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Small Business – the central front in the fight against poverty

By Rawle Lucas

Fight against poverty

There is plenty of excitement about the potential of micro and small businesses to help people get out of poverty. The global enthusiasm for micro and small businesses became noticeable after the Grameen Bank, a credit institution in Bangladesh, gave micro credit to poor women in Bangladesh to start businesses that helped them to lift the veil of poverty from their lives. Ever since the positive story of the millions of female customers of Grameen Bank came to light, governments, international organizations and non-governmental entities have embraced micro and small businesses with a passion in the fight against poverty.

The strident effort to make micro and small businesses an implement of economic reform has also been adopted by Guyana. This effort became an integral part of the program of support provided by the IMF, World Bank, and the United Nations development agencies, the European Union and other donors as Guyana made adjustments to its economy under their direction in the last 20 years.

Guyana has always supported small industries since its independence. It used institutions like the Small Industries Corporation and later on the Guyana Agricultural and Industrial Development Bank, the Guyana Cooperative Insurance Service and the Guyana National Cooperative Bank in the attempt to get and keep small businesses going.

Those entities no longer exist and, as the need for their services became clearer, have been replaced by separate enterprises of differing ownership, sizes and focus working on behalf of small businesses. The entities serving the small business community include the Scotia Enterprise Micro-Lending Programme; the Commonwealth Youth Credit Initiative; the Institute of Private Enterprise Development; the Private Sector Center Project; the Small Business Credit Initiative; the Small Business Development Finance Trust; and the Guyana Small Business Association. While they all provide financial and technical support in varying degrees to micro and small businesses, they do not offer many of the services needed by micro and small businesses to help them stay afloat.

Should the Small Business Act of 2004 be fully and effectively implemented, an eighth enterprise, the Small Business Development Fund, would be added to the set of existing bodies available to the small business community.

Official policy and attitude

Earlier efforts by Guyana to harness the economic power of small business faltered under the philosophy 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 small businesses and cottage industries, and disrupted the orderly and predictable trajectory of small business development in Guyana.

Though 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 restrictive trade policies of the past never eliminated the small entrepreneur. Instead, the policies helped to push small business out of the official economy and into the unyielding grasp of the indisciplined and unregulated market.

Undeterred

In that disorderly framework, the unbridled passion of small operators continued unabated. Small business thrived with the emergence of unofficial cambios, overloaded flying traders, private mini-bus operators, ingenious auto mechanics, roadside vendors, crop-growing squatters and corrupt managers. Out of sight in the hinterland and in the backlands of villages, small-scale miners and sugar cane growers continued to push ahead with their economic interests. The cumulative effect of these undeterred efforts emerged to transform the business and physical landscape of Guyana and helped to create the story line for the unsavory narrative about life in Guyana.

Starting in 1988, there has been to date a 20-year process to bring micro and small businesses back into the economic mainstream and under the influence of national fiscal and monetary policy. A cornerstone of current national and international efforts to harness the power of small businesses in Guyana is the Small Business Act of 2004. The Act defines a small business as any business that employs 25 people or less and either has revenues of G$60m or less or assets of G$20m or less. The business can assume any organizational form and must have profit making as its motive.

The Act does not make a distinction between micro and small businesses even though the Fiscal Enactment (Amendment) Bill of 2003 might give us a clue. In that Bill, the government gives the Guyana Revenue Authority the right to use a presumptive method to determine the taxable income of businesses with sales of less than G$10m. The idea behind this assessment method is to capture revenues from businesses that fly under the radar screen and the businesses most likely to do so and earn less than G$10m in sales are the micro businesses. While some small businesses might feel offended, it is reasonable to surmise, in the absence of a clear definition of the concept, that any business with revenue below G$10m is a micro business.

Access to finance

The expectation of the external donors was that the Small Business Act would help to solidify the process of returning small businesses to the mainstream of economic life in Guyana. The Act does have that as a goal by requiring small businesses to register with the Small Business Council so they can carry the designation of “an approved small business”. However, the Act does not indicate what benefits becoming an approved small business would bring to these entities. One could imagine, though, that it would remove uncertainty from among creditors about the legitimacy of a business and increase the chance of loan applications being seriously considered by a bank or other creditors. Potential investors would feel more at ease investing in the equity of the business as well.

Recent newspaper articles and statements by public officials indicate that small businesses continue to participate in many parts of the economy, including retail, agriculture, manufacturing and processed foods.

In comments to the Thematic Consultations on poverty reduction held on March 17, 2008 at Buddy’s International Hotel, the head of Go-Invest reported that micro and small businesses made up more than half of the Guyana economy.

This claim demonstrates the influence of the small entrepreneur even though it is not clear how many of the new business start-ups survive to become long-term participants in the economy. Moreover, the importance of micro and small businesses does not show up where it matters most, in the net profits of these entities, and hence, in the hands of the business owners and families trying to escape poverty. While more detailed study is required, data available in the latest annual report of the Bank of Guyana suggest that micro and small businesses could have accounted for between five to eight percent of reported net profits earned by all private sector businesses in Guyana in 2007.

Strategic
game-changer

Despite the prominence of small business in the Guyana economy and its potential role as a strategic game-changer in the fight against poverty, official attitude is once again in danger of thwarting the progress of small business. As the saying goes, “action speaks louder than words” except that in this case it is inaction that is sending the loudest message of discouragement and might be interfering with the productivity and profitability of small businesses.

The Small Business Act was adopted in 2004 but it took two years to set up the Small Business Council, the primary body to make that act meaningful. An important task of the Council is to ensure that small businesses were receiving 20 percent of public procurement contracts. The Act also requires the setting up of the Small Business Bureau so that the Council could get its work done.

Four years after the approval of the Small Business Act, we learnt from the Chairman of the Guyana Small Business Association last week that the Bureau had not been set up as yet. His remarks left doubts also about the status of the “Small Business Development Fund” and whether small businesses were getting their fair share of procurement contracts. With the Public Procurement Commission and Competition Commission still to be established, the failure of the administration to act expeditiously, once again, on matters of benefit to the entire private sector is fast becoming an unfortunate and unhelpful pattern.

This attitude calls into question the willingness and ability of this administration to help the private sector to develop its capability to compete successfully. Moreover, by failing to support the small business community fully, the administration is calling into question its own commitment to the widespread use of micro and small businesses as a strategy to fight poverty in Guyana.

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8 Responses to “Small Business – the central front in the fight against poverty”

Joe Coxall
on September 5th, 2008 11:09 pm

Raul,
In order to fully understand to success story on the Grameen bank and the poor rural women of India, we must first explain the money mechanics behind that success story.

It was an Indian economist ( I do not recall his name) who introduced this concept. He raised local capital and charged a very small interest. Both the principle and interest remained in the region to fuel further development.

This entire undertaking would have been doomed to failure if he had taken loans from all of the above mentioned vulture capitalists who deliberately use their system of usery to entrap and enpoverish entire nations.

I am talking about the following statement you made in your article
“This effort became an integral part of the program of support provided by the IMF, World Bank, and the United Nations development agencies, the European Union and other donors as Guyana made adjustments to its economy under their direction in the last 20 years”

As you mentioned, Guyana made adjustments to its economy under their direction in the last 20 years- and what was the result?- widespread poverty and unemployment.

So here they come again under the ostensible guise of assisting in replicating the India success story. They have no shame in their trickery for taking credit for a success story they had nothing to do with. They have now usurp[ed the entire concept as their own, but under their system, it will fail and the government will be blamed for its mismanagement.

They want it to fail because the real system that was used in India kept them out of the loop. If this system catches on in the rest of the third world, they would not be able to profit from it.

Every hungry, malnourished and illiterate child, every idle unemployed person in Guyana and the world over are as a result of the slight of hand money trickery of these Robber Barons.

If you really want to repeat the success story of the women of India, I can get you the name of the Indian economist who made it happen, but first the Guyana government must upturn to tables of the money changers and politely tell them thanks but no thanks.

Joe.

[Reply to this]
A380100
on September 6th, 2008 12:51 am

Someone should show this article to the members of the Government, as they think all businessmen are criminals.

[Reply to this]
Joe Coxall
In reply to the above comment on September 6th, 2008 8:42 am:
A380100,
You can google grameen bank where you will see that Dr. Yunus has written two books on social banking practices and the eradication of poverty.

He is the person that coined the term “micro loans” that term was nowhere in the lexicon of the banking cartel. Now they have rewrapped their vulture loans around the term micro loan which they are now using to entrap the poorest of the poor in all third world countries.

The Guyana government who has already been entrapped by this evil system would be wise to secure copies of Dr, Yunus’ books and invite him as a guest speaker to Guyana. and stay away from the masters of evil.

The banking cartel are the personification of evil encarnate on this planet. If there is ever such an entity as THE DEVIL on earth, they embody its character in every shape and form. They are the ones responsible for every social ill and injustice on this godly earth.

We should never forget NO WAY, they crucified Jesus Christ. They did not disappear in the dust of time and history. They are still alive and more powerful than ever and now are in the business of crucifing nations.

Let us pray that more people like Dr. Yunus can show us the path to economic freedom and prosperity, and world leaders like President Putin can stand up to their military wing and thwart their ultimate agenda of a NEW WORLD ORDER

Joe.

[Reply to this]
A380100
In reply to the above comment on September 6th, 2008 10:43 am:
I have seen this on TV. Great idea and great for the people, especially the women, of Bangladesh.
Joe Coxall
on September 6th, 2008 6:43 am

The word “Grameen” means village. The Grameen Bank of Bangladesh was designed by Nobel Laureate Muhammad Yunus. A borrower (which happened to be mostly women) is allowed to buy one and only one share in the bank, for as little as 3 US dollars.

The interest rate of loans are set so that after paying expenses, the bank makes a modest profit which is returned to the shareholder-borrowers in the form of dividends. The bank’s website reports that 54% of it’s borrowers have crossed the poverty line and another 27% are very close to it, beginning with loans of as little as $50.

Loans are given to people that other banks- operating under the guidelines set by the IMF- would be considered bad credit risks.

92% of the bank is owned by its borrowers (mostly women) the government of Bangladesh owns the rest.

As soon as any country takes a single dollar from the IMF and its gang of ungodly thieves, it commits the untimate sin of guaranteeing poverty of its people not eradicating it.

Joe.

[Reply to this]
Sonny
on September 7th, 2008 2:06 pm

I do not know where and when it started, but the people in the villages of South Asia, like the people in the villages of Guyana, practiced something called “bax”. They all put up a certain amount of money weekly. Week one, all the members contributions are given to 1 of the members. Week two, all is given to the next member, and the whole thing keeps rotating so that each member can get a lump-sum to invest in things that would have been very difficult for him to save and acquire. I think that the Bangladesh system is based on something similar. The borrower had to find a certain number of friends and relatives that agree to pay in the event of the first borrower failing to pay. In return, they are guaranteed to secure similar loan after the first person pays back.
I have no trust in anything that the IMF is part of.
In respect of Guyana, small business can be viable. Yes, here we go again : E-Commerce. Guyanese have to learn to sell their products and services where it is demanded. In this way they can get the best possible prices. I just commented on this under another topic. I compared “Crab Oil” of Guyana to “Tea Tree Oil” of Australia, where proper packaging, labels and marketing can bring success. Crab oil is just one example. Look, 1 pound of shark fin is retailed in China at prices between US$200.00 to US$300.00. Guyanese exports tons of shark fins every year, but it passes through various middlemen before it reaches the Chinese customers. Shark fin soup is a delicacy in China and based on information I am getting so far, a bowl of shark fin soup costs app 100 UK Pound. With the internet and proper marketing, people in Guyana can now take on international markets…….but quality and reputation must never be compromised. Besides “crab oil” and shark fins, there are hundreds of other items that can be marketed this way. People have to just look for things that Guyana has and other countries do not have. If you want to target an international market…….please, do not sell Tylenol and diapers. Sell huge “carahi” (cooking pots), sell hammocks made by hand in the rural villages. Sell dried shrimps, fruits and vegetables, seasoning and so on. North America has hundreds of soft drinks, yet Chubby, coming out of Trinidad is making it big here. It is in all the chains, and now it is being manufactured under franchise in North America. Why not rice and sugar? Brand it and sell it.
Rgds,
Red Lion

[Reply to this]
New Paradigm
on September 8th, 2008 7:41 am

Joe Coxall “This entire undertaking would have been doomed to failure if he had taken loans from all of the above mentioned vulture capitalists who deliberately use their system of usery to entrap and enpoverish entire nations.”

This is the nature of our banking system. What makes it worse is that they are in the major foreign owned and the profits are transferred to other countries. It is impossible for our country to be built in this way as businesses are not being facilitated.

We need to examine alternative economic systems. I believe if the private sector commission would commence to think rationally then they would see that they cannot be the engine of wrowth as , and i do not blame them, they only look after themselves and their profits.

the social reponsibility that Jerry and Mc lean speak about is not going to happen as capital tend to control people as opposed to the vice versa.

[Reply to this]
Joe Coxall
In reply to the above comment on September 9th, 2008 7:21 pm:
New Paradigm,
You are absolutely right, one of the stipulations that the IMF make on countries that borrow their loans is that they are not allowed to print their own money. I was explaining this to a friend and he was puzzled and responded “but Guyana prints their own money”. So allow me to explain to the rest of our blogger family what I mean.

If the Guyana government wants the equivalent of 10 million US dollars for some local project but does not want to borrow. They must first go the the central bank with a “show of hands” meaning they must first show the bank that they have the 10 million of the worlds reserve currency in their hands, they must also turn out their pockets to ensure no underhand tricks are taking place.

The central bank then takes that 10 million US and “removes it from circulation” so that the Government cannot come back with it again. They then call upon the printing presses (I assume in Canada) to print the equivalent in Guyana currency.

Now that 10 million US dollars shows up as a deposit on their books, and according to their banking laws they are entitled to lend out 90% of that amount, so right there they have just created 9 million US dollars out of thin air, which they can go on to lend again and again to the tune of 90 million US dollars. See the trickery where money is created by simple computer entries and lend to countries at exorbitant interest?

Now the amount of third world debt in 2006 was 2,100 thrillion US dollars. The banking cartel if they really were interested in assisting these countries to develop, can wipe out that entire amount by a simple keystroke of all zeroes where that amount stood, and thats it, debt is gone, finito, no more and the world is now debt free.

Now I know your might be thinking how is this possible, it is possible because that was the way it was created in the first place, out of thin air.

The banking cartels are not using any monies from European depositors or any other persons accounts. What is happening is the deposits allow them to lend out 90% of that amount and they simple print the amounts with no backing of assets of any kind. In otherwards it is legalised counterfeiting.

That is how they get these neverending sums of money to lend to the third world countries and just sit back and collect interest. This is what is known as fiat currency lending.

Henry Ford was once rumoured to have said, that if the American people really knew how their money was created as loans to them, there would be a revolution overnight.

This entire system that has bankrupted entire nations is an illusionary slight of hand magic trick conjured up by none other that the brilliant and cunning minds of our European Masters of trickery and greed.

Joe.

[Reply to this]