of financial institutions.

At present, the JBDC has engaged in a partnership with Sagicor Bank to which it recommends MSMEs for loans. In the same way, whenever the financial institution can fulfil a loan application for an MSME, it recommends that business to the JDBC for capacity development in its accelerator programme.

But while many small business owners consider accessing financing in the form of loans, the JBDC is also educating them on accessing capital through equity-based financing. In this regard, the JBDC CEO shared that the business development organisation has been in dialogue with the Jamaica Stock Exchange (JSE) to realise the listing of an MSME.

"We are working closely with the JSE because we have to have the end game on the table. So we have to understand what the requirements are and especially for the more advanced clients, we have to put that as an option. We are not able to say that we have a number of companies looking that way because they are prepared for any opportunity…We haven't arrived there yet," Veira shared.

Even as the JBDC works towards having one of the MSMEs list on the JSE, manager of business advisory services at JBDC Melissa Barrett pointed out that in the meanwhile the organisation is preparing businesses for investment for equity investment opportunities through angel investors and venture capitalists (VC).

Whereas an angel investor is one who invests his or her own money into a small company, a VC invests pooled funds from investment companies and pension schemes into small companies.

"Jamaica has some angel [investors] but we don't have enough angels to support the access and the entrepreneurs are struggling to understand equity-based financing. So part of what we emphasise in our programme is teaching entrepreneurs that listing on the [Jamaica] Stock Exchange is an advanced stage of equity financing," Barrett said.

"So for our entrepreneurs in the accelerator programme, we are introducing them to angel investors and in some instances we bring in venture capitalists. So the stock exchange does not come right after the accelerator because the accelerator activities are bringing in the angel investors and the early-stage seed investors to help drive the growth… So the push for us is on the early-stage investments from the angels and some venture capitalists may consider some of the entities," she added.

However, Barrett noted out that before MSMEs can access equity financing, the JBDC works with them to close some gaps with investors. A common complaint from angel investors, she shared, was that some MSMEs are not "structured for financing".

At the same time, she said that some entrepreneurs "fear that giving up equity means that you're giving you're giving up the entire company and so they don't want to talk to investors".

To address these challenges, one of the modules in training entrepreneurs at the JBDC is in record-keeping and understanding financial statements, and communicating this to investors. This, Barrett asserted, will help entrepreneurs to communicate much better with investors when engaged in deal negotiations.

Moreover, she said that some angel investors are first introduced as advisors and over time purchase a stake in companies.

"So we are building out the networks with all the players to be able to drive the entrepreneurs' readiness and the investors' willingness to support them," Bennett remarked.

On this note, JBDC Deputy CEO Harold pointed out that MSMEs need to be mindful of the fact that financial institutions and investors are into business and so are expecting a return on their investments. However, he highlighted a change in the approach of financial institutions towards MSMEs with many carrying products for small businesses and creating dedicated units for that sector.

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