Change in consumers’ preference, external factors affecting micro businesses- SBDF Director

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The steady influx of Chinese businesses and the change of consumers’ preference are some of the major challenges that micro businesses are facing, according to Small Business Development Finance Trust Inc (SBDF) Director Mohamed Ali.

Speaking at the Trust’s Annual General Meeting (AGM) on Wednesday, Ali outlined that SBDF granted a total of $279.3 million in loans last year, compared to $307.3 million in 2016. He noted that the micro-loan sector, which caters for vendors and small shops, was mostly impacted by this decline.

SBDF Director Mohamed Ali

“The very small micro-businesses continue to face major competition from Chinese influx and the shifting of consumer preferences to shop at large and smaller supermarkets for their needs. If you travel around, you will notice a lot more supermarkets are being opened up so the bottom house-style shop business is gradually being eroded. You will also notice that the vending business has declined tremendously,” Ali noted as he read the Chairman’s report.

According to the SBDF Director, the number of loans granted by the Trust has declined in 2017 by 80 when compared to the previous year, with females and single mothers, who are the dominant players in the micro-loan sector, being the ones mostly affected.

Of the total amount of loans granted last year, 45 per cent went to the agriculture sector, 30 per cent to retail trade/services, 10 per cent for consumers, and four per cent each for the fisheries, livestock, and manufacturing industries; while two per cent went to other miscellaneous sectors.

In the agriculture sector, a total of $338.8 million was invested, with 199 loans granted to mainly cash crop and rice farmers. This is compared to 225 loans granted in 2016.

“During the early part of 2017, many farmers stayed away from the first crop owing to previous crop losses in 2016, which was mostly due to diseases, drought and carry-over financial difficulties from 2015 when you had low paddy prices and late payments by millers to farmers…However, in the latter part of 2017, many of those farmers who stayed away, returned for the second crop with increased demands; hence, the average loan price was $1.6 million per farmers,” the SBDF Director stated.

Meanwhile, Ali pointed out that the commercial sector, which represents manufacturing and fisheries, and carries an average loan size of $206.8 million, has recorded relatively low growth over the years since the Trust is unable to cater for high-value loans given its limited capital base. However, the SBDF managed to grant 17 loans last year, two less than 2016.

Nevertheless, the SBDF Director went on to say that despite the overall decline in loans granted in 2017, the Trust managed to record a surplus in revenues last year.

“In terms of our financial performance, SBDF created a surplus of $28.4 million from revenues…, and was able to retain 37 per cent of these revenues verses 35 per cent in 2016. This means that although we may have generated less revenues in 2016, our retention factor in terms of a surplus was greater than what we did 2016 – bearing in mind this surplus is being reinvested in SBDF… for relending to you our clients,” Ali asserted.

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