By NEIL HARTNELL
Tribune Business Editor
A small business advocate yesterday branded the continued reliance on guaranteed bank loans to finance the sector as "dinosaur practices", as he urged entrepreneurs: "Think globally."
Mark A Turnquest, principal of Mark A Turnquest Consulting, told Tribune Business that Bahamian entrepreneurs would be better able to access more innovative financing mechanisms, such as crowdfunding, if they looked beyond the immediate 400,000 strong local market.
Speaking after he addressed the University of The Bahamas' business school on the need to finally pass the Small and Medium-Sized Business Development Bill into law following a 12-year wait, Mr Turnquest argued that this was vital to providing a legal foundation and structure to the government's efforts in this area.
While the Small Business Development Centre (SBDC) was doing everything envisaged by the initial Bill, acting as a hub for preparing entrepreneurs' business plans, connecting them with professional help and facilitating access to capital, he expressed concern that these efforts could be overturned on a whim if the Government again changes hands at the next election.
And Mr Turnquest argued that the need for a proper legal framework to guide small business strategies had assumed increasing importance given upcoming efforts to revive commercial activity in Abaco and Grand Bahama.
Agreeing that the Inter-American Development Bank's (IDB) estimate of a $180m small business "financing gap" was not far off the mark, he told this newspaper: "The challenge is that there's not a lot of projects that are going to be financed, opportunities that are going to be met for young entrepreneurs and the development of businesses because lenders are too risk averse to support it.
"I was talking about crowdfunding mechanisms as one concept to reduce the gap where investors put in equity, have skin in the game and you don't have to rely too much on loans and debt. They can obtain seats on the Board."
Yet Mr Turnquest said Bahamian entrepreneurs needed to look beyond this nation's borders if they were to interest the global crowdfunding market in their ideas, meaning they had to think on a wider scale and/or develop export opportunities.
"The challenge is everyone's thinking locally, and there's only 400,000 persons here," he told Tribune Business. "Right now we're not looking at crowdfunding. Right now we're looking at loans, and guaranteed loans. That's dinosaur practices with these guaranteed loans. These are safe mechanisms."
The IDB, in documents detailing its $25m initiative to enhance credit availability for micro, small and medium-sized enterprises (MSMEs), said there was a "considerable" capital shortfall that must be "addressed by the financial system in The Bahamas".
Pegging this at near $180m, it noted that Bahamian MSMEs reported the highest "rejection rates" in the Caribbean of 85 percent when they approached commercial banks for loans, meaning that over four out of every five applicants were turned away.
And 77 percent of credit extended by the Bahamian banking system is classified as "personal loans", which are typically taken out to finance the purchase of vehicles and other consumer goods such as furniture, appliances and vacations.
Warning that the Government's small business strategies face the threat of being "mashed up" every time the Government changes, Mr Turnquest argued that the only way to prevent this was to pass the Small Business Act.
"Look what happened to the National Development Plan," he told Tribune Business. "It was a good plan because it was bi-partisan, but look where it is now. We don't want small businesses to die on the hill every election because every time something new comes.
"There's no sustainability with small business development. Every time there's an election it change. The PLP came up with SMEDA, the FNM came in and said: 'Forget that. Here's the SBDC."
Mr Turnquest added that he was making "a final push to legislate the Small Business Act so we can correct the challenges we are facing and be prepared for future natural disasters and changes in the business cycle like recessions, and be more proactive so there's funding in place".