Bahamas ripe for microfinance
The Bahamas is ripe for a microfinance industry, according to presenters of the 3rd Caribbean Microfinance Forum, with $3 million currently being spent to connect small regional entrepreneurs with much-needed capital.
The forum is being held at the Bahamas Breezes Spa and Resort and runs through November 16, 2011. Presented by the Caribbean Microfinance Capacity-building project, it’s funded by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), the Caribbean Development Bank (CBD) and
the European Commission (EC).
MIF chief of the Access to Finance Unit, Tomas Miller, who also manages the project, told Guardian Business that microfinance allows economies to better utilize resources as small businesses access competitive offers fo liquidity.
“As this business with more liquidity can grow, and not all of them can grow, but if some of them are becoming more successful you start seeing that they are not running a micro-enterprise anymore, but a small company, hopefully.”
So you start thinking about a larger loan, a longer maturity,” Miller said.
“So it is a virtual circle, and I think that is what we want. To have enterprises regardless of their sizes have access to finance so that they can fulfill and take advantage of the opportunities they have.”
Microfinance involves the provision of financial services to clients who may not be able to access them otherwise – often to low income, rural clients. Loans under the classification are small, according to MIF specialist, Winsome Leslie, often starting as low as $200 and generally not more than $1,000.
The borrower is typically not salaried, but derives his or her livelihood from the entrepreneurial activity for which they are borrowing.
Leslie, who is also the team leader of the Caribbean Capacity-building program, told Guardian Business yesterday that there are really no financial institutions in The Bahamas that qualify as a microfinance institute (MFI) under the MIF’s definitions – one of the reasons The Bahamas was selected to host the forum.
“Based on our definition of a microfinance institution, The Bahamas doesn’t really have that yet,” Leslie said. “One of the reasons we brought the meeting to The Bahamas was because we see that the time is right to really promote and foster the industry here.”
Leslie listed the downturn in the U.S. economy and approaches from many local institutions who want to add microfinance to their product lines as additional reasons for hosting the conference here.
Leslie told Guardian Business that throughout the Caribbean credit unions are stepping up as MFIs. While she said organizers were hoping to have at least one Bahamian institution classify as an MFI by next year, the true benefits may come as the established industry begins to compete for clients.
According to Miller, once key ingredients are in place, an industry that drives down interest rates and results in more product offers for the client can thrive. He said in some countries it could bring borrowing rates close to converging with those offered to large commercial clients, although he said true convergence is not likely due to the nature of microfinance lending.
The “finance” offered to clients often goes beyond a lending relationship to include contractual savings obligations and better savings mobilization capacity, and micro-insurance in some instances as well, according to Miller.
The forum kicked off on Sunday, November 13, and is represented by participants from across the Caribbean Community (CARICOM) including St. Lucia, Barbados, Suriname, Guyana, Trinidad & Tobago, Antigua, Belize and Jamaica.