Self reliance
On Monday last, the administration launched the Micro and Small Enterprise Development (MSED) Project. Judging from the remarks of the President and his ministers and the documentation provided, the initiative is designed to tether the roving spirit of micro and small businesses to a specific development philosophy, that of self-sufficiency. Therefore, the launch of the project is significant in two respects. One, it highlights a 25-year effort to bring micro and small businesses back into the economic mainstream and under the influence of national fiscal and monetary policy. Restrictive economic policies helped to push small businesses out of the official economy and into the unyielding grasp 
of the indisciplined and unregulated market. To benefit from the MSED project, micro and small businesses would have to register with the Small Business Bureau and be tax compliant. Though the submission of small businesses to official policy is yet to be completed, the effort to get them to do so was started in 1988 when the economic reforms of Guyana got underway. Some of that success is seen in the many thriving cambios of today.
The second reason that the launch was important related to the effort to get Guyanese to accept the concept of self-sufficiency once again. Self-sufficiency is one of the possible outcomes of self-reliance. By embracing self-sufficiency, the administration has finally acknowledged the validity of the policy of self-reliance, articulated and pursued during the reign of the PNC, as a means of Guyanese achieving and sustaining economic independence. This must be a weight off the shoulders of the administration to finally line up behind an economic vision of Guyana with a vintage condition for development. It probably did so in the hope that no one would notice.
Dependence on
non-traditional products
It should be kept in mind that since its independence Guyana has always supported small businesses. From ever long, the goal has been to restructure the Guyana economy and to increase the participation of its citizens through micro and small enterprises. These efforts have always aimed at lessening dependence on rice, sugar and bauxite and increasing dependence on non-traditional products for employment, domestic consumption and exports. The strategy being used today contrasts markedly with the strategy used in the previous era. The economic structure that was inherited at independence was considered incapable of helping Guyana to achieve the goals of full employment and economic diversification.
But, the alternative mechanism to harness the economic power of small business for the purpose of growth and development faltered under the vehicle of ‘cooperative socialism’ and a regime of restrictive trade policies aimed at preserving foreign currency and protecting local industries. Official policy and attitude, though well intended, adversely affected the interests of the private sector including those of micro and small businesses, and disrupted the orderly and predictable trajectory of small business development in Guyana.
Resilient
Despite being easily undermined, small business is the most resilient component of the Guyana economy. It is easy to start a small business in any industry where the entrepreneur is armed with a vision and formidable barriers to entry do not exist. The easy entry is typical of industries that require the use of simple technologies like hand tools and utensils. Another trait of such businesses is that they are linked to essential goods and services like clothes, food, water and similar activities where fixed infrastructure is not always required and customers could come and go with ease. The easy entry does not guarantee success because it usually attracts heavy competition. It is not unusual to find many vendors side-by-side selling the same range of products on the pavements or in the market. Under such competitive conditions, micro and small businesses are generally price-takers.
The Lucas Stock Index (LSI) fell by 0.20 percent in trading during the second week of October 2013. Trading involved four companies in the LSI with a total of 102,109 shares in the index changing hands this week. There were no Climbers, only one Tumbler since the other three traded stocks remained unchanged in value. The Tumbler was of Banks DIH (DIH) which declined by 1.5 percent on the sale of 101,869 shares. All the other stocks traded lightly, Demerara Bank Limited (DBL), 100 shares, Demerara Tobacco Company (DTC), 40 shares and Republic Bank Limited (RBL), 100 shares, and remained unchanged.
They start and fail with a high degree of regularity. Indiscipline, lack of management skills and insufficient cash flow are often found among the reasons that such businesses fail. But even when they survive, size prevents them from enjoying economies of scale. Often this means that no individual supplier was likely to be able to supply inputs for the manufacturing sector at competitive prices. It also means that the opportunity for independent growth is limited, unless small businesses could come up with more cost-effective ways of producing their products. While it is reasonable to bet on micro and small business being around to keep the wheels of commerce and industry turning, the sector is not strong enough to do it on its own. Global trading rules and competition from imports also put additional pressure on these enterprises for unlike in their early history in independent Guyana, micro and small businesses cannot dwell under the canopy of import substitution. Consequently, it makes sense to direct special attention to the micro and small business sector. The launch on Monday then could be seen as another attempt to capture the power and energy of micro and small businesses. This time the effort is being driven by private initiative.
Split responsibilities
The responsibilities for providing support to micro and small businesses are split between the Small Business Bureau (SBB) and other stakeholders, including the University of Guyana. Some of the groups will provide business management skills training, technical skills training, administrative support and preparation of business plans. The SBB will provide collateral guarantees, interest subsidies and grants which will go to micro enterprises. Attendees to the launch were informed that three financial institutions will likely participate in the financial component of the programme. These are the Guyana Bank for Trade and Industry (GBTI), Republic Bank Limited (RBL) and the Institute for Private Enterprise Development (IPED). The grant portion of the project will be handled by the Small Business Bureau. The relationship between the SBB and the participating financial institutions will be confined to collateral support and interest subsidies.
Consequently, the institutions being used to deliver the financial input are different from those which were used during earlier times. Institutions like the Guyana Agricultural and Industrial Development Bank and the Guyana National Cooperative Bank were used to provide loans for micro and small businesses. All of the institutions were heavily influenced by the state. The participation of financial institutions that are independent of the government brings a different dimension to how the MSED project is expected to operate.
Multiplicity of Stakeholders
Be that as it may, the success of the effort will depend on how well designed the project is and how well it is implemented. The first has to do with the loan conditions and the willingness to participate by the various stakeholders. The second has to do with the procedures to be followed to access resources and the support services promised. The literature provided by the Ministry of Tourism, Industry and Commerce indicates that the project is designed to meet the administrative and financing needs of small businesses, and these functions are to be undertaken by separate entities. By having both an administrative and financing focus, a multiplicity of stakeholders are part of the support process.
The information provided by the Guyana Bank for Trade and Industry (GBTI) indicates that the investor must have a stake in the business. However, that stake is set at 10 per cent, a relatively low level of the total investment. And so is the annual interest rate which is set at six per cent. Other benefits include a reduction in the cost to service the loan, no prepayment penalties, and a likely moratorium on the repayment of the loan. By using the financial institutions, the government does not have to add to the liquidity in the system by finding separate funds for the loan programme.
Frustrate and discourage
Investments by micro and small businesses that would be supported by the project could be made in several areas. These include agriculture, aquaculture, manufacturing, eco-tourism, transportation, information technology, entertainment, arts and crafts, publishing and printing, and business support services. Expanded output in any of the identified areas helps to expand the economy. They have the potential to create jobs and increase aggregate demand. The administration however plans to sell its own project plans to prospective borrowers in the hope of steering them in the direction that it would like them to go. One could only hope that this does not become a mechanism for discrimination to frustrate and discourage the free spirited entrepreneurs from participating in the project.
