Small and medium-sized enterprises (SMEs) in The Bahamas will soon be able to compete globally, as public and private executives are presently crafting the Small Business Act (SBA) of The Bahamas. The SBA is forecasted to be legislated during2011. It will stimulate economic growth and mitigate the negative impact of future recessions on the Bahamian economy.
2.0 The mission of the SBA
The SBA, from a domestic perspective, will provide the foundation on which to improve the economic conditions of The Bahamas. From an international perspective, it will attract foreign investors who want to partner with local entrepreneurs in fields such as e-commerce, manufacturing, agriculture, and information technology. These industries are tremendously under served and underdeveloped. These types of investments would diversify the Bahamian economy, which relies heavily on tourism and financial services.The SBA will revitalize the entrepreneurial spirit in all islands of The Bahamas and will outline policies and initiatives that would assist in the development of SMEs–a major driving force of the economy.
The SBA will increase the national economic value of SMEs in The Bahamas. In addition, its purpose is to synchronize and unify the efforts of the government, financial lending institutions, non-governmental organizations (NGOs), SMEs and other stakeholders as it relates to small business development in The Bahamas. Most importantly, the SBA will identify how local and international investors and entrepreneurs can qualify for incentive and stimulus programmes when it comes to financing and developing innovative products and services.
3.0 The importance of the SBA
The major reason why there is not an explicit master plan for SME development in The Bahamas is because of the absence of a SBA to drive national strategies.
There are six important reasons why the SBA must be crafted:
1) The SBA will encourage Bahamians to become entrepreneurs because it will outline incentives/concessions that will be rewarded for the development of new innovative products /services;The hiring of a specific number of Bahamians;Increasing government revenues due to a significant amount of payment made for National Insurance, customs duties, property taxes, license fees, etc.
2) The SBA will increase foreign direct investments, because international investors,who are entrepreneurial, will partner with local Bahamians to develop innovative products and services in under served and undeveloped industries.
3) The SBA will keep many existing businesses open during a recession, because it will provide incentives/ concessions to businesses that employ a moderate amount of staff,are up to date with National Insurance payments and customs duties, and contribute to making The Bahamas more competitive globally.
4) The SBA will encourage Family Island development by providing incentives/concessions to Bahamians who want to open small businesses on a Family Island that will increase the employment rate, improve the infrastructure of the island, encourage Bahamians to reside there permanently, and entice more domestic and foreign tourists to visit.
5) The SBA will increase the gross domestic product (GDP) of The Bahamas, because it will eventually reduce the importation of foreign products and services, increase compensation to employees, increase business profits, increase government income and increase interest payments to Bahamians.
6) The SBA will reduce the national debt, because it will decrease government spending, particularly on hiring civil servants, and increase government licenses, fees and taxes, as more businesses will be operating in The Bahamas.
4.0 The impact of the SBA on stakeholders:
The SBA should impact the decision making process of the following organizations:government, SMEs (new entrepreneurs, existing business owners), financial lending institutions, NGOs, professional/trade associations in the following manner:Government:
Incentive programmes will be developed to encourage the creation of innovative products or services that will improve economic development;Business recovery programmes will not focus on unemployment hand-outs, but will assist businesses owners in maintaining current employment levels;T he Bahamas Development Bank, the Bahamas Agriculture and Industrial Corp and the Bahamas Entrepreneurial Venture Fund would harmonize policies and procedures to become more effective and efficient when catering to SMEs.
SMEs (new entrepreneurs):New entrepreneurs that create innovative products or services will have easy access to financial funding and business support services.
SMEs (existing businesses):
SMEs that operate in a socially responsible manner (are up-to date in NIB and custom duty payments etc) will find it less arduous to access financial funding and stimulus packages during economic downturns.
Financial lending institutions:
Commercial banks, credit unions, and government financial funding programmes would focus on providing adequate capital to variable SMEs in introductory, growth and maturity stages of the business life cycle.There will be a collaborative effort by all financial lending institutions to develop various funding packages that address all financial requirements of viable SMEs.
NGOs (trade associations/other):
The Bahamas Chamber of Commerce, the Inter-American Development Bank, The College of The Bahamas (and other colleges), the International Labour Organization,the Inter-American Institute For Cooperation on Agriculture and The Bahamas Business Association would collaborate efforts to develop SMEs and possibly set up an advisory and regulatory board to oversee the enforcement of the SBA.
Business, accounting, medical, technical, fishing, agriculture associations, among others, would lobby for industries specific programmes / concessions/ incentives that would increase competitive capabilities to offset any negative impact of the European Partnership Agreement (EPA).
5.0 The basic structure of the SBA
The basic structure of the SBA will have five major components:
1) A clear definition of an SMEThe national definition of an SME will be based on the combination of the following:industry, annual sales, employment level and ownership (capital structure). This definition may or may not separate the wording of “small businesses” and“medium-sized businesses.”Stakeholders that cater to SMEs will be requested to honor this definition.
2) Incentives, concessions and stimulus programmes
The present Incentive/Concession Legislation will be encompassed in the SBA.The SBA will outline new incentives and concessions that would be received by SMEs for developing innovative products and services that contribute to the country’s economic development.The SBA will introduce stimulus programmes that will be available to selective SMEs to mitigate the negative impact of future recessions.These SMEs must be “socially responsible,” maintain a specific employment level and show signs of vitality.The SBA will explicitly indicate which SMEs are eligible for incentives, concessions and stimulus packages.
3) National SME financial funding scheme Government lending agencies, commercial banks, credit unions and other financial lending institutions will collaborate and pool together resources to develop a National SME Financial Lending Scheme (NFS). The NFS will make it easy to access capital for various stages of an SME’s life cycle(introductory, growth, restructuring, recovery, etc).T he NFS will have clear policies, and loan packages will be categorized into specific programmes based on financial requirements (needs). NFS will be properly overseen by the SBA Regulatory and Advisory Board.
4) Business support programmes (BSPs)BSPs will be available to all SMEs. SMEs will have access to accountants, lawyers,business, marketing, human resources and financial consultants who sign up and are approved by the SBA Regulatory and Advisory Board to offer their services at affordable rates.BSPs will consist of training, coaching and consulting initiatives. Mentors/ consultants will be assigned to SMEs on a need-by-need or contractual bases.BSPs and financial funding via the NFS will be linked together, so that SMEs will have a greater chance to operate viable businesses.
5) SBA Regulatory and Advisory Board The SBA will identify the roles and responsibilities of a Regulatory and Advisory Board that would oversee the enforcement of the SBA.Public and private sector executives will be selected to this Board. Members of this Board will be mandated not to make decisions based on political, gender or cultural motives.This Board will have the authority to make recommendations to modify particulars of the SBA based on economic conditions or the request of stakeholders.
The major benefit of the SBA will be that, through its aggressive financial and overall SME support policies, the Bahamian economy would become diversified and hence be more protected against future recessions.The views expressed in this report are those of the contributor and not necessarily those of The Bahamas Investor.
Bio:Mark A Turnquest Mark Turnquest is a Caribbean management and marketing consultant. He is also an author, corporate trainer and small business consultant. Turnquest is the president of Outreach Sales & Marketing Management Ltd, executive director of The Small Business Resource Centre and an associate partner of CTS Training & Consulting Institute. He is a member of the Board of Directors of the Bahamas Agriculture and Industrial Corp.