The Tribune

• ArawakX: Challenge converting crowdfund pledges to purchases

• Executive says ‘real world problems we have to fix as a society’

• Smallest investors lack accounts; can’t afford time on bank line

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian crowdfunding platform was yesterday moving aggressively to solve the challenges faced by small retail investors “cut out of the financial system”, adding: “We’ve treated these people like second class citizens.”

D’Arcy Rahming Jnr, ArawakX’s chief technology officer, told Tribune Business that “real world problems we have to fix as a society” were exposed when it inquired why the smallest investors in recent crowdfund equity offerings had yet to actually pay for the shares they were acquiring.

In seeking to convert “pledges” into actual transactions, he explained that many purchasing the minimum amount - between $36 to $50 worth of shares - were revealing that they either lacked bank accounts or, as workers who were paid daily, could not afford to stand in bank lines since they would lose a day’s pay.

Mr Rahming told this newspaper that such persons had effectively been cut-off from the formal financial and banking system, meaning that The Bahamas still has some way to travel before it can convert promises of financial inclusion into reality. Some of the smallest investors, he added, were prepared to spend more than their daily pay to acquire shares in the companies offered via the crowdfund platform.

ArawakX is now working with digital payment providers, such as Cash N’Go and Island Pay, as well as the commercial banks to facilitate payment and ensure pledges convert into share ownership. However, Mr Rahming confirmed this will likely take some time, and added: “To solve anything in this town is not easy.”

He told Tribune Business: “What we’ve discovered in trying to make the market more financially inclusive is that when people purchase $36 or $50, those are people with no bank account. Those are people who have never bought securities in their life. 

“What we are finding is that we’re calling them. They say: ‘I’m going to pay, I’m going to pay. I want to be a participant in the financial system, I want to own assets. But it’s difficult for me to pay because I get paid daily’. And it’s difficult for them to stand on a bank line.

“Think about the guy making a daily wage. It’s like that for a couple hundred people we have talked to. It’s not like they don’t want to pay. They cannot afford to stand on the bank line as they will lose a day’s pay. That’s why we’re addressing these payment options. That’s why we’re working with Cash N’ Go and other providers to give people a plethora of payment options. They want to be part of this, but the system is so difficult to make payments.”

Chef Kevin Culmer, founder of Tropical Gyros, the restaurant business that has raised its $320,000 minimum capital target via ArawakX, confirmed to this newspaper that the offering was still struggling to convert some investor pledges into actual share purchases.

“The difficulty we’ve been having is that we’ve got a lot of pledges,” he explained. “The one thing is people getting into pay, so ArawakX is coming up with options for people to go to Cash N’ Go and Island Pay so that they can convert pledges into cash and share ownership.”

Mr Rahming, meanwhile, added: “I’ve always had a bank account, and never thought it would be so difficult for people to make payments. But we’ve treated them like second-class citizens. They’re cut out of the system. We want to be as financially inclusive as possible, but there are real world problems we have to fix as a society.

“These people have to pay more than their daily wage to invest. My God, that’s incredible. That’s what we’re experiencing. The real world. It’s fine to say we will be financially inclusive, but to get to the crux of it that is a real problem. I couldn’t live under those circumstances. It’s insane.

“That’s what’s really happening and we’re working our way through it. We’re working with the payment services providers and other financial institutions to solve it. I don’t think anyone’s figured out why are financial system is like that but that’s the way it is. It’s going to be solved. It’s just time.”

The Central Bank has previously argued that access to bank accounts is relatively good, with domestic commercial banks reporting having around 495,000 customers and 580,000 accounts as at year-end 2020. However, Mr Rahming said that besides the “tie in” with digital payment providers, ArawakX is also seeking to open up its own account with each of the commercial banks to help make investor payments easier.

“I’m just thinking about all the forms I have to fill out,” Mr Rahming joked. “There’s lots of inefficiency in this space, which will take time to take out, but from the outside we’re trying to close that gap. It’s the smaller investors. It’s not a lot that they’re buying, $36, $50, but when you get a lot of them it adds up really quickly. These guys may not own a home, but can participate in society at some level and this is all this is about.

“We’ve spent the last couple of months of the [Tropical Gyros] raise trying to get down to the problem. People are reluctant to admit some of these things, that they don’t have a bank account, and it takes time to get the facts from people. For the first 30 days people were saying they will pay next week, next week. That’s Bahamian speak for ‘we’ll get to it’.

“Eventually people said it was just too difficult; that they cannot afford to stand on this bank line. When we found out about this it was: ‘Oh my God. I can’t imagine living like that’. This is a labour of love for our company. We know we need it as a business community for the financing, but we also need it as an investor community. People need to be allowed to participate in the system.”