By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The effectiveness of the government’s COVID-19 small business support has been called into question by a report that found just 54 percent of loan recipients have remained operational.

The Inter-American Development Bank (IDB), in a paper accompanying its latest $140m loan to The Bahamas, said initial findings on the Business Continuity Loan initiative revealed that only 298 out of 557 micro, small and medium-sized (MSME) funding recipients had remained in business.

“To support MSMEs during the COVID-19 crisis, a Business Continuity Programme (BCP) was executed by the Small Business Development Centre (SBDC), allocating $30m in loans to small businesses, ranging from $5,000 to $300,000 as well as grants for payroll assistance,” the IDB report said.

“The programme is targeted to formal MSMEs, with the requirement to retain at least 51 percent of employees and share their credit performance with the credit bureau and other financial institutions. Preliminary findings show that the continuity rate of beneficiary MSMEs is 54 percent (298 out of 557), with a retention rate of 56 percent employees on average.

“Of the continuing firms, 56 percent (168 out of 298) managed to retain 95 percent of employees on average. The remaining 44 percent of continuing beneficiaries retained 30 percent of their employees on average.” If correct, that suggests a number of businesses breached one of the conditions required to receive the Business Continuity Loan, which was that they retain at least 51 percent of their pre-pandemic staff.

The IDB report, revealing that 34 percent of firms that received loans were headed by women, conceded that its findings were preliminary and that more research was required. It based its numbers on data obtained from the SBDC as well as National Insurance Board (NIB) administrative records, defining a “continuing” business as one that was recorded by both organisations.

“Conclusions are still preliminary, and the initial monitoring exercise on the results of the BCP highlighted the need for a strengthened system with quick access to the control variables in the NIB and the Department of Inland Revenue (DIR),” the IDB report added.

“To broaden the scope of the beneficiaries and reduce informality, the SBDC also developed a programme to encourage and support business registration, which supported around 50 percent of their beneficiaries to formally register their businesses.

“However, BCP experienced difficulties regarding the monitoring and evaluation of its beneficiaries, as the administrative records for firms have different identification numbers in each relevant institution, such as the National Insurance Board (NIB) and the Inland Revenue.”

Nevertheless, the IDB report raises concerns that the Business Continuity Loan may not have been as effective as anticipated in sustaining some small firms at the height of last year’s COVID-19 lockdowns and associated restrictions. However, the fact that almost 300 companies remained in operation will be viewed as a success by the Government.

The Prime Minister has frequently talked up the benefits of the Business Continuity Loan, grants and other mechanisms used to provide private sector support during the crisis, and data revealed during the Budget debate indicates that the IDB report did not assess all loans and beneficiaries.

“More than 1,000 small businesses were approved for loan and grant financing as part of my government’s COVID-19 programme. This initiative, administered by the Access Accelerator Small Business Development Centre or SBDC, represented a collective $45m allocated and dispersed,” Dr Minnis said during last week’s Budget communication, unveiling numbers well in excess of those referred to by the IDB.

Kicking-off the Budget debate in the House of Assembly yesterday, he added that a further $35m has been allocated to support small business development in the Government’s Budget for the upcoming 2021-2022 fiscal year.

“When this administration came to office, the business license register reflected a total of 24,241 small and medium-sized businesses,” Dr Minnis said. “I am proud to say that the efforts made to support small businesses by this administration have been fruitful. The number of registered small and medium-sized businesses has grown by 58 percent since 2017, from 24,241 to 38,227 at the end of 2020.

“The SMEs that launched over the last four years have been characterised by a quality of innovation that is needed in the Bahamas economy. Take, for example, Island Honey, an apiary business started by two young Grand Bahamians, Kevin Wildgoose and Rakrisha Forbes.

“After participating in a 16-week programme held by the Ministry of Grand Bahama, in partnership with various international agencies, over $180,000 was provided in funding under soft lending terms for seven participants. Now, Island Honey is producing products such as natural flavoured honey, beeswax candles, lip balm and honey butter.”

Dr Minnis also returned to the Government’s Over-the-Hill initiative, which he first raised during the Budget communication, to justify his argument that the Government’s targeted tax breaks are increasing economic activity and will, eventually, result in increased revenue to the Public Treasury from the same.

“Many people may argue that the Government is giving away taxes, concessions, etc, and will find itself in trouble. I am a strong believer that a reduction in taxes stimulates growth, not the opposite,” the Prime Minister added.

“A perfect example, Mr Speaker. In the inner-city, 49 individuals entered a programme for financial assistance to commence their own business. The inner-city had taken advantage of the tax concessions that were offered to the tune of $2.5m up to November of last year. Forty-nine individuals had gotten $120,000 plus a few hundred as grants via the SBDC to assist them in their businesses.

“Those 49 individuals were able to employ 142 individuals. They created employment. In addition to that, they took advantage of $122,000 while the entire inner-city took advantage of only $2.5m in concessions, but those 49 individuals were able to generate $4.5m within our economy.”