In his book, “Capitalism at the Crossroads,” Stuart L. Hart advocates “building from the base of the pyramid,” because the old formula of “top down” development tends to exclude adequate strategies for the poorest of the poor, who aspire to become entrepreneurs.
The book speaks to “providing economic access to millions of people who occupy the bottom level of the economic pyramid,” and “multinational businesses as forces for sustainable development and poverty alleviation.”
Locally, similar messages are being driven by the proponents of small businesses. Their ideas, backed by Government funding to microfinance institutions, through the Development Bank of Jamaica, could provide a significant boost to the productive sector. And, it is against this background that, despite limited access to training, credit and expertise, Jamaica’s small and micro enterprises could become the lifeblood of the economy.
“Our economy thrives on the efforts of our micro and small enterprises,” says Edward Chin- Mook, Immediate Past President of the Small Business Association of Jamaica (SBAJ). “They provide the vast majority of employment opportunities that offer the basic support for many working-class families.”
More than 80 percent of the island’s employment opportunities, according to the Private Sector Development Programme (PSDP), are created by small and micro entrepreneurs, although many continue to operate outside the formal business net. Informal micro enterprises contribute as much as 40 percent of the gross domestic product.
“Expanding the entrepreneurial base within the formal economy to include more of our informal businesses will lead to stronger economic and social development,” says Frank Whylie, General Manager of JN Small Business Loans Limited (JNSBL), the island’s leading microfinance institution. He says his company has substantially increased financing to the micro and small business sector in the last year, assisting many clients to make the transition into the formal sector.
“It is not enough to provide micro entrepreneurs with access to funds,” Mr. Whylie says. “We have to teach them how to manage their businesses and demonstrate the benefits they can achieve by formalizing their enterprises, growing the business and, thereby, contributing effectively to building their communities.”
In addition to the 2,398, new micro businesses that JN Small Business Loans helped to establish in 2009 through its BizStart loan products, the company offered training to all of its clients through its own employees.
Originally, the company partnered with the Jamaica Business Development Corporation (JBDC) to provide business development training to its clients to take advantage of emerging opportunities in the global recession. However, through a “training the trainers” process, JNSBL training officers are now equipped to deliver the training programme.
“Training is offered on a monthly basis to every client,” Mr. Whylie explains, “It exposes new business persons to record-keeping, marketing and business management and other entrepreneurial skills.”
“Most Jamaicans lack formal business training; however, there is an innate entrepreneurial spirit in the society,” Mr. Whylie points out. More than 73 percent of persons who start their own enterprises do so because they have a passion for business and want to be their own boss, the PSDP survey indicates.
And most of those who borrowed from JNSBL, have found the experience to be rewarding, as a study by the Tropical Medicine Research Institute at The University of the West Indies reveals. The team led by Professor Terrence Forrester points to the improved economic circumstances of JNSBL borrowers, noting that they were able to spend more per annum, and more of them own a home, compared to non-loan beneficiaries.
Many JNSBL clients grow their businesses and graduate to larger loan portfolios such as the BizGrow and BizBoost products, Mr. Whylie says. They also shift into the formal economy, by registering their operations and becoming General Consumption Tax (GCT) compliant.
Beverley Brown, a potter, is one of numerous clients who saw her business grow, based on her relationship with JNSBL. Mrs. Brown says that in addition to the financial boost from the loan which she procured, the training she received through her field officer, Marsha Salmon, at no extra cost, was particularly useful.
“Marsha is a professional field officer. She visited my home several times to ensure that I was doing the right things to grow my business,” Mrs. Brown said. “She showed me how to market my goods and helped me to gather data about items that people really wanted to acquire.”
Since her first loan from JNSBL seven years ago, both her business and personal life have been transformed. She has been able to purchase a car to transport her pottery products, and she also saved enough funds from the sales generated by the business, to purchase a parcel of land. Mrs. Brown is now moving towards formally registering her establishment.
The potential for small business development is great, according to a 2008 Bill Johnson survey, which pointed out that, “as many as 164,000 people are considering starting their own businesses,” and indicated that they would “need a loan of $100,000 or less to do so.”
“Part of our micro-financing mission is to tap into that aspiring group, to develop the Jamaican economy by responding to the needs of those who are at the base of the pyramid,” Mr. Whylie maintains. “Our small and micro-businesses are the foundation of the national economy: If the economy is to progress then they have to be strengthened.”