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Small business funder spells out challenges facing the sector

Timothy Simmons

Timothy Simmons

Barbados’ smallest businesses are struggling and a leading financier of their sector has the proof. Enterprise Growth Fund Limited CEO, Timothy Simmons, today reported a surge in delinquency and simultaneous “sharp drop” in loan approvals over the past year.

EGFL is a successor to the defunct Barbados Development Bank and was established 15 years ago to provide developmental finance to the island’s small and medium sized enterprises.

Speaking this morning at a media briefing at his organisation’s offices at Barbarees Hill, St. Michael to release and review its 2012 performance, Simmons said while EGFL itself earned $700,000 in profits last year and was on course to tally net income of $400,000 this year, an increasing number of its clients in the tourism, agriculture and manufacturing sectors were struggling to pay their bills and repay their loans.

“Our clients are feeling the stress and naturally they are feeling the stress because their clients are not paying them on time and they too are not paying us on time and the level of delinquencies are increasing, but we intend to manage it, stay steadfast and continue to perform our mandate as the premier developmental financial institution for SME companies,” he said.

While the entity’s loans disbursements moved from $6.9 million to $13.7 between 2012 and last year, loan approvals dropped from $9 million to $4.7 million over the same period.

Additionally, loan delinquencies jumped from 12 per cent in 2011 to 20 per cent last year, a figure which the CEO said while manageable was undesirable.

“I think our delinquency is now around 20 per cent. I think previous year it was around 12 per cent so you see the trend moving from 12 per cent 2011 to 20 per cent in 2012, which is manageable but of course we would always prefer delinquencies to be at the lowest that they can be,” he said.

“Some of it is in tourism, … some of its is in agriculture, I can’t tell you the exact split, but you know that tourism investments are fairly lumpy investments, in other words the outlay for a tourism investment is significant.

“So if you have a tourism loan that is delinquent the impact generally is much higher, so that in absolute numbers there may be more small loans from another sector that is delinquent but because of the size of a tourism investment if that becomes delinquent the impact is more significant on a proportionate basis.”

Simmons traced these difficulties, especially for EGFL clients in the tourism industry, to the current global economic environment, especially in the United Kingdom and United States.

“So generally it’s the impact of the global environment that is cascading down in our tourism sector and until that moderates you will continue to see some businesses struggling under the strain of a declining economic environment,” he stated.

“Meanwhile, there are some green shoots, there are one or two companies that have positioned themselves quite well in the tourism sector in terms of their pricing, in terms of their product and they have been able to come through more or less unscathed, but unfortunately that is the minority of our portfolio.”

Simmons said while EGFL intended to help nurture its clientele “to get them through these difficult times”, enterprises needed to work harder and smarter, deploying technologies to enhance their business competitiveness, and using renewable energy to reduce their energy consumption.

“All of these things will eventually filter down to the performance and the bottom line of the business. There is no one size fits all strategy that you can implement, so my advice to small businesses to small business will be to just dig in and work harder, smarter and be more innovative,” he advised. (SC)

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