A Roadmap for Action
W. Bernard Drum
January 17, 2013

 Briefly summarize the findings and recommendations from the recent study on access to finance for SMEs in
Suriname
 Obtain feedback on the study report from a small group of important stakeholders. This will help in preparing a final version of the report for wider dissemination
 Identify areas of consensus and establish priorities for action
 Identify concrete next steps

 Initiated in September 2012 by CUS in the Office of the
Vice President, with the support of IDB’s Compete
Caribbean Project
 Work done by consultant W. Bernard Drum with support from CUS staff
 Consisted of (i) desk research and (ii) ten days of field research in Suriname in October 2012
 Analysis and recommendations draw on Suriname specific findings and on international best practices

 Solid economic growth of 4.4 percent since 2000
 Fiscal surplus of 1 percent of GDP in 2011
 Debt at low level of 17.6 percent of GDP
 But economy highly dependent on commodity exports
 Economic diversification is a top priority
 Large companies dominate in mining, banking, agroprocessing and trade
 Private sector includes up to 20,000 SMEs, mainly in retail, trade, transportation and services
 More than 25 percent of workforce employed by Govt.

 GEF Global Competitiveness Report 2012-2013
 World Bank/IFC Doing Business Report 2013
 World Bank Enterprise Survey 2010
 Compete Caribbean Private Sector Assessment
Report 2012



GCI ranks Suriname 114 out of 144 countries
 Main constraints
 government bureaucracy
 corruption
 access to finance
Doing Business ranks Suriname 164 out of 185 countries
 Main areas of poor performance are




 protecting investors, enforcing contracts, starting a business, registering property getting credit
 resolving insolvency

 WB Enterprise Survey cites the top three constraints experienced by Suriname enterprises as
 Inadequately educated workforce



Customs and trade regulations
Access to finance
 Compete Caribbean PSAR cites the need to improve
Access to finance


Property rights
Transaction costs for trade
 Labor markets









Identify and target priority sectors for development promote clusters, linkages, innovation and new technologies
Strengthen the institutional framework for competitiveness including improved interagency coordination, public private dialogue and investment promotion
Implement business regulatory reform
Target MSMEs for development, strengthen MSME skills and business associations
Improve the corporate tax structure
Improve corporate governance
Improve access to finance, especially for SMEs (identified as a key constraint in all the reports)






Good performance on capital adequacy (12 per cent), return on assets (1.9 percent) and return on equity (27 percent)
Ongoing proactive measures by the Central Bank to improve supervision
Deposits are around 51 percent of GDP – near the regional average
Interest rate spreads around 5 percent for local currency – near or below the regional average
But credit to the private sector is only 23 percent of GDP, and Suriname ranks as one of the lowest in the region on this criterion

 Sector is highly concentrated with 80 percent of assets in top three banks
 State ownership predominates
 No formal credit information sharing mechanism
 No movable assets registry
 Clearing and settlement and POS/ATM infrastructure relatively well developed
 NBFS not significant as a source of finance for business with the exception of informal lending

 A number of internationally financed credit lines have been extended through the commercial banks over the last 30 years, in many cases with NOB as the apex institution
 Anecdotal evidence is that the performance of these credit lines, particularly the earlier ones, was mixed
 Recent announcements of trade guarantees for SMEs through DSB
 Plans are on the table for setting up a partial credit guarantee scheme






Central Bank reserve requirements – 25 percent for domestic currency and 40 percent for forex
Loans secured mainly by real estate – no movable assets registry or developed secured transactions regime
Lack of a formal credit information sharing or reporting mechanism
Historical focus of the commercial bank lending on larger borrowers
Inadequate financial reporting regulations and practices in
Suriname continued

 Lack of skills in SMEs in the preparation of business plans and loan proposals
 Weaknesses in the investor protection regime that impede the development of the capital markets
 Little use of leasing or factoring and the absence of an enabling environment to encourage the use of these instruments
 Little or no venture capital available

 Create a private credit bureau
 Independent ownership
 Comprehensive sharing of all credit information
 Wide coverage of credit sources
 Use internationally available expertise
 Consult fully with the public to ensure success
Continued:

 Strengthen the secured transactions regime and create a movable assets registry
 Review the legal framework governing property rights and collateral and make changes where necessary
 Design and implement a collateral registry




 to cover all movable pledged collateral in Suriname
Limit information to security interests
Online and accessible at all times
Secure
Subject to data entry by registrants

 Strengthen accounting and auditing rules and standards




Draft an Accountancy Act to include institutional and accounting reforms
Strengthen capacity of SUVA and improve training of accountants
Establish a Securities and Exchange Commission and continue to improve Central Bank supervision
Phase in new reporting requirements at a rate compatible with development of accounting capacity

 Support training of entrepreneurs in business planning and loan proposals
 Engage all stakeholders and complete a study of supply and demand
 Avoid generic training and focus on specific needs
 Delivery it in a market friendly way through private providers
 Ensure cost recovery through beneficiary contributions
 Apply rigorous monitoring to ensure desired targeting

 Support training of bankers in SME lending
 Assess supply and demand for such training and determine its scope
 Select an institution to deliver it
 Likely focus will be on SME lending skills such as:





Risk appraisal and management
Loan products and pricing
Collections
Information systems
Compensation and incentives for loan officers

 Develop additional sources of finance and financing instruments





To promote the stock market complete a review and update corporate governance laws, regulations and practices
Create a new code of good corporate governance

Improve financial disclosure


Enhance the roles and compositions of boards of directors
Increase CEO and director accountability
Enact a new capital markets law
Review and improve legislation impacting the creation of venture capital companies
Review the laws and tax rules governing leasing and factoring

 Complete a detailed cost benefit analysis of current proposals for a credit guarantee facility. If a decision is taken to go ahead:






Establish monitoring and evaluation criteria in advance and apply them rigorously
Building of capacity, particularly risk management skills, within lending institutions should be a major objective
Maximize involvement of private institutions in implementation
Central Bank should supervise the operation
Beneficiaries should be SMEs who should be required to provide collateral or other security
Participating financial institutions should be required to cover a share of the risks