Jamaican Government needs policy for small business development
Published:Wednesday | September 22, 2010 | 12:00 AM
Dionne Rose, Business Reporter
General Manager of the Central Bank of India Gajanan Songaonkar is proposing that the Government of Jamaica ramp up support for small, medium and micro enterprises (SMEs) by implementing a small-business policy.
Songaonkar made the suggestion while addressing the small business conference at the Wyndham Hotel in Kingston yesterday.
"In my opinion, support can be ramped up to these 100,000 plus small businesses operating across Jamaica through a small business development policy, which requires government ministries and agencies to allocate a certain percentage of their budgets towards procurements of goods and services from micro and small businesses," he said.
Affirmative action
Songaonkar also recommended affirmative action that will see more lending programmes for SMEs and a special thrust toward women and young people who are from vulnerable communities.
He also disclosed that his own bank, a commercial bank in India, is committed to work with the CARICOM Secretariat to provide technical assistance on projects to increase opportunities to small business financing in Jamaica.
Songaonkar said in his own country, India, the SME sector has grown, but this was due in part to the support from governments and regulators to develop the sector.
Turning to some of the challenges faced by SMEs in India, Songaonker said the sector is handicapped in achieving economics of scale, in procuring equipment, raw materials, financing, among other challenges.
"While there has been increased lending to the SMEs, the SMEs borrowers feel that the lenders are not doing enough for SMEs and are catering to the needs of large corporations," he said.
Sme-friendly policies
Songaonkar said only four to five per cent of SMEs are covered by institutional funding, leaving 95 per cent not covered by the banks.
However, he noted that the government of India has implemented SME-friendly policies to help the sector address some of these challenges, such as implementing legislation where domestic commercial banks are expected to lend credit to priority sectors and ensure that these sectors advance.
He said in order to ensure that sufficient credit is available to micro enterprises within the SME sector, the banks must allow 40 per cent of the total advances in SMEs to go to manufacturing enterprises that have investments in plant and machinery up to approximately US$10,100 as well as to micro service enterprises which have investments in plant and machinery of up to US$4,300.