Finance for Small and Mediumsized Enterprises in the Caribbean

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Small and mediumsized enterprises (SMEs) are seen as the engine of economic growth and employment creation in the Caribbean, as in other parts of the world. This study explores the difficulties such enterprises have in accessing longterm financing and how these could be overcome. The book reports the results of a survey of SMEs from ten Caribbean countries, and a parallel study of lending institutions that might be expected to offer finance to SMEs. The author offers a commentary on the differing perspectives of SMEs and lenders to the problem of finding affordable longterm financing, and suggests policy options for improving access to finance for this sector.




The objective of the study was to determine what, if any, impediments existed to access to long-term finance by SMEs, what these impediments were and how they could be overcome. A secondary, but related, objective was to ascertain what, in the perceptions of SMEs, were the obstacles to their development. It is evident from the findings of the study that many SMEs have not accessed long-term finance either because they do not need it or because, for various reasons, they think that it is unavailable. Of the SMEs that needed long-term finance, 30 per cent were unable to obtain it. The major obstacles to access are the requirement for collateral, insufficient equity, insufficient cash flow and the high cost of debt finance. More significant, however, is the finding that nearly half the financial institutions surveyed did not provide long-term finance to SMEs. This could be a major and serious obstacle to these enterprises gaining access to such finance. From the lenders’ perspective, the low level of access was related to SMEs’ low level of cash flow and insufficient collateral. No doubt these are standard market considerations when assessing loan requests. More to the point, however, is the fact that only 41 per cent of all businesses surveyed availed themselves of opportunities for accessing some form of finance. The need for long-term finance, therefore, appears to be a significant concern for SMEs.


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