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.
•
Cottage
Less than $5,000.00
•
Small
$5001 - $25,000.00
•
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
Loan Guaranteed to Date
S ector
Agriculture
Commercial
Construction
Fisheries
Manufacture
Real Estate
Total
No
4
26
3
39
1
2
Amount
54,817.75
294,169.62
349,231.66
310,316.55
50,000.00
38,039.54
75
1,096,575.12
No
Amount
Micro Financing
S ector
Agriculture
Commercial
Fishereis
Manufacture
Processing
Real Estate
Total
4
51
18
10
3
1
36,128.28
307,641.39
60,640.37
73,701.59
31,382.00
11,708.00
87
521,201.63
Distribution of Investment by Sector
800000
700000
Agriculture
Commercial
Construcvtion
Manufacture
Fisheries
Manufacture
Processing
Real Estate
600000
500000
400000
300000
200000
100000
0
No
Amount
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 $7,815.72
Common problem that the sector has encountered is the poor management,
marketing, lack of appropriate infrastructure, and traditional and cultural
implications.
Sectoral Lending Operation
–
•
Loan for project within the fisheries sector account for 35% of the
total loan approved. About $370,956.92 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
$5,000.00 to $10,000.00. A few problems have emerged that
have affected the industry. These were related to unreliable
weather, marketing, management, and technical support.
•
–
•
Fisheries
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
–
•
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.
–
•
•
Processing
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.
Distribution of Investment by Municipality
200000
180000
160000
Kitti
Kolonia
Madolenihmw
Nett
Sokkehs
Sapwuafik
U
140000
120000
100000
80000
60000
40000
20000
0
No
Amount