Nadaleen Singh

It's been an on­go­ing is­sue for mem­bers of the small and medi­um en­ter­pris­es (SMEs)–ac­cess­ing fund­ing to ex­pand.

And Caribbean In­for­ma­tion and Cred­it Rat­ing Ser­vices (Cari­CRIS) Ltd has un­der­tak­en the project to cre­ate a cred­it rat­ing where these busi­ness­es can ap­proach banks and oth­er lend­ing agen­cies to ac­cess fund­ing.

Chief ex­ec­u­tive of­fi­cer, Wayne Dass, said it was a pi­lot project first ini­ti­at­ed by the Bank­ing As­so­ci­a­tion of T&T (BATT) and "maps out" what a busi­ness needs to do to im­prove its op­er­a­tions.

"The cred­it rat­ing is an in­de­pen­dent as­sess­ment of the busi­ness in terms of de­ter­min­ing the strengths of the busi­ness, what they need to do to im­prove their cred­it wor­thi­ness. It gives the SME busi­ness an in­de­pen­dent di­ag­nos­tic of their busi­ness."

The project, Dass said, be­gan with a project which was fund­ed by the BATT and the In­ter-Amer­i­can De­vel­op­ment Bank (IDB).

"We were asked to con­cep­tu­alise to­wards cre­at­ing these SME rat­ings which would rep­re­sent one, an in­de­pen­dent as­sess­ment, and two, it would help the fi­nan­cial in­sti­tu­tions to­wards more risk-based pric­ing of cred­it.

"In oth­er words, the in­ter­est rates to the SMEs would be based on the un­der­ly­ing risk rather than a sort of one-size-fits-all ap­proach where, gen­er­al­ly, one in­ter­est rate is ap­plied to the whole group of SMEs," Dass said.

The rat­ings are be­tween SME 1 to SME 5 where, the SME 1 rep­re­sent­ing the low­est risk or best-rat­ed client and the SME 5 is the client with the high­est risk.

"The mod­el is very well en­trenched in some of the in­ter­na­tion­al mar­kets, par­tic­u­lar­ly in In­dia, where they are al­so in a very heavy di­ver­si­fi­ca­tion thrust, now. There are thou­sands of thou­sands of SMEs that are rat­ed in that mar­ket. Those rat­ings are well ac­cept­ed by fi­nan­cial in­sti­tu­tions.

"As a mat­ter of fact, the whole SME-rat­ed pro­gramme is sup­port­ed by the gov­ern­ment there."

Feed­back from the 25 SMEs which have ben­e­fit­ted from the rat­ing has been "quite good," Dass said.

He said some of the SMEs were able to: ne­go­ti­ate low­er in­ter­est rates in T&T, use the rat­ing to ac­cess cred­it from in­ter­na­tion­al sup­pli­ers, while oth­ers were able to use it as part of their ten­der doc­u­ments, which led to a stronger bid.

The tenure of the rat­ing is for one year, af­ter which a re­view is done to de­ter­mine how far the SME has reached in im­ple­ment­ing their plans.

A sec­ond phase is in the pipeline.

"We are in process of for­mu­lat­ing a sec­ond round of rat­ing and now we are tar­get­ing a much larg­er group we are look­ing at 50 to 75 SMEs now. We are in dis­cus­sions with the IDB to­wards pro­vid­ing the fund­ing.

"This sec­ond round of rat­ing the IDB is will­ing to fund up to 50 per cent of the cost of the rat­ing, so that the SME them­selves would on­ly have to pay 50 per cent of the cost. That would av­er­age some­where around $6,000."

When the sec­ond phase is com­plet­ed, Cari­CRIS is ex­plor­ing the op­por­tu­ni­ty of com­mer­cial­is­ing the rat­ings.

"We plan to ap­proach the Gov­ern­ment to get them in­volved in a mod­el that is sim­i­lar to In­dia where the Gov­ern­ment pro­vides some lev­el of fund­ing to sup­port the SME rat­ings pro­gramme as de­vel­op­ment of the SME is in­te­gral to di­ver­si­fi­ca­tion and cre­at­ing sus­tain­able em­ploy­ment and im­prov­ing the com­pet­i­tive­ness of small busi­ness­es."

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