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(CNS): The law governing the Cayman Islands Development Bank appears to be a barrier to small businesses accessing low-cost government-guaranteed loans to help them weather the COVID-19 economic challenges. Some CI$5 million has been set aside to fund a low-interest loan programme through the government-owned bank but uptake has been very low. So far, only 48 businesses have applied for the loans.
Part of a relief package announced by Commerce Minister Joey Hew in April, the low cost loans, with an interest rate of around 1%, have attracted only a fraction of small businesses, whereas over 500 have applied for the government grants offered as part of the same package.
The Development Bank, which is entirely owned by the government, was established to offer loans to local micro and small businesses. The current programme will enable local business owners to access up to $50,000 in loans, rated at 1% over five years, with no payments for the first six months.
But only businesses that are 100% Cayman-owned may apply because of the CIDB law, which prevents Caymanian owners with a foreign partner from applying.
Speaking at the COVID-19 briefing on Friday, Premier Alden McLaughlin admitted that this legislation was a major stumbling block for local businesses to access this programme, and more than 60% of the allocated funds are still available.
McLaughlin said the loan application was the most “problematic part of the whole exercise”, as he referred to the full package of support being given to the small business community. “We are not in direct control of the process,” he said.
The premier explained that the bank operated under its own management and board of directors. While government created the loan programme and provided the money, the CIDB law states that any loans the bank gives to local businesses must be 100% Caymanian-owned.
“That eliminates a significant number of entities that would be operating here that might be Caymanain controlled but still have some degree of foreign ownership,” the premier said, explaining one of the factors that appears to be stifling applications.
“We are having discussions about this because this is quite worrying… This is one truly under-performing bit of the package that government is trying to roll out,” McLaughlin added, as he stressed the need to address the issue.
The premier did not say if government was prepared to change the law to enable local business owners with foreign partners to access the cash.
Government set aside over CI$14 million in the first part of its stimulus package that was designed to prop up the small business community. The package is being administered by the Cayman Islands Small Business Development Centre within the commerce ministry.
As well as the $5 million low cost loan programme, it includes $9 million in grants for tourism businesses that can reinvent themselves to operate in the domestic economy.
A support network has also been established to offer technical assistance and training progammes. So far almost 600 businesses have applied for some form of support from the centre and government has settled around 77% of the applications.
Government has paid out just three quarters of a million dollars so far in grants. Some 300 people have taken part in the training and support services on offer.
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