Pauline Clarke and her husband Junior, operators of a welding business in Kingston, had a contract to fill but no funds to acquire the raw material to do the job.

On the verge of losing critical income for the struggling business, they turned to the Jamaica Wood Products and Furniture Association (JaWFA).

Soon, with the backing of the trade association, the Clarkes were able to access a $500,000 loan to deliver the school desks and chairs that the Ministry of Education had commissioned.

The formation of industry alliances is opening the door to local manufacturers who, on their own, are usually unable to access funding.

The Clarkes are members of JaWFA, which itself is a sub-grouping of MSME Alliance, a two-year-old operation overseen by Dr Rosalea Hamilton.

pooling of associations

MSME Alliance, a pooling of associations within the small and micro-business sector attached to the Technology Innovation Centre at the University of Technology (UTech), says some $26 million of business was secured for several JaFWA members who were in a similar position as the Clarkes.

Pauline Clarke said the family business had run short of money for raw material as they had received no jobs for a period of eight months preceding May 2009.

"First, we needed board, iron, as well as paint and nuts. For my contract, I needed $500,000 to buy raw material. We did not have it," she said.

Hamilton, who is also professor of entrepreneurship at the UTech, said in October that bridge financing for members was negotiated on the basis of persuading the Ministry of Education to assign member contracts to the micro-financing institutions to mitigate the risk of repayment of the loan.

The Ministry of Education contracts to individuals were each valued between $800,000 and a little more than $1 million.

The approach prevented many members from going out of business.

JaWFA further assisted the process through the provision of technical support to members who had difficulty completing the contract.

According to Hamilton, the repayment for the $26 million in loans, at one per cent weekly, is at 100 per cent compliance.

The deal with the Ministry of Education was secured when Hamilton and members of JaWFA met with procurement officials in the Ministry of Education and with the finance ministry.

It was agreed that the contracts would be the collateral for loans, and so were awarded to micro-financing institutions instead of the micro-businesses.

"The micro-financiers came to speak to us," said Clarke.

"They had a class for us and for those who were just coming into business."

Those sessions included explana-tions about the loan, the interest rate, and the system to be used in its repayment.

Clarke received the Ministry of Education contract in June 2009 with a three-month timeline to deliver.

Delivery was done in August and payment made in one week.

"I was able to pay back the loan with $60,000 in interest payments. That was excellent," she said.

"This works for me. Once you know where your money is coming from to pay back, you can borrow on good terms."

Ann Marie Baker of Swallowfield in Kingston whose construction and furniture-manufacturing company is only one year old, was introduced to JaFWA by other members. After receiving the Ministry of Education contract, she also secured a loan for $300,000 to complete chairs and desks valued at $800,000.

loan processing

"I was able to buy the material all at once as the loan took only three days to process," said Baker.

"It saved me a lot in terms of transportation. It took me only one month to deliver because of the loan. I repaid it in two weeks as the ministry sent the payment to the micro-lending company, and I got the remainder."

With JaFWA, Baker has also done computer courses and training in how to set up a business. But, the woman who describes herself as a community leader in Swallowfield, said her experience in project management came while she was president of the community-development centre for three years.

"We had to deal with different agencies, put proposals together to get work done in our community and also look for new projects," Baker told Sunday Business.

She chose construction and furniture manufacturing, she said, as this was where the labour was available.

"I did a feasibility check to see where the demand and skills were. I deal with professional persons who you do not have to be over all the time in order to get them doing their job. As long as you have the money, you will get things moving."

Hamilton explains that in 2007, no one would lend to furniture producers due to the high rate of default in an industry that was in rapid decline.

The school-furniture contracts provide life-line income for many furniture producers, and the bridge-financing initiative was one of the strategies to manage and mitigate the risks involved in lending to MSMEs.

avia.collinder@gleanerjm.com