“And now abideth faith, hope, charity, these three; but the greatest of these is charity” – 1 Corinthians 13:13
Faith is the strong belief in God, the controller of human destiny; Hope is a wish with expectation of fulfillment; and Charity is the theological virtue of love directed first toward God but also toward oneself and one’s neighbours. This is a powerful life companionship trio which, if nurtured, allows one to soar above the clouds of turbulence, where there is minimal drag, high fuel efficiency and visions of the superb. Couple this with meditation and slow the process down until you can penetrate the space between thoughts – you are then exposed to the universe of infinite possibilities. What a paradise! However, many of us have to settle for less as we make our contribution to the wellness of mankind.
Last week I humbly submitted to the challenge to develop the idea of creative investment solutions. I promised to start with the concept of a Charitable Trust in the context of mitigating the rate of abandonment of industries with high social and economic impact at major costs to society. If entrepreneurs are believers, entertain only positive thoughts and exude love in their immediate environment, then they deserve all the help they can get from charity in return.
Barbados appears to be one of the only common law countries in the world that has attempted a major statutory redefinition of charity. In 1978 the Barbados Parliament, as part of an attempt to attract the headquarters of major international charities to Barbados, passed the Charities Act (Cap 243 – Laws of Barbados).
The term ‘charity’ is defined within this Act as any institution, corporate or not, which is established for charitable objects or purposes, is intended to and does operate for the public benefit, and is subject to the control of the court in respect of its jurisdiction with respect to charities. The meaning of “charitable purposes” is quite extensive but geared to the happiness of the human being and to supporting initiatives which mitigate the social and economic divide. Trustees are appointed to effect good governance.
One of the primary constraints to entrepreneurial development is the inability of start up enterprises to obtain essential seed capital to effect a successful “lift off”. The purposes for which this seed capital is required may be to cover the entrepreneur’s living expenses; engage in product development; conduct market research; provide emergency business survival loans; conduct a Strategic Visioning Retreat to sharpen the vision of the enterprise; prepare a Business Plan; and for temporary initial capitalisation while awaiting equity or venture capital investment as prescribed in the Business Plan.
However, whichever financial institution the fledgling enterprises approach, as if by mantra, the refrain is “we do not fund start ups”. The reason usually given is that start up enterprises have been demonstrated to have a high rate of failure and hence there is high risk associated with the provision of financial resources to these enterprises.
My suggested approach is not to accept that there is an inevitable high risk of business failure, but to examine what should be done to reduce the failure rate and mitigate this risk. The solution therefore, in developing a business, is not only to ensure that the idea is sound with potential for development and well capitalized but also that the management of business systems is seriously addressed from the start up of operations .
Over the last ten years I have been primarily focused on entrepreneurial development and can empathise with the plight of the young entrepreneur who is not fortunate enough to possess the financial resources to develop his/her enterprise. I have time and time again been met with cries of frustration and disappointment because of the lack of timely access or no access to seed capital funding. Even when an entrepreneur qualifies for available funds, the time for processing a request is often so lengthy that the entrepreneur misses an opportunity or loses interest and gives up in the process.
In terms of government’s further involvement from a governance perspective, I would like to propose a solution where there can be government financial intervention without necessarily having government ownership or government management of the entity.
My proposal is that a not-for-profit (no shareholders) organisation be established under the Charities Act, perhaps a Charitable Trust, where funding is initially provided by government on behalf of the people of Barbados. Trustees, reflecting a private/public sector partnership but diverse in business systems skills, are entrusted with the responsibility of the funds and the governance of the organisation.
The source of funding can come from a commercial bank overdraft supported by a letter of comfort or a government guarantee. Funds should be extended with the understanding that, as the business expands, there will be some requirement to pay it back thus creating a revolving loan fund and ultimately liquidating the overdraft. One may also consider the trust taking some equity in the business and even playing a role and even sitting on the board of that business. The progressive capitalization of the business could be enhanced by the private sector to support the initial capitalization by government in the spirit of faith, hope and charity.