The grounds of the University of the West Indies, Mona, Kingston. UWI is being contracted by the Inter-American Investment Corporation for a diagnostic study of SMEs.

Sabrina N. Gordon, Business Reporter

The Inter-American Investment Corporation (IIC) is negotiating deals with regional universities for a study on small and medium enterprises (SMEs) that is meant to diagnose the problems that have become barriers to long-term capital financing for such businesses.

The goal of the research is to open access to credit for small and medium enterprises.

Essentially, the researchers are to identify weaknesses of the SMEs and the technical assistance required to strengthen their operations in order to make them more attractive as candidates for bank loans.

"Companies don't give long term money to these small businesses because they don't provide the information required to access long-term loans," said Michael Apel, Finpyme coordinator at IIC in Washington.

The study, to span four Caribbean countries, is to be done under a project dubbed Finpyme, which Apel said was a Spanish acronym for innovative SME financing.

Finpyme is being financed in part by the Korea-IIC SME development trust fund and Austria, with the remaining funds coming from IIC's own budget.

Pro vice-chancellor in agreement

The agency is in talks with pro vice-chancellor and principal of the University of the West Indies, Professor Gordon Shirley, with an agreement expected to be signed before April - ahead of the Inter-American Development Bank (IDB)/Inter-American Invest-ment Corporation annual general meeting in Miami that month. IIC is an affiliate of the IDB.

The proposal is for the Mona School of Business to do the research.

The university will lead the assessment in Jamaica, Barbados, and Trinidad and Tobago.

A similar contract will be signed with the College of The Bahamas to conduct the assessment in that country.

The IIC declined comment on the cost of the studies, saying the diagnostic review will not be implemented until the third quarter of 2008.

The contracted universities are first to develop a database of SMEs in each target country that fit a pre-determined profile, then select a subset of the companies - 20 per participating country - for the study.

Diagnosis of companies

"A diagnosis of each participating company will be done and technical assistance will be provided where necessary to enhance their competitiveness and other areas," said Apel.

The Finpyme coordinator said the programme would be working with a local bank, not yet selected, regarding the provision of credit for companies chosen as test cases.

IIC has already signed agreements with seven other universities in Latin America where the Finpyme programme is ongoing.

The agency said it would be hiring one or more Central American universities to assist with training of their Caribbean counterparts over the summer.

"It is done this way because we want the diagnostic skill to remain with the local agent so that on a long-term basis the institution can keep providing this service to other companies," said Apel.

Private and public organisations

The database of SMEs to be created for Finpyme will include both public and private companies.

The SMEs to be selected for the assessment programme must fit certain criteria, including annual sales greater than US$5 million, but Apel said the conditions may vary from country to country.

Exporters or potential exporters are preferred candidates; the company must demonstrate the ability to borrow and repay and have future expansion projects planned or other short-, medium- or long-term financing needs.

The diagnostic assessment will be done free of cost to the selected companies.

But, once the level and cost of the technical assistance have been determined, the candidates will be required to contribute financially to the programme.

To access the technical assistance, companies will pay 15 per cent of the cost, while the remaining 85 per cent will be borne by the donor countries.

sabrina.gordon@gleanerjm.com

How companies are selected