The sharing of its plans for a St. Maarten Investment Bank (SMIB) by General Pension Fund APS (see Wednesday paper) sparked quite some public interest. Lack of readily available capital for business ventures is a longstanding complaint on the island.
Of course, commercial banks and other lending institutions provide loans, but their cost and requirements, including the necessary collateral, often prove tough to comply with especially by budding entrepreneurs. There are a few more options nowadays, including microfinancing and crowdfunding, but these remain limited in scope and number.
People should not make the mistake either of seeing a possible SMIB as alternative to regular local banks. While part of the attached conditions for borrowing money may be less strict, such an entity would still need to safeguard future repayment as best possible to survive in the long run.
The difference lies in the fact that an investment bank’s main interest is not turning a profit but rather promoting sustainable development of the territory where it operates. In that sense, learning from the experience of others instead of trying to reinvent the wheel makes all the sense in the world.
An intriguing analogy was drawn between the closure of the Lago oil refinery that led to establishing the Aruban Investment Bank and the passage of Hurricane Irma on the Dutch side. In both cases the economic impact was severe, as many inhabitants lost their jobs and/or income, with all social consequences.
One big advantage is the idea of “syndicating” to spread the risk. Although this can conceivably be done independently by so-called consortiums of private-sector financiers like banks and insurance firms, having an investment bank to stimulate and coordinate such processes could prove a major plus.
However, it’s good to keep in mind that proper guidance may be just as or even more important than money. In fact, Curaçao’s development financing corporation Korpodeko calls that the “critical ingredient” for the high success rate it can boast among clients.
