Building Up Business: Microenterprise Demand for Credit in the Caribbean

This paper investigates the role of formal and informal savings and credit mechanisms in the financial lives of microentrepreneurs in the Caribbean. It explores the nature of demand for microfinance in four Caribbean countries: Belize, Guyana, Jamaica, and Suriname. It uses a quantitative market survey complemented by qualitative interviews with microentrepreneurs as well as formal and informal providers of financial services to low income segments. The paper reveals that preferences are clearly delineated between savings and credit, where microentrepreneurs typically finance their businesses through both formal and informal savings. Other findings include:

• Nearly all microentrepreneurs surveyed saved, and business needs were the most common reason for saving. Saving and borrowing were not mutually exclusive and strong savings culture may create less incentive for seeking loans for business investment;
• Respondents wanted low interest and fees, repayment schedules that match their cash flows, and some lenience for late payments;
• Many microentrepreneurs were cautious about business prospects since the global economic crisis of 2008. This increased reliance on savings and discouraged borrowing;
• Many respondents were unfamiliar with microcredit and its products;
• While microentrepreneurs’ preferences and perceptions are important factors in uptake, major supply-side constraints also hindered outreach.