Linden entrepreneurs complain about lack of support from new loan entity

Several new micro, small and medium scale businesses say they are being stifled since they have been unable to access loans to further develop their businesses under the Linden Enterprise Network (LEN).

LEN is the successor entity of the Linden Economic Advancement Programme LEAP), which became operational in January this year, following the completion of the LEAP seven-year programme which ended in December 2009.

LEN came to fruition following recommendations by key stakeholders, including the Linden Chamber of Development and Commerce (LCDC), the Regional Democratic Council, Linmine Secretariat and the Mayor and Town Council.

Speaking to Stabroek News, Minister within the Ministry of Finance Jennifer Webster said that a meeting will soon be held with persons from the Linden community to identify two persons to sit on the board of LEN. This, she said, would allow for the completion of the registration of LEN and it is hoped that by the start of the new month the institution will restart issuing loans with available funds while negotiations continue with Caricom Insurance on other matters.

A number of affected entrepreneurs declined to go on record, saying that they were given the royal runaround in times past after they spoke out publicly against the fund. “We were speaking for our rights and because of that it wasn’t easy at all,” said one client.

Given the assurance that her identity would be protected, one client said that her business is being stifled since she has not been able to access additional funding for expansion and working capital.

“I have been going back and forth since January to get additional funding and all I have been getting is lot of disappointing news. From the onset this thing was set up to bring economic [gains] but instead it has been more frustration than anything else,” she said.

The Linden Economic Advancement Fund (LEAF) was launched two years into the LEAP programme in November 2004 and commenced the disbursement of loans in January of 2005.

Of a total of 1,694 applications to the tune of $2.1 billion, 701 loans were approved and disbursed to the tune of $732 million.

Business operatives across Region Ten received loans for business start-up and expansion in the areas of agriculture, forestry, services and vending.

In the micro category, loans worth $150 million were disbursed, while small businesses received loans to the tune of $377 million. Medium-scale businesses were issued loans totalling $205 million.

Of the $732 million loaned, $359 million were repaid as at 31 December 2009. At the time of LEAP’s existence, GUYFLAG, now Caricom Insurance Company, was contracted to execute the activities of the fund. Following the exodus of LEAP, Caricom Insurance was tasked with the responsibility of collecting the loan payments from clients.

According to reliable sources close to the entities, Caricom Insurance has received some $185 million from interest earned, application fees and late fees. Through an arrangement with the Guyana government Caricom Insurance is expected to deposit monies collected into a special account. “The sum was to go to the government and then back to LEN as a revolving fund for the loan programme to continue but this time though LEN,” said the source.

Stabroek News understands that as at December 31st between $50 million-$67 million were paid into the account. “The big question is why none of this money has been forwarded to LEN so they can at least start lending to applicants?” asked a member of the LCDC who chose not to be named.

Since its formation in January 2010 LEN has been operating with two-man board of directors — Linmine Secretariat’s Andrew Forsythe as secretary and the Ministry of Finance’s Tarachand Balgobin as treasurer.

The entity has a contracted staff of 13 and is being financed with some $9 million which was generated by LEAP but this amount is almost exhausted. An additional sum of just a little over $200,000 garnered from rental fees on a monthly basis assists in absorbing administrative costs. The LEN Business Centre houses some 21 tenants.

Mingo disappointed

Meanwhile, contacted for comment on the question of businesses experiencing difficulty in accessing loans, Regional Chairman Mortimer Mingo said he is disappointed that after six months LEN has not been able to start lending through the revolving fund. “People are saying that at its best to date LEN is just a façade because it is not carrying out its mandate because to date no monies have been transferred to carry out at the least the fund aspect,” Mingo said.

He also stated that while the entity is managing the business incubators it does not speak directly to the economic advancement of residents of the region. He said the lending arm was a window that was created to provide financing for micro and small business in order to improve the economy of Region Ten.

Mingo said while some of the small businesses would have accessed the facility under the previous fund management they would have needed additional financing to assist their businesses to grow, a process they are being denied at this time.

“LEN stands to go under because there is no serious economic activity that is taking place within that institution which would have spoken to the sustainability and its buoyancy,” added Mingo.

He said the bad debt portfolio is one that the region could be proud of since it accounted for about 10% of the actual loans disbursed.

He also alluded to an escrow account with approximately $4 million, which the government has access to that could be put into LEN. “We feel that it is a lack of will, we feel strongly that the people of Linden and Region Ten are being short-changed by the absence of this revolving fund and we are calling on the government to urgently address this issue since the whole question of unemployment whether we like it or not, however form or shape you put it is a major issue here in Linden and Region Ten.”

President Bharrat Jagdeo on his most recent visit to Linden made mention of LEAP and its successor LEN, saying that the LEAP programme has helped a few people in the community and that the LEN component is being worked on.

Mingo said that earlier this year Caricom Insurance had announced that it was going to start a fund similar to that of LEAF but, according to him, up to now the fund has not issued any loans and the Caricom Insurance application in April 2010 to operate as an insurance company was refused.

Eleven loans

In a subsequent interview, Linden Manager of Caricom Insurance Leonard Forde produced documents to verify that the company is licensed to operate a micro credit fund. Forde said the fund has already disbursed 11 loans to the tune of $3.1 million and an additional 27 applications are being processed.

When asked about the monies that are to be repaid to the government through the LEAF arrangement, Forde said he was not in a position to make a comment but recommended that contact be made with the Board of Directors to which he reports.

He, however, seized the opportunity to note that a number of persons who were placed on the bad debt list under the LEAF regime were not legally entitled to be placed on that list according to law. “So all bad debtors have been rescinded under the former loan arrangement and we are beckoning them to come to the office to attend to their arrangement with the fund,” Forde said.

He said legal actions are being taken against clients who have lapses of 90 days and over with a strong view towards recovering the funds. On the other hand Forde said his company is prepared to review and recalculate the amortization so as to reschedule loan repayments in cases where persons are qualified for such consideration. He said this measure would only be granted to those persons who go in willingly to the Caricom Insurance office.

“They must understand that when we grant this consideration those persons would not be eligible to access any additional loan until they would have completed repaying their existing debt,” he said. To activate this arrangement, clients must go in with at least one month’s money of the original instalment.

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