DEFINITIONS VARY, BUT however you describe them, small businesses make a significant contribution to economic development. It is estimated that 9 700 “formal” micro, small and medium enterprises (MSMEs) contribute 47 per cent of the national employment.
The Caribbean Development Bank (CDB) estimates that MSMEs account for more than 50 per cent of regional enterprises, and more than half of the Caribbean’s gross domestic product.
The World Bank says SMEs constitute more than half of all formal jobs worldwide, while the International Trade Centre (ITC), a joint agency of the United Nations and the World Trade Organisation, concluded that SMEs, formally registered or otherwise, “account for nearly 70 per cent of global employment”.
Barbados’ smallest businesses, like those internationally, were hard hit by the economic recession of eight years ago, and many of those that survived are struggling. It is expected, though, that MSMEs will continue to drive economic development here and elsewhere.
However, another unavoidable truth is that the majority of these enterprises need assistance, especially financial and technical, if they are to thrive.
Barbados’ Small Business Association (SBA) shared this view in its 2016 annual report. Its board of directors, in their report to members, said while the MSME sector was often “pivoted as the driver for economic recovery”, it “continues to be challenged to be viable owing to the lack of critical inputs such as access to finance, markets and technical support”.
“An enabling legislative and policy framework, coupled with relevant and rewarding programmes are needed to build capacity and competitiveness in the sector,” the SBA said.
Last year, the CDB released the report Micro Small Medium Enterprise Development In The Caribbean: Towards A New Frontier and it shared similar concerns.
CDB president Dr Warren Smith said: “MSMEs face a number of major constraints, including inadequate access to financial resources for investment and working capital; gaps in training in business skills; high cost of infrastructure services; inadequate physical infrastructure; low levels of technology usage to improve productivity and lack of competitiveness.
“Given the important role of the sector, the major challenge facing policymakers today is to ensure that MSMEs receive adequate support needed to enhance competitiveness; maximise growth potential; and generate employment while contributing to gender equality, and poverty reduction.”
The report’s recommendations included: developing training programmes aimed at enhancing the capacity of MSMEs to improve financial management of their operations in line with financiers’ information needs; expanding the range of financial products available to MSMEs; introducing tax reforms that allow formal MSMEs to retain a larger share of their profits and cash flows; introducing labour reforms that allow MSMEs to be more flexible in terms of hiring and firing labour; refocusing MSME policy; pursuing the establishment of a business-friendly environment as a top priority; improving private, public sector collaboration and enhance institutional strengthening for capacity development; and developing a road map to support the development of an innovation eco-system.
The Edinburgh Group, which is a coalition of 14 accountancy bodies from across the world, thinks there is scope to grow the global economy through SMEs.
It recommended: identify any additional information and support mechanisms that can be targeted toward SMEs to encourage their involvement in fast growing economies; look for opportunities to reduce unnecessary red tape and regulations concerning international trade and investment; create clear signposting to help SMEs identify and access the full range of financial support available for international activity; and assess whether additional targeted tax breaks could encourage SME internationalisation, particularly in the aftermath of the global financial crisis when recovery is proving slow in many economies.