CDB – ECSRC will bring crowdfunding to Eastern Caribbean MSMEs

(MENAFN-Caribbean News Global)

BRIDGETOWN, Barbados – Building on the Caribbean Development Bank’s (CDB) focus on innovation and improving access to finance to drive growth and development, the regional financial institution has partnered with the Eastern Caribbean Securities Regulatory Commission (ECSRC) to develop a solution to improve the availability of financing for Micro, Small and Medium Enterprises (MSMEs) and establish equity-based crowdfunding in the Eastern Caribbean.

During the 18 months Increasing access to finance for micro, small and medium enterprises in Eastern Caribbean Monetary Union countries through the development of a draft crowdfunding framework Funded by the CBD and implemented by the ECSRC, a viable equity crowdfunding platform will be established in the member countries of the Eastern Caribbean Currency Union (ECCU) by 2023, supported by an appropriate regulatory framework.

Crowdfunding is an innovative technology-based activity that uses online platforms to economically and efficiently connect potential individuals, businesses and groups seeking to raise capital with potential funders. Equity crowdfunding, pursued under this project, allows potential investors to offer financing to companies in exchange for shares or equity participation in these companies.

According Lisa Harding vs Coordinator, Development of Micro, Small and Medium Enterprises, CDB “The bank is aware of the importance of MSMEs in the economic ecosystems of the region, and although the post-pandemic recovery has been slow in the sector, thanks to this agreement, greater guarantee will be mobilized to achieve an accelerated rebound. and even more successful, among Eastern Caribbean Businesses.

The project was conceptualized according to the needs expressed by the sector. Access to finance, especially in the wake of COVID-19, remains a major impediment to the growth of MSMEs in the Caribbean. There are approximately 20,000 MSMEs in the Eastern Caribbean representing 95% of businesses and contributing 50% of GDP and employment. Beyond the shutdown, many of the small businesses that survived are facing serious cash flow problems due to public health restrictions and their trade and business implications. This initiative aims to both improve the environment and support increased access to finance for MSMEs in the ECCU.

The first phase of the project includes capacity building sessions to be administered by the ECSRC starting in September 2022. Activities include cross-sector stakeholder engagement and outreach, training in crowdfunding and investment in actions for entrepreneurs and investors from a gender perspective. The project will also provide a crowdfunding policy framework developed by the ECSRC and a prototype for testing and fine-tuning. The project responds to the ongoing challenges faced by MSMEs due to the informality of the sector.

In the sector, small businesses that could qualify for financing from commercial banks often do not apply due to complex application procedures and high interest rates. MSMEs also face a lack of knowledge regarding information on the different funding schemes available, both at local and regional level. There is also limited capital outside of loans from commercial banks, as well as grants and funds available through development banks and international donor agencies.

Crowdfunding therefore offers an alternative financial instrument that offers new investment opportunities, especially in underdeveloped capital markets such as the ECCU.

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