Prime Minister Dr Keith Mitchell spoke at the launch of AXCEL Finance on 7 April. The theme was “Financing SMEs: A Critical Pillar of the New Economy.” The following is the text of his speech.
Ladies and gentlemen,
It is a pleasure to be here with you this evening, to mark the launch of AXCEL Finance in Grenada. This opening is timely, as our Country, like many others, is in the midst of a long and deep financial and economic crisis, which has affected us all, in one way or another. Indeed, these challenging times demand nothing short of a radical transformation of our economy and the need for partnership between government and private sector in achieving this transformation.
The themes of economic transformation, growth, job creation and poverty reduction will be preoccupations of our Government for the foreseeable future. Colleagues, in regard to the need to transform the Grenadian economy from the “old” drivers of economic development to “new” dynamic sources of growth and development, we have spent a great deal of time advancing the “new economy” as a new development orientation for our Country.
But contrary to some commentators, I am sure you will all agree that the new economy is not like rain or manna which will fall from the sky. In fact, the new economy will require even greater effort from us all as we shift from “old” approaches and orientations, and embrace new opportunities, new sectors: requiring new, and in many instances, a different skill set.
This is why I have been so enthusiastic about the potential of ICT as a “game changer” for our youth, allowing them to embrace new opportunities for learning, skills development, employment and income generation. The New Economy opens opportunities through ICT for our business sectors to become more efficient, to reduce costs and increase their reach to clients throughout the world. The “new economy” opens opportunities for agriculture, tourism and related services, and for the expansion and start-up of a range of micro, small and medium-sized enterprises.
Ladies and gentlemen, for over a century Grenadians have been engaged in successful micro, small and medium-sized businesses. Compared to other countries, this has been the strength of the Grenadian economy — what some have termed our “peasantry class.” We often accept that our people are not entrepreneurial, but this is not quite true. They are — From the bus-driver to the barbers, to the day care nurseries, to the small garages, small traders, hucksters, vendors, taxi-drivers, to name a few. Many of our people have been excellent entrepreneurs.
Roast Corn vendors…
But the growth of these micro, small and medium-sized enterprises, have always been affected by two major factors: lack of capital to grow, and lack of managerial capacity. The commercial banks have served many of the larger businesses well, particularly where we have had stable markets and where businesses had the collateral to satisfy their requirements.
However, as competitive advantage has shifted away from the traditional or “old” sectors toward new enterprises, the demand for finance has also shifted away from traditional banks to higher risk capital. As a consequence, what this has meant is that for much of the “New Economy” ventures and entrepreneurial activities, the traditional sources of finance are no longer available or appropriate.
Globally, venture capital, micro-lending institutions, and informal capital markets have become the sources most usually associated with financing new entrepreneurial start-ups and micro, small and medium sized enterprises.
Ladies and gentlemen, it is for this reason that this Government has taken the strategic decision to support the establishment of micro-lending institutions here in Grenada. We believe that they occupy an essential and critical space in the financial market, which is not adequately being serviced by the traditional finance institutions.
Colleagues, our policy stance of welcoming micro-finance institutions was also based on our clear understanding that in a Grenada context, micro, small and medium-sized enterprises were essential for ordinary Grenadians, including youth who did not have the usual required collateral, but had a dream of hard work and sacrifice, to develop their own business should they be afforded an opportunity to do so. This Government stands irrevocable on that commitment.
Even as we are engaged in the IMF Programme, Government is clear about the relationship between these actions of providing access to financing and poverty reduction. We understand that given the under-developed nature of our capital and finance markets, where persons are unable to seize growth-promoting business opportunities, they are likely to remain poor.
Ladies and gentlemen, supporting the establishment of micro-financing institutions such as ACXEL Finance, is a well thought out, deliberate strategy of this Government. Therefore, as we mark the formal opening of AXCEL Finance this evening, my administration also views this as the assembling of yet another essential piece of the architecture for the New Economy, as it relates to financing for Micro, Small and Medium Sized Enterprises.
We view the arrival of AXCEL Finance as momentous, particularly since Micro, Small and Medium-Sized Enterprises are one of the key pillars of the new economy and is an essential part of Growth and Poverty Reduction Strategy (2014-2018). SME’s as an engine of growth has also been recognised as a trend throughout the Latin American and Caribbean region.
A June 2013, IDB Report states:
“Small and Medium Enterprises (SMEs) play a major role in most countries in Latin America and the Caribbean. According to the OECD, SMEs account for about 99% of firms and 67% of employment in the Region. They generate employment and income for about 50% of the formal workforce in manufacturing and most of new jobs and sales growth in the region.”
According to the IDB study, there is every reason to expect that most of the new jobs will be created by SMEs. In a workshop held in Barbados last month, the IDB identified a number of problematic factors (insufficient capacity, inadequate supply of infrastructure, access to financing etc) which has been inhibiting the growth of SME. Topping the list was the inability to access financing.
Sir Dwight Venner, Governor of the Eastern Caribbean Central Bank, highlighted the need for a strong private sector to reverse the downward spiral of the region. According to him: “The crisis has exposed the major structural issues…that we “have not developed a private sector which has been given the chance to move out of a certain zone because the system has been skewed towards importation for distribution and a few commodity exports.”
Ladies and gentlemen, there is definitely a need for us to do our part in reversing this trend by supporting our entrepreneurs to produce more of the goods and services that we consume, and in some cases exports. In this regard, Government will provide additional training, technical assistance and financial and business support to the SMEs. Already we are doing our small part through the Small Business Development Fund, and the Grenada Youth Enterprise Initiative.
But I will like to make two important points which also reflect our new dispensation, particularly where we are under severe fiscal constraints. The first point is that Government cannot do it alone. It is therefore pleasing when entities like AXCEL Finance enter the market to play a role in the growth and development of the country. This is even more critical at a time when the entire global economy is still striving to recover from recession.
Second, our approach is not to displace private imitative, such as ACXEL Finance. Instead, we want to work in a manner which is complementary, and over time our hope is that Government can exit the market for micro-finance entirely, leaving it to a more robust private sector micro-lending sector.
Ladies and gentlemen, it is this critical need to access financing that makes the launch of AXCELFinance’s new branch here in Grenada significant. It is anticipated that several small contractors would be able to secure bridging finance, credit to purchase raw materials and supplies, as well as tools and equipment. At the consumer level, it is my understanding from Mr Rosenberg’s message that AXCELFinance will offer loans for the people of Grenada to meet a range of personal needs such as education, healthcare and household items.
On the premise that all the foregoing is feasible, then there is every reason to expect that the presence of AXCEL Finance here in Grenada will further stimulate economic growth and by extension create more jobs.
Mr Rosenberg, I recall media reports showing that members of your team volunteered their services to assist the community in other countries. I expect that AXCEL Finance will also demonstrate its corporate responsibility in Grenada. I noted further an interesting newsletter which is being circulated named “Basic Cents.” Indeed, financial literacy sessions can be built around the points in your Basic Cents bulletin to provide the citizens of Grenada practical advice on sound financial management. The establishment of your new Grenada branch is timely. It should definitely assist government in our efforts to build the new economy.
The New Economy will be stronger and more resilient to any unexpected financial downturns, if it is based on the citizens of Grenada taking control of their destiny by starting and growing businesses. Perhaps an important lesson from the global economic crisis is the need to innovate, and to move beyond the traditional perception of income generation being only a day job. I commend AXCEL Finance for introducing new innovations and for ultimately assisting in spurring the entrepreneurial spirit of our enterprising people of Grenada.
Ladies and Gentlemen, I have shared with you in other quarters the many additional projects and plans which my administration is rolling out across Grenada in building our new economy. Given the high debt levels, our Government is unshakably committed to a focus on facilitating the private sector in creating new jobs. Meanwhile, we will continue to maintain the public infrastructure, fund social and educational programs and also uphold law and order with good governance.
In declaring the AXCEL Finance new office officially opened, I encourage you, consumers and entrepreneurs alike, to take full advantage of this new opportunity to access credit responsibly in pursuit of your dreams and aspirations. I want to assure AXCEL that this Government will do everything possible to support the institution, and in particular, in collaborating with you in accessing larger pools of financing for SME development at the Latin-American and global levels.
As the Prime Minister with lead responsibility for ICT, I commend you for using ICT as a management tool for the management of the AXCEL Offices, in a truly cost-saving manner.
I am particularly impressed at the virtual manner in which loans can be processed and approved from anywhere in the AXCEL Network. I understand that from your “virtual dashboard, you can monitor, approve, manage and follow-up on transaction in any office on a real time basis. Indeed, this is a capacity in which most commercial banks and finance houses are not yet capable. We invite you to share this capacity with your clients here in Grenada as we strive to build a stronger Grenada, and indeed, a stronger OECS Economic Union.
I thank you.