By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange’s (BISX) planned microcap listing facility was yesterday praised as “long overdue”, a consultant to the sector telling Tribune Business it would force small businesses to “up their game” as well as improving access to capital.

Mark A Turnquest, of Mark A Turnquest Consulting and a BAIC Board member, told Tribune Business that small businesses and entrepreneurs looking to raise capital through BISX would have to become “more transparent and accountable”, due to the need to “prove themselves” to potential investors.

This, he added, would also force small Bahamian firms to transform themselves into “high performance organisations”, improving their productivity and efficiency, and adopting structures and processes - such as external audits - they have long neglected.

“It’s overdue,” Mr Turnquest told Tribune Business of BISX’s microcap plans. “It’s something that was supposed to have been done a long time ago, and I’m happy it’s come about now.

“You’ll be surprised at what it does. It will create businesses that become more accountable and responsible in their business activities, because they want to be more attractive to investors. They will be more transparent, and they will improve their business models to become high performance organisations through reducing inefficiencies.

“Every business that wants to list on BISX will wish to prove themselves to investors. Their productivity levels will go up, as they would have to up their game. It’s a good start.”

The planned BISX facility will provide diversification and alternative avenues for Bahamian small businesses and entrepreneurs to raise much-needed capital, through mechanisms such as equity offerings and bond/preference share issues.

If all goes to plan, it will ensure that the small business community - the main engine of economic growth - will no longer be as reliant on risk averse commercial banks, or family, friends and second mortgages, when it comes to obtaining crucial financing.

Praising BISX for its “innovative approach”, since it would also require small businesses to prove their viability in return, Mr Turnquest told Tribune Business the microcap lending facility should also be open to international - as well as Bahamian - investors.

This would deepen the pool of available capital, and BISX’s chief executive, Keith Davies, said yesterday that the exchange was looking to go this route long-term once the facility had become large enough.

“They should design it for local and international investors to invest in small companies in the Bahamas,” Mr Turnquest said. “Otherwise it would limit access to resources if they have only local investors.”

He added that the current Bahamian business environment was “not conducive” to the type of financing arrangements the proposed BISX expansion could facilitate.

There were many persons, Mr Turnquest said, who “want to invest”in Bahamian businesses where they had management involvement, but “we don’t promote that type of arrangement”.

“I have a lot of small business customers that need capital, but unfortunately the traditional ways - even with the Government’s venture capital fund - are not conducive,” he added.

Mr Turnquest told Tribune Business that a major effort needed to be made to lower the risk profile associated with lending to small businesses, especially given the depressed economy and high level of delinquent loans, which had reduced the lending appetite of commercial banks even further.

“Due to the high delinquency rate of mortgages and other debt instruments, the banks don’t see it as an attractive model to lend to high risk types of entrepreneurial activity,” he added.

“That’s how it is. What we need to is reduce the risk of investing in businesses in the Bahamas.”

Mr Turnquest suggested a “three-step strategy”, which involved reducing the costs involved in operating a Bahamian business, protecting them and then “securing the most important contributors to business in the Bahamas” - companies with over 25 employees.

Such companies, he added, had to be treasured and facilitated, given that they “understand the risks involved”, and have overcome the roadworks and recession. Ultimately, they needed to be encouraged to hire more persons.