The  Role  of  SMEs  in  the  Caribbean  
by Pamela Coke-Hamilton*  
 

There  is  no  denying  the  important  role  that  the  private  sector  plays  in  the  Caribbean  
region.   According   to   statistics   from   the   CARICOM   Secretariat,   the   regional   private  
sector  creates  at  least  70%  of  jobs.  Apart  from  large  mineral  companies  (e.g.  bauxite  
and   petrochemicals),   the   majority   of   Caribbean   firms   can   be   considered   SMEs   and  
they   operate   in   a   variety   of   sectors   including   the   agricultural,   manufacturing,  
tourism  and  services  sectors.  There  is  no  fixed  definition  of  an  SME  across  the  region  
even  though  efforts  are  underway  to  develop  a  Regional  Micro,  Small  and  Medium  
Enterprise   Policy   that   will   standardize   such   definitions.   For   example,   in   Jamaica   a  
small   enterprise   is   defined   as   one   with   4-­‐‑10   employees   and   with   assets   of   US$  
100,000   or   less   whereas   in   Trinidad   and   Tobago,   a   small   enterprise   must   have  
between  6-­‐‑25  workers  with  assets  of  US$40,000  -­‐‑  $240,000.1    
According  to  the  CARICOM  Secretariat,  SMEs  contribute  about  40%  to  the  Region’s  
GDP.   Given   their   importance,   the   Revised   Treaty   of   Chaguaramas   establishing   the  
Caribbean   Community   including   the   CARICOM   Single   Market   and   Economy   has  
deliberately   focused   on   establishing   an   environment   capable   of   supporting   the  
development  and  viability  of  SMEs.  For  the  purpose  of  this  article,  we  will  examine  
the   role   that   SMEs   play   in   the   economic,   social   and   environmental   development   of  
the  Caribbean.  
 
Economic  Role  
While   SMEs   are   the   backbone   of   Caribbean   economies   and   a   notable   source   of  
employment,   inadequate   statistics   on   their   contribution   to   economic   development  
limits  the  degree  to  which  one  can  effectively  assess  the  economic  role  they  play.  A  
similar   situation   exists   when   attempting   to   quantify   export   earnings   generated   by  
SMEs.  However  at  the  wider  regional  level;  that  is  at  the  level  of  Latin  America  and  
the  Caribbean,  SMEs  constitute  over  95%  of  companies  in  the  region,  but  only  13%  of  
these  export.  In  addition,  the  Caribbean  SMEs  that  do  export  tend  to  export  a  limited  
number  of  products  to  a  small  number  of  markets2.    
 
Caribbean   Export   has   been   working   to   enhance   regional   exports   through   a   number  
of   initiatives   such   as   market   study   tours,   the   CARIFORUM-­‐‑EU   Business   Forum,  
sector   specific   trade   missions,   the   Direct   Assistance   Grants   Scheme   and   Export  

                                                                                                                         
1  Hendrickson,  2009.  SME  Competitiveness  in  the  Caribbean:  Challenges  and  Opportunities-­‐  ECLAC  
2  IDB  INTAL  publication,  #37,  Vol  17,  July-­‐December  2013  

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Marketing  training  among  others.  One  initiative  worth  highlighting  is  a  collaborative  
effort   between   the   Jamaica   Promotions   Corporation   (JAMPRO),   Caribbean   Export,  
and  other  stakeholders,  to  assist  companies  which  are  already  exporting  or  which  are  
export-­‐‑ready   to   increase   their   export   sales   through   a   number   of   capacity   building  
initiatives.   This   effort   dubbed   the   Export   Max   Development   pilot   initiative,   has  
assisted   small   exporters   in   generating   roughly   JMD   $1.4   billion,   among   15   local  
producers.    
 
The   SME   sector   is   also   becoming   an   important   source   of   tax   generation,   given   its  
significant  contribution  to  creating  employment  in  the  region.  The  challenge  remains  
the   high   informality   of   SMEs   in   the   Caribbean   with   the   World   Bank   and   IDB  
estimating   this   to   be   about   40%.   Other   ways   in   which   SMEs   contribute   to   the  
Caribbean   economy   include   workforce   skills   upgrading   and   innovation   and  
technology  changes.  
   
Social  Role  
Beyond  generating  economic  benefits,  regional  SMEs  also  provide  solutions  to  social  
and  development  problems  such  as  food  security.  SMEs  in  the  agricultural  and  agro-­‐‑
processing  sectors,  from  honey  production  in  Guyana,  shrimp  farming  in  Belize  and  
coffee   production   in   Jamaica,   have   traditionally   played   a   vital   role   by   converting  
indigenous   raw   materials   into   food   and   beverage   products.   However,   this   is   a  
continuous   challenge   for   CARICOM   member   states   which   generally   suffer   from   a  
high   food   import   bill.   One   initiative   embarked   on   by   the   Trinidad   and   Tobago  
government   entitled   the   Food   Security   Facility   could   open   up   additional  
opportunities   for   firms   interested   in   meeting   the   region’s   food   needs.   Through   this  
initiative,  farmers  in  Trinidad  will  have  access  to  land  in  Guyana  to  produce  a  range  
of  food  crops.    
 
SMEs  have  also  provided  services  in  health  care  and  education  which  have  helped  to  
ease  the  burden  of  the  state  in  meeting  these  needs.  Such  involvement  of  SMEs  in  the  
provision   of   what   can   be   considered   public   goods   is   expected   to   continue   in   the  
future   as   companies   become   more   aware   of   their   corporate   social   responsibility.   In  
2013,  the  Jamaican  National  Building  Society  Foundation  partnered  with  the  United  
States  Agency  for  International  Development  (USAID)  to  develop  and  implement  a  
three   year   programme   called   the   Social   Enterprise   Boost   Initiative   (SEBI)   to  
strengthen   social   businesses   throughout   the   country.   Moreover,   some   of   Caribbean  
Export’s   clients   have   already   incorporated   a   social   mandate   into   their   business  
models.   For   example,   one   Grenadian   firm   in   the   health   and   wellness   sector   has   set  
up   its   production   facilities   in   Haiti   after   training   rural   women   to   manufacture  
natural  oils  which  are  then  purchased  as  business  inputs.  As  the  region  continues  to  

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experience   economic   difficulties,   there   will   be   a   growing   need   for   SMEs   to   impact  
social  development.    
 
Entrepreneurship   has   also   served   as   a   social   safety   net   for   women   and   youth.  
According   to   studies   conducted   by   the   Global   Entrepreneurship   Monitor,  
particularly   in   lesser-­‐‑developed   countries   women   are   more   prone   to   start   or  
maintain  businesses  out  of  ‘necessity.’  Caribbean  Export  has  witnessed  an  increase  in  
the  number  of  female  participants  across  several  of  its  programmes  delivered  under  
the  10th  European  Development  Fund  (EDF).  For  example,  776  females  participated  
in   Agency   initiatives   in   2012.   However   this   increased   by   5%   to   817   in   2013.   It   is  
expected  that  SMEs  will  continue  to  offer  women  and  youth  the  opportunity  to  earn  
a   livelihood   and   empower   them   to   be   active   participants   in   their   respective  
economies.  
 
Environmental  Role  
Caribbean   SMEs   are   also   beginning   to   play   an   increasingly   important   role   in  
contributing   to   the   growth   of   a   green   economy   in   the   region.   With   rising   oil   prices  
globally,  small  island  developing  states  are  in  search  of  alternative  energy  sources.  In  
some  countries  such  as  Barbados,  SMEs  have  been  making  a  difference  in  reducing  
the   dependence   on   imported   fossil   fuels.   This   is   critical   given   that   the   country  
produces  a  mere  15  percent  of  the  total  energy  required  domestically.3  As  a  result  of  
SMEs  which  provide  solar  water  heating  services,  in  2002  Barbados,  was  able  to  save  
15,000  metric  tons  of  carbon  emission  and  achieved  US$100  million  in  energy  savings  
from  the  35,000  solar  hot  water  systems  that  had  been  installed  at  the  time.4  
 
SMEs  have  also  launched  into  other  types  of  business  activities  which  further  reduce  
the  carbon  foot  print  in  the  region.  For  example,  one  Barbadian  SME  is  now  offering  
energy   efficient   LED   lighting   as   an   alternative   to   the   traditional   incandescent   and  
fluorescent   lamps.   Moreover,   in   2013,   Caribbean   Export   facilitated   the   introduction  
of   the   first   electric   vehicles   in   the   island   and   the   creation   of   the   first   solar   powered  
electric  vehicle  charging  station.  SMEs  in  other  Caribbean  countries  like  Antigua  and  
Barbuda  and  Jamaica  are  also  playing  a  similar  role  as  evidenced  by  the  increase  in  
hotels   and   guest   houses   that   have   installed   solar   panels   thereby   reducing   their  
dependence   on   electricity.   Caribbean   Export’s   support   to   firms   in   this   regard   has  
been   mainly   through   the   provision   of   funding   through   the   Agency’s   Direct  
Assistance   Grant   Scheme.   The   continued   investment   into   companies   in   the  
renewable   energy   sector   has   the   potential   to   assist   the   region   in   overcoming   one   of  
the  greatest  impediments  to  private  sector  competitiveness;  high  energy  costs.    
 
                                                                                                                         
3  http://blogs.iadb.org/caribbean-­‐dev-­‐trends/2013/11/22/barbados-­‐energy-­‐market/  
4  http://www.unep.org/greeneconomy/SuccessStories/SolarEnergyinBarbados/tabid/29891/Default.aspx  

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It   is   evident   that   Caribbean   SMEs   are   supporting   the   region’s   economies   and  
societies   in   a   plethora   of   ways;   however,   there   are   still   some   challenges   or   barriers  
that  must  be  overcome  if  they  are  to  continue  to  play  such  an  integral  role.  Some  of  
these  include  difficulty  in  accessing  credit,  lack  of  business  and  market  intelligence,  
inadequate   transportation   and   bureaucratic   procedures.   Regional   agencies   and  
governments   must   therefore   continuously   seek   ways   to   improve   the   enabling  
environment   for   SMEs.   Caribbean   Export   is   contributing   in   this   regard   through  
facilitating   SME   access   to   finance,   research   and   market   intelligence   services,  
advocacy  efforts  on  key  issues  affecting  the  private  sector  and  the  provision  of  export  
development  and  promotion  services.    
 

*   Pamela  Coke-­‐‑Hamilton   is   the   Executive   Director   of   Caribbean   Export.   Caribbean  

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