My Thoughts on Technology and Jamaica: 20% of Jamaican MSME's Fail to get Bank Loans - Why MSME's need Business Plans, Marketing Plans and Market Research

Friday, January 23, 2015

20% of Jamaican MSME's Fail to get Bank Loans - Why MSME's need Business Plans, Marketing Plans and Market Research

Getting money to fund your business can be tricky for an MSME (Micro, Small and Medium Enterprise).

Especially when Banks are refusing, which leaves you with only VC (Venture Capital) and Crowdfunding as your only options as explained in my blog article entitled “JN Foundation and JNSBL launches Jamaica's first Crowdfunding website, iSupport Jamaica - Local Crowdfunding to the rescue of Jamaican Innovators so you don't have to be The Lone Ranger”.

But what if the problem is with the MSME’s themselves?

This is what CEO of the JBDC (Jamaica Business Development Corporation), Valerie Viera, who point out that the main reason for many MSME being turned down for loans is a lack of documentation and research into the market as it relates to their business as noted in the article “Only 20% Of MSMEs Qualify For Loans - Most Lack Business Plans Other Necessities”, Published Tuesday January 20, 2015, The Jamaica Gleaner.

In fact, only 20% eventually get a loan from a financial institutions, a question that JBDC CEO Valerie Viera asked during the Jamaica Gleaner's Editor's Forum on Wednesday January 14th 2015, quote: “So is it any surprise that only about 20 per cent of the client group that applies for, or is even granted a loan from a financial institution?”

Dear reader, prepare yourself; this may be my shortest article yet!

JBDC CEO Valerie Viera is packin' the heat with some stats, my favourite thing that lays it bare as to why MSME's fail:

1.      85% of MSMEs do not have a business plan
2.      50% have no marketing plan or even how they plan to market their products
3.      70% have not thought about research and development, much less done any
4.      20% of MSME applicants eventually get a loan from financial institutions

This is no surprise. Many Jamaicans have an idea for a business but do no documentation of any sort, thinking that all that's required is a lot of money, no business plan on paper and word-of-mouth marketing with no advertising budget to get their business going.

If these stats are true, it would seem that her previous sentiments expressed at the Mona School of Business and Management Inaugural Conference at the Holiday Inn Sunspree Resort, Montego Bay suggest that the main problems that MSME's have is not financing, but a lack of documentation and research, quote:  “I want to be a little radical and say it is not the first obstacle that my clients in the field are facing. I want to first start to say we need to build the capacity of the MSMEs to really be in a position to negotiate for the financing”.

Thanks to this lack of research by MSME’s, most of the products and services being offered have no connection to the market as many MSME's haven't even done any research, resulting in product/market mismatches, to again quote JBDC CEO Valerie Viera: “I often wonder what's the philosophy behind many of the products that the financial institutions are offering because most of them have no relationship to the needs of the client group. If I'm diabetic and you give me a beautiful cake you (are) not helping me. That's exactly what is happening and we need to revisit that”.

Thus a perception is built up in the minds of some MSME's that their being blocked form accessing business loans and Banks only give loans to their “friends” or associates as JBDC CEO Valerie Viera suggests, quote: “Many of our financial institutions speak about ... products for the MSMEs. The truth is that it's the same people who access those funds over and over because it's the same people who qualify for interviews”.

JBDC CEO Valerie Viera stats speak otherwise. The ball is really in the MSME's court to do the one thing many of these businesses aren't doing; actually operate like one!

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