Options for Financial and Technical Support for Youth Entrepreneurial Development. December 2014

Transcription

1 Options for Financial and Technical Support for Youth Entrepreneurial Development December 2014

2 THE REAL JAMAICA Approximately 25% of the labour force earns at the level of the national minimum wage. Approximately per cent of the labour force is one paycheck away from poverty 70.1% of the labour force has no certification Jamaica s informal market is estimated to be 36.4% of the formal economy Banking penetration 21.8% in 2008 Internet penetration 37.8% Mobile penetration % 2

3 THE REAL JAMAICA Minimum wage in Jamaica is J$5 600 per week for a 40 hour work week or J$140 per hour or US$51.14 per week or $1.28 per hour vs. US Federal Minimum wage of US$7.25 per hour A MSME Survey of 2008 in Jamaica found that many MSMEs do not employ any form of ICT in their business: Micro (56%); Small (40%) and Medium (28%) Domestic credit less than 35% of GDP Gini Coefficient billion minutes of talk time (94.6% of market is prepaid) 3

4 THE CHALLENGE Young entrepreneurs have great difficulty in gaining access to traditional sources of financing. Because they tend to have little experience and few assets, financial institutions tend to see them as too risky despite the modest amounts of investment that many require. And because they are starting from scratch, they are often too small to be of interest to most angel investors and venture capitalists. Governments therefore should support alternative mechanisms and institutions that provide young entrepreneurs with the capital they need to start and grow their businesses. G-20 Young Entrepreneur Summit 2010 Final Communiqué 4

5 ENTREPRENEURIAL FRAMEWORK Entrepreneurship culture - The culture of a country can affect entrepreneurs and entrepreneurship on many levels. Education and training - Review entrepreneurship specific education and assess how important this is for encouraging entrepreneurship Access to funding - Securing access to funding, both at the start-up phase and at later stages of enterprise development, is one of the biggest challenges for young entrepreneurs Regulation and taxation - The regulatory and taxation environment is one of the areas in which governments have a key role in providing an enabling environment for entrepreneurial growth Coordinated support - There are several different agencies involved in facilitating and supporting entrepreneurship in Jamaica. The level of support these agencies provide and the extent to which they coordinate with one another can make a crucial difference to the entrepreneurship environment. 5

6 MISSED OPPORTUNITIES Persons are socialized through the school system to seek a good paying job in the traditional professions and the entrepreneurial field is by and large left to those who have not done well academically. Teach entrepreneurship!! Identifying young persons who have the entrepreneurial traits and grooming them and also remove the stigma that is traditionally associated with being an entrepreneur. Entrepreneurship is not a hustle but a legitimate mechanism in the organization of business Obligations of parents and the state to adapt to the old adage : "If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime. Stop diagnosing almost every child as having ADHD or having bipolar disorder and dosing them with Ritalin to get them to conform Don't be an entrepreneurial type. Fit into this other system and try to become a student. That s the message being sent Fostering entrepreneurial traits even through the games children play. Teach them not to waste money. Failure to incorporate modern technology in our lives in a useful fashion e.g. Girl Guide Cookies now being sold online 6

7 VALUE STRUCTURE Lunch money or allowances teach kids the wrong habits. Allowances, by nature, are teaching kids to think about a job. An entrepreneur doesn't expect a regular pay cheque. Allowance is breeding kids at a young age to expect a regular pay cheque Let them earn it and teach them the art of negotiating the deal Fifty per cent of all the money that they earn or get gifted goes in their house account, 50 per cent goes in their toy account. Anything in their toy account they can spend on whatever they want. The 50 per cent that goes in their house account, every six months, goes to the bank Get kids to stand up in front of groups and talk, even if it is to just stand up in front of their friends and do plays and make speeches. Those are entrepreneurial traits that you want to be nurturing. Teach the youth. 7

8 VALUE STRUCTURE 8

9 SOLUTIONS Partnerships between commercial lenders or investors and non-profit organisations can overcome information and profit disincentives, and offer effective ways to meet expected returns on lending to clients perceived as risky, for example young entrepreneurs. Guarantee mechanisms can be critical to enabling partnerships between commercial lenders or investors and non-profit organisations that increase access to capital to underserved entrepreneurs. In order to expand access to finance for hard-to-reach entrepreneurs through lending or investing partnerships, non-financial support should be formally recognised in the same way that collateral and other guarantee requirements are. Recognising non-financial support as an alternative to traditional forms of collateral and guarantee for youth enterprise lending depends on the delivery of quality services. Depending whether the services and/or the provider is registered, agreed measures of quality control would systematise recognition by financial institutions. Need for those organisations involved in entrepreneurship finance to be proactive in helping overcome the information deficit of banks and other financers and demonstrate the cost effectiveness of non-financial services in reducing the risk of supporting young and other hardto-serve people into business. 9

10 SOLUTIONS The cry by entrepreneurs everywhere is about access to finance, access to markets and establishment of business networks. They are often ignored because they're harder to help. Indeed you have financial institutions in Jamaica which tell you that as a matter of policy they do not lend or treat in any way with start-ups. The great news is we already know what works. We don't need to invent solutions because we have them -- cash flow loans based in income rather than assets, loans that use secure contracts rather than collateral We also have the Secured Interest in Personal Property legislation which allows for nontraditional forms of collateral The private sector namely commercial banks should be flexible and responsive, with a willingness to recognise the case for non-financial support as assurance against increasing the viability of capital to young entrepreneurs and to scale up successful partnership lending models. This might be through adjusted guarantee requirements and / or credit scoring. Micro-loans and Micro insurance (M Banking) Crowdfunding FIRM Expo 10

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