The Caribbean has its commonalities, but it’s also a region of widening disparities where the wealthiest islands consistently outperform their more disadvantaged neighbours. Hoping to address these gaps and ensure that every island plays to its economic strengths is the CARICOM Development Fund (CDF) which has been active in Saint Lucia since its inception, supporting projects in agriculture, trade and tourism.
SME support
The CDF’s mandate is to provide technical and financial support to disadvantaged member countries (as defined by the International Monetary Fund). “We support infrastructure development, in terms of expanding production and trade, and we support enterprise development and business competitiveness,” says CDF CEO Rodinald Soomer. “We are open to supporting SMEs in all sectors: agriculture, tourism, manufacturing and the cultural industries; that is a core part of our mandate.”
The Fund was established in 2008 and is currently in its second round of disbursements, which are channelled through Country Assistance Programmes. Disadvantaged member states must apply for funding and their proposals are subject to a rigorous appraisal before being evaluated by the CDF Board. From submitting the paperwork to obtaining Board approval can take as little as three months as the Fund aims to be as nimble and effective as possible.
At work in Saint Lucia
As one of CDF’s disadvantaged member states, Saint Lucia has benefitted from several grants and loans over the years, receiving over US$6 million since 2011. The first round of funding was funnelled into four key areas that aligned with the CDF’s mandate of enhancing and supporting the private sector.
Aiming to provide direct assistance to struggling small businesses, the CDF provided a concessional loan of US$3.72 million to the Saint Lucia Development Bank (SLDB) in 2017. This resulted in the SLDB being able to approve US$4.5 million in sub-loans to the private sector. CDF funding also helped create the Trade Export Promotion Agency (TEPA), which received US$1 million in 2015. It also supported the Youth Entrepreneurship Agri-Entrepreneurship Project (YAEP) with a grant of US$1.37 million for training, tools, land preparation and infrastructure development. By the end of 2017, the YAEP had trained 75 young agri-entrepreneurs.
Soomer says the first cycle of funds saw very positive outcomes in Saint Lucia: “These projects have gone very well for Saint Lucia. We have had a good track record there.”
In the current round of funding, TEPA is receiving further assistance with a US$332,800 grant to develop a revised National Export Development Strategy. A second CDF grant of US$120,000 will help establish the ‘institutional framework and roadmap’ for the government’s Village Tourism initiative, with a focus on enabling small producers in the tourism sector to scale up and leverage opportunities in the Village Tourism market.
Areas of interest
Tourism is the Caribbean’s strongest sector, but upcoming areas such as agriculture and renewable energies are increasingly coming across the CDF’s radar. In April the CDF met with the Caribbean Agricultural Research and Development Institute (CARDI) to sign a Memorandum of Understanding. Collaboration between the two agencies will take the form of knowledge, expertise and technology.
In terms of renewables, the Fund has helped St Vincent and the Grenadines build a solar photovoltaic farm at the Argyle International Airport and, in February, Antigua and Barbuda received a US$1 million CDF grant to help increase its solar power capabilities.
By the end of 2020 the CDF aims to roll out a pilot project making it easier for energy SMEs to access finance and technical support. According to Soomer, the Credit Risk Abatement Facility (CRAF) is “an eco-system comprising a credit risk instrument, technical assistance and monitoring and evaluation aimed at addressing the funding gaps in the energy sector by encouraging financial institutions to lend to SMEs with bankable projects.”
The CRAF pilot will take place in three countries and Soomer says it is “highly likely” that Saint Lucia will be one of the three.
Stronger together
The CDF is a CARICOM agency and, as such, its overriding aim is to promote regional cohesion, particularly in the economic sense, to smooth the way for the CARICOM Single Market and Economy (CSME). “Given the integration process in CARICOM, driven by the implementation of the CSME, some will benefit more than others,” says Soomer. “Without interventions to promote cohesion, targeting the disadvantaged, integration could accentuate uneven rates of development, causing greater disparities.”
As it approaches the end of its 2015-2020 Strategic Plan, the CDF is scaling up. It now has the means to grant funds not just to Less Developed Countries but also the More Developed Countries (MDC) among its 12 members, provided they are used to help a disadvantaged community or sector within the MDC. Soomer says: “We are at the stage now where we are moving to the next level. We are now in a position to support disadvantaged regions and sectors across the entire community.”
In addition to this, the Fund is looking to expand its membership, hopefully welcoming Monserrat in the near future and, once several issues have been resolved, eventually Haiti.
“In the short-term we can very easily embrace Montserrat but Haiti is a little more demanding,” says Soomer. “I believe the community would like to see the CDF expand but it is something we need to do in a structured and organised way. It is not easy to double your operations overnight. We have to be very careful and studied in our approach.”
Another area where the Fund must show caution is cost. Its operations are self-financed through its loan portfolio and the return on its investments. Disbursements come from a combination of member states’ contributions and international assistance from bodies such as the European Union and the UK Department for International Development. In the first cycle of funding, which ran from 2008 to 2015, the CDF collected US$100 million from member states. Projected contributions for the second round, covering 2015 to 2020, are US$65.8 million.
Collecting those contributions is an ongoing battle, says Soomer who became CEO in 2015 and often finds himself in the role of salesman. “I came in to an organisation that had demonstrated its relevance and its ability to make a difference. What I did not expect was that we had to still re-engage countries to convince them of its importance. Because of the fiscal pressures they face, you need to continue to give them good reasons to support our regional institutions.
“We have to face up to the economic realities our members face. We just have to keep on plugging away and ensure they prioritise their contribution. It is a continual process of advocacy.”
