Presentation on theme: "Small Business Guarantee & Finance Corporation EXECUTIVE RETREAT 2008."— Presentation transcript:
Small Business Guarantee & Finance Corporation EXECUTIVE RETREAT 2008
Small Business Guarantee & Finance Corporation Background Information The Corporation was established pursuant to State Law 3L-86-95, as amended or better known as “Business Development Act of 1994”, which create a CORPORATE BODY to be know as “Small Business Guarantee & Finance Corporation, which shall provide, promote, and widen in both scope and services reach various alternative modes of financing for cottage, small and medium-size enterprises including but not limited to direct and indirect project lending, venture capital, financial leasing, secondary mortgages and/or rediscounting of loan papers to small business. Mission Its statutory mandate is to help the growth of small and medium-size enterprises by facilitating financing for the establishment of new ventures and/or expansion of existing businesses designed to provide for the needs of economic development in the State of Pohnpei, Federated States of Micronesia. Products and Services SBGFC has a very limited offering of its services to the general public. It essentially offers only two services. These services are loan related and comprise of term loan and loan guarantee of term loans offered by local financial institutions, and commission on the credit life insurance for the direct loans provided to its clients. The fees received for the administration of those funds reportedly are less than the costs associated in administrating the loan funds.
Activities a. Loan Guarantee The main aim is to provide loan guarantee to qualify businesses to help spur their growth and assure their access to financing. The program was eased during mid part of 2005 due to compelling legal and technical issues surrounding the guarantee agreement. Revival of the program is in the pipeline. Micro Financing The purpose of this program is to facilitate the statutory intend for which to provide loan terms to cottage, small and medium enterprises to assist stimulate the economic growth of Pohnpei State. Project Supervision and Monitoring The main purpose of this activity is to ensure effective utilization of the funds that are used for the purpose for which they are given and that there is no diversion or no major departure from the plan as approved. To identify and/or anticipate critical areas in the functioning of the project and to diagnose symptoms of any weakness, to ensure that the loan is repaid within the originally stipulated period, and finally to undertake the evaluation of the borrower financial position so that probable solution to emerging problems are provided accordingly.
Pohnpei SME Defined The definition of small and medium enterprises has evolved over the years, but always on the basis of either asset size or the number of employees. Small and medium enterprise is define as any business activity or enterprises engaged in industry, agribusiness, tourism, trade, and/or industrial and business services, whether single proprietorship, cooperative, partnership, or corporation, whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipments are situated must have a value falling under the following categories. CottageLess than $5, Small$ $25, Medium$25,001 to $250,000
Accomplishment As of May 2008, there were 162 business establishments supported and financed by SBGFC through its loan guarantee and micro financing program. Of these 112 were cottage, 33 were in small and 19 in medium size category. These balance consisted of cottage, small, and medium enterprises, which are generically classified under small business category. While large firms account for bulks of the revenues, the reverse is true for employment creation. SME’ generated more than 100 jobs by all types of business establishments funded through the above stated programs.
Loan Approved to Date Loan Guarantee & Micro Financing Loans
Distribution of Investment by Sector
Sectoral Lending Operation -Agriculture The development of Agriculture is a priority in Pohnpei State. Encouragement is being given at all levels were people are encouraged to participate in the development of agriculture projects for domestic as well as export were possible. Lending in this sector represents five percent (5%) of the total number of loan and accounted for six percent (6%) of the total loan portfolio. Type of agriculture project finance through loan guarantee and micro financing include piggery, vegetable farming, and export. The common problem that contributes to the slow in the development of this sector includes marketing and technical support. –Commercial Loan within this sector amount to 36% of all loan by dollar amount and 47% by number. Loan within this sector have assisted with the establishments of taxi service, Laundromat, retail store, video rental, and fitness center. These loans average about $7, Common problem that the sector has encountered is the poor management, marketing, lack of appropriate infrastructure, and traditional and cultural implications.
Sectoral Lending Operation –Fisheries Loan for project within the fisheries sector account for 35% of the total loan approved. About $370, of loans have been approved for projects in the fisheries sector. By dollar amount loans within the sector account for 23% and 35% of all loan approved. These fishing projects comprise mostly small scale ranging from $5, to $10, A few problems have emerged that have affected the industry. These were related to unreliable weather, marketing, management, and technical support. –Manufacture For manufacture sector a total of 11 loans were approved within this sector. This amount to 7% of all loan approved. By dollar amount loans within this sector account for 8% of the total loan portfolio.
Sectoral Lending Operation –Processing Three loans were approved for this sector account for 6% of the total loan portfolio and 3% of the total number of loan. The common problem experienced by the industry has to do with marketing, quality control and management. –Real Estate Three projects were approved within this sector account for 2% of all loan approved and 3% of the total loan portfolio The common problem faced by the industry has to do with the fluctuation of demand and marketing.
Constraints Faced by SMEs Constraints that Small and Medium Enterprises are facing Just like any other developing countries, Pohnpei SMEs are confronted with the following problems: weak access to financing, limited market information, low level of technology, lack of Research and Development (R & D) program, and lack of human resources development program. The problem at present is how to cope up with the regional competition. Many SMEs are apprehensive about the ill-effect of trade and investment liberalization. In an economic environment where there are freer flow of trade and investment they fear that only the large enterprises are bound to benefit. In an open market, only the big companies are expected to cash in since they are the ones with access to market information and the technical and managerial know-how needed to adapt to drastically changing economic conditions. One of the main challenges facing the Corporation at present time is to reduce its dependence on the State assistance as the compact funds declines and to find sustainable alternative source of financing. Likewise SBGFC will need to stop relying on the government subsidy and should begin tapping into international capital market or depend solely on its own capital resources.
Constraints & Challenges There are good prospects for development in several sectors, specifically fisheries, agriculture, and tourism. The government overall objective is the achievement of significant result in these sectors over the next few years requires not only well target investment in these areas but also the building of a supportive infrastructure. This need for the government to assist SBGFC is spurring economic activities in the private sector including improvement of supportive infrastructure has been the main desire of SBGFC. If these policies initiatives can come to fruition (some of which already have) Pohnpei State can have a more self-reliant economy and there is a better change for sustainable economic development within the State. Since SBGFC operates within such an environment, its success will be contingent on the changes of the local economy. That means if the economy deteriorates, SBGFC will be adversely impacted. The same is true with a reverse situation.