Three years ago, I and my MIF colleagues who focus on Jamaica made a deliberate decision to target access to finance for Jamaican SMEs–a critical area of need in the country, and one in which we could make a difference. Today, the MIF portfolio in Jamaica includes a group of mutually reinforcing projects that offer support to small and medium firms through a range of models. I recently attended the 2015 Jamaica Stock Exchange (JSE) Conference in Kingston, which got me reflecting on the progress we’ve made with this targeted approach.
Commercial Banking: We launched two projects with commercial banks. In the first, we partnered with National Commercial Bank (NCB) to develop and deploy a new credit scoring system, and train SMEs to make them more “bankable.” NCB also put aside a pool of loan funds to be accessed by project beneficiaries; and this past month, as a result of the project, the bank launched Capital Quest, the Jamaican equivalent of the U.S. TV show Shark Tank, where entrepreneurs compete for investment from a panel of financiers.
The second project, with Scotiabank, is the first project in the Caribbean under our women entrepreneurshipBanking (weB) program, and helps SMEs to improve their risk profile and creditworthiness through an enterprise risk management tool developed in an earlier MIF-funded pilot. This tool will be incorporated into Scotia’s own credit appraisal process to serve the credit needs of both male and female-headed companies.
Venture Capital: MIF is also supporting SMEs by fostering the development of Jamaica’s Venture Capital (VC) industry. We provided funding to the Development Bank of Jamaica (DBJ) to study what challenges need to be addressed in order to develop a sustainable VC industry in Jamaica, and we are now developing a second project this year to help to address some of those challenges. We are actively coordinating with other donors (e.g. the World Bank) and stakeholders who are supporting entrepreneurship innovation and angel networks.
The Jamaica Stock Exchange Junior Market
At the start of the JSE conference, we signed a project agreement with the Exchange to support SME listings on the Junior Market, adding another dimension to our efforts in SME financing. The goal is 25 new listings over the life of the project, and to strengthen the Junior Market’s operating systems as well, particularly in the areas of monitoring and supervision. We are encouraging JSE collaboration with the DBJ’s venture capital initiative, as the Junior Market is not only a source of funds for SMEs, but can be a viable exit mechanism for VC investors.
It seems to me that this type of approach, where we approve several complementary projects in a key development area, should be an important MIF strategy going forward in small countries such as those in the Caribbean, which present the ideal environment to test new ideas. This strategy can increase the chances of a greater development impact and allow us to leverage resources more effectively by generating “cross-cutting” knowledge products and lessons learned.