By ANNELIA NIXON

Tribune Business Reporter

anixon@tribunemedia.net 

Just 10-15 percent of applicants for Bahamas Development Bank (BDB) financing succeed in obtaining funding for their ventures, a senior official disclosed yesterday.

Sumayyah Cargill, the BDB’s acting manager director, told a renewable energy conference organised by the Bahamas Chamber of Commerce and Employers Confederation (BCCEC): “So that means out of every ten applications, maybe one or two is something that we’ll actually step in and fund.

“I think the biggest issue for small businesses is maybe cash flow isn’t where it needs to be. Collateral isn’t there. The documentation isn’t there. I don’t work in credit... They’re going to ask you things like, ‘Do you have a separate bank account?’... If your business is already struggling, it’s not going to behoove you to come to the bank to get more money.

“If you haven’t been keeping records, you’re probably not getting it funded. If you don’t have the collateral... Fortunately, like I said, we can do 100 percent on solar which means you don’t have to come up with collateral, but your project needs to be structured in a way that we can collateralise the asset.,” she added.

“And that’s actually been our biggest issue with solar specifically, because the way solar systems are placed, it doesn’t allow us to fully collateralise the asset. And so that’s something that we continue to be working on.”

Ms Cargill added that financing is hard to come by and, although solar energy has become more accessible and costs have decreased, it is still a significant investment. Ms Cargill said the BDB does not see many bankable projects.

“When you’re talking about a $15,000, $16,000, $20,000, $30,000, $50,000 investment, this is where access to real capital comes in, and the reality i, capital is not as accessible as we need it to be,” she added. “When we talk about equity investment, for example, and things like community level, micro grids, etc, investors often need to see something like a 10 to 14 percent return.

“And then we also, in the industry that I’m in, we see a limited number of bankable projects. So people talk about, ‘we can do this, we can do that.’ But when it comes to actually coming to the bank with a project that we can invest in, we don’t actually see a lot of those.

“And then MSMEs (micro, small and medium-sized businesses) frequently don’t have the collateral nor the credit history for us to make an energy investment for us to say, ‘Okay, we’re going to lend you what you need in order to invest in solar’.”

Ms Cargill said the BDB has a memorandum of understanding (MoU) with the Small Business Development Centre (SBDC). She added that the SBDC had a grant for energy auditing and is a good place for renewable energy proponents to start before approaching a funder.

“SBDC also provides a collateral guarantee, and they also make sure, to some degree, that you have a really strong business plan before you come to a funder. So we have an MoU with SBDC,” Ms Cargill said, “and I think we’re just looking to assign it right now, which means that if you go through SBDC, or you come to BDB and you need a guarantee, we basically work in sync with one another. They’re the preparer, we’re the funder...”

The BDB is “moving from a transitional lender to a development architect”, designing frameworks and joining policy and capital. It is building “financial architecture for blended finance”, combining grants, concessional loans, guarantee and equity.

“Through the joint SDG (sustainable development goals) fund, we piloted a blended financing product that combines repayable finance with grant elements,” Ms Cargill said. “This ability to blend finance is crucial if we want to unlock financial leverage. We are existing in a time now when brands are drying up. I think we’re all aware of what’s happening abroad.

“Even though we’re still talking about climate resilience, etc, we’re seeing some major donors back away from this space. But through blending, we can actually create concessional financing that goes further. So with joint SDG, we turned a $150,000 grant into $1.5m in financing, which is really good for a pilot.

“We’re at stage two of our green climate accreditation process, which is going to allow direct access to the largest fund in the world. GCF provides grants, loans, equity up to $250m so that is going to be tremendous,” she added.

“And so we have to commend the Government for supporting BDB through this process. We’re also redesigning our green lending products. As I mentioned, we already lend up 100 percent for electric vehicles and solar systems, and we’re building our capacity for PPP (public-private partnership) and SPV (special purpose vehicle) structures, for major infrastructure, housing, transport, seaports. We really want to finance economic transformation, and energy is a key part of that.

“We’re developing investment fund structures that will allow citizens and institutions to own shares in national development. And so that’s what I mean when I say we’re moving from lender to architect. We aren’t waiting for opportunities. We see these national needs, and we’re going to step in to fill them with finance and investment.”