An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

De­vel­op­ment Fi­nance Ltd (DFL) says ac­cess to fi­nanc­ing is no longer the biggest ob­sta­cle fac­ing many small and medi­um-sized busi­ness­es, ar­gu­ing in­stead that weak busi­ness mod­els are pre­vent­ing en­tre­pre­neurs from se­cur­ing the cap­i­tal they need.

That mes­sage came as the Caribbean De­vel­op­ment Bank (CDB) signed its fourth line of cred­it with DFL, mak­ing an­oth­er US$10 mil­lion avail­able to fi­nance projects in sec­tors in­clud­ing man­u­fac­tur­ing, agri­cul­ture, tourism, re­new­able en­er­gy, en­er­gy ef­fi­cien­cy and the cre­ative in­dus­tries.

Speak­ing to the Busi­ness Guardian af­ter Mon­day’s sign­ing cer­e­mo­ny, DFL chief ex­ec­u­tive of­fi­cer Gary Awai said the in­sti­tu­tion’s fo­cus ex­tends well be­yond ap­prov­ing loans.

“The fund­ing is the same phi­los­o­phy for lend­ing that CDB has. Their fo­cus right now is on sup­port­ing sec­tors like agri­cul­ture, man­u­fac­tur­ing, en­er­gy re­silient sec­tors.”

Awai said DFL’s role ex­tends well be­yond ap­prov­ing loans.

“We are very big on help­ing cus­tomers to de­vel­op their busi­ness mod­els so that they can be more sus­tain­able and re­silient. We’re not just here to lend you mon­ey. We are here to try and help you be­come more suc­cess­ful.”

He said suc­cess is mea­sured by much more than prof­itabil­i­ty.

“That is not just de­fined by you mak­ing prof­it, but de­fined by a busi­ness mod­el that will con­tin­ue to be sus­tain­able, Awai said adding that the fi­nan­cial com­pa­ny works along­side busi­ness­es to iden­ti­fy weak­ness­es be­fore fi­nanc­ing is ap­proved.

“As a de­vel­op­ment bank, we want to work with you to iden­ti­fy risks and help you to find so­lu­tions to man­age and mit­i­gate those risks.”

He ac­knowl­edged that some en­tre­pre­neurs sim­ply want ac­cess to fi­nanc­ing with­out mak­ing changes to their op­er­a­tions.

“Some­times peo­ple don’t like that hard truth. They want to lend me the mon­ey and make it work. For us, it’s about help­ing you to build a strong busi­ness mod­el.”

Be­yond fund­ing

While the fa­cil­i­ty is ex­pect­ed to ben­e­fit many small and medi­um-sized en­ter­pris­es, Awai stressed it will not be lim­it­ed ex­clu­sive­ly to SMEs.

“Not on­ly SMEs. We’ll fi­nance oth­er larg­er SMEs who need the most help.”

He said busi­ness or­gan­i­sa­tions rep­re­sent­ed at Mon­day’s launch will play an im­por­tant role in en­cour­ag­ing com­pa­nies to en­gage with DFL.

“The in­ten­tion is that they will go back with the good news to their mem­bers that, hey, let’s have that con­ver­sa­tion. So we’re invit­ing peo­ple to come talk with us and start that con­ver­sa­tion about un­der­stand­ing your busi­ness and what you plan to do.”

Those dis­cus­sions, he said, of­ten re­veal weak­ness­es that can be ad­dressed be­fore fi­nanc­ing is ap­proved.

“Of­ten when they have that con­ver­sa­tion, when there are a lot of gaps, we will help you to un­der­stand how to close those gaps. And hope­ful­ly we can find so­lu­tions that will al­low us to fund you.”

Awai ex­plained that the US$10 mil­lion line of cred­it is on­ly one of the sources of fi­nanc­ing avail­able through DFL.

“This is just one line of cred­it that we have to fund dif­fer­ent types of busi­ness. So we will lend on that line un­til it’s ex­haust­ed.”

He said DFL al­so rais­es mon­ey through de­posits and bond is­sues.

“We’ve got de­posits; we have oth­er sources of fund­ing for our bonds. So this is just one way to fund.”

If de­mand ex­ceeds the avail­able fund­ing, Awai said DFL would seek ad­di­tion­al fi­nanc­ing.

“When that line is ex­haust­ed, we’ll go for an­oth­er line. You can get more fund­ing. So fund­ing is not the is­sue.”

In­stead, he be­lieves the re­al chal­lenge is en­sur­ing busi­ness­es are ca­pa­ble of man­ag­ing fi­nanc­ing suc­cess­ful­ly.

“The prob­lem re­al­ly is help­ing cus­tomers to fix their busi­ness mod­el, so they be­come bank­able.”

e not­ed DFL wants bor­row­ers to move away from tra­di­tion­al as­set-based lend­ing and fo­cus more on their busi­ness­es’ strengths.

“It moves away from that think­ing to one that says, we’re go­ing to help you to look at your busi­ness mod­el a lit­tle deep­er. To make sure that when we lend you, you’re go­ing to grow. You’re go­ing to hit your tar­gets. You’re go­ing to achieve your ob­jec­tives.”

Awai al­so ad­dressed con­cerns over for­eign ex­change. Busi­ness­es bor­row­ing in Trinidad and To­ba­go dol­lars will re­ceive fi­nanc­ing in lo­cal cur­ren­cy even though the fund­ing orig­i­nates in US dol­lars.

“If you had bor­rowed in TT dol­lars, if your need is for TT dol­lars, I will ac­cess the US fund, and I will lend you in TT dol­lars. So you’ll pay it back in TT dol­lars.”

Busi­ness­es re­quir­ing US dol­lar loans, how­ev­er, must demon­strate that they gen­er­ate US cur­ren­cy in­come.

“If the need is in US dol­lars, I will lend you US dol­lars, but I’ll have to make sure that you have a source of earn­ing US dol­lars.”

Awai said DFL is able to man­age the for­eign ex­change ex­po­sure through its own in­vest­ment port­fo­lio.

“We earn for­eign ex­change as well from our US dol­lar in­vest­ments and our port­fo­lio. So we can eas­i­ly cov­er that from our in­come.”

He re­ject­ed sug­ges­tions that fi­nanc­ing it­self is the biggest hur­dle fac­ing SMEs.

“I want to stress, they save fund­ing, and that’s not the prob­lem. Of­ten when you can’t ac­cess fund­ing, it’s be­cause there’s a flaw in your busi­ness mod­el.”

In­dus­try back­ing

TTMA chief ex­ec­u­tive of­fi­cer Dr Ramesh Ramdeen wel­comed the ini­tia­tive, say­ing it pro­vides im­por­tant sup­port for en­tre­pre­neurs, par­tic­u­lar­ly man­u­fac­tur­ers seek­ing to ex­pand.

“I think it’s a great ini­tia­tive. Of course, you know the chal­lenge we have in Trinidad and To­ba­go is ac­cess­ing for­eign ex­change.”

He said the fi­nanc­ing can help busi­ness­es in­crease pro­duc­tion ca­pac­i­ty while po­si­tion­ing them­selves to be­come ex­porters.

“This ini­tia­tive where fi­nanc­ing is be­ing made avail­able to SMEs in Trinidad and To­ba­go, es­pe­cial­ly cer­tain groups like women in man­u­fac­tur­ing, youths in man­u­fac­tur­ing. It’s a great ini­tia­tive to build ca­pac­i­ty, al­low them to grow from strength to strength and be­come ex­porters and own­ers of their own for­eign ex­change in Trinidad and To­ba­go.”

Ramdeen said de­vel­op­ment in­sti­tu­tions have an im­por­tant role to play in in­creas­ing fi­nanc­ing op­tions for SMEs.

“In­sti­tu­tions like the CDB, the CAF, the IDB, these or­gan­i­sa­tions, need to come on board and as­sist as best as they can.

He said TTMA and the Gov­ern­ment have al­ready tak­en steps to im­prove fi­nanc­ing through ini­tia­tives such as the Ex­im­bank fa­cil­i­ty, but more sup­port is still re­quired.

“We are do­ing all that we can do in T&T from a TTMA per­spec­tive, from a gov­ern­ment per­spec­tive in terms of cre­at­ing a fa­cil­i­ty at the Ex­im­bank. A lot more needs to be done.”

Ramdeen added that many en­tre­pre­neurs re­quire tech­ni­cal guid­ance as well as fi­nanc­ing.

“A lot of these SMEs, a lot of these en­tre­pre­neurs need hand-hold­ing.”

Al­though US$10 mil­lion may ap­pear mod­est, he said it can make a sig­nif­i­cant dif­fer­ence for small­er op­er­a­tors.

“For the small play­ers who need US$40,000 to buy a piece of ma­chin­ery, who need US100,000 to do some­thing, it goes a long way. So it’s a start, it’s a help.”

Lisa Hard­ing, di­vi­sion chief in CDB’s Pri­vate Sec­tor Di­vi­sion, said the fa­cil­i­ty tar­gets mi­cro, small and medi­um-sized en­ter­pris­es op­er­at­ing in pri­or­i­ty sec­tors in­clud­ing man­u­fac­tur­ing, agri­cul­ture, re­new­able en­er­gy, en­er­gy ef­fi­cien­cy, tourism and the cre­ative in­dus­tries.

She said DFL will ap­ply its own lend­ing cri­te­ria while ad­dress­ing a fi­nanc­ing gap iden­ti­fied among SMEs.

“They have iden­ti­fied a strong de­mand for ac­cess­ing af­ford­able and ap­pro­pri­ate cap­i­tal. We’re re­al­ly, re­al­ly ex­cit­ed that this par­tic­u­lar line of cred­it will help to fill that fi­nanc­ing gap and pro­vide cap­i­tal that so many SMEs so des­per­ate­ly need in T&T.”

Hard­ing said CDB is al­so ex­plor­ing lo­cal cur­ren­cy lend­ing as part of its ef­forts to be­come more re­spon­sive to bor­row­ers through­out the re­gion.

She out­lined that ac­cess to fi­nance re­mains one of the biggest bar­ri­ers fac­ing SMEs, along with the cost of bor­row­ing and col­lat­er­al re­quire­ments.

“One of the oth­er chal­lenges is the col­lat­er­al re­quire­ments, which some SMEs don’t have.”

Hard­ing said CDB has been ex­am­in­ing ways to re­duce those bar­ri­ers through mech­a­nisms such as trade fi­nance guar­an­tees and al­low­ing in­tel­lec­tu­al prop­er­ty to be con­sid­ered as col­lat­er­al, par­tic­u­lar­ly for busi­ness­es op­er­at­ing in the cre­ative in­dus­tries.