The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nearly one in five small businesses on Dorian-devastated Abaco and Grand Bahama have reported being asked to pay a bribe to obtain government services, a UN agency’s report has revealed.

The United Nations Development Programme’s (UNDP) report on how COVID-19 and Category Five storm have impacted micro, small and medium-sized businesses (MSMEs) on the two islands, which was released yesterday, disclosed that 18 percent of such firms had been shaken down when trying to access public services.

“Almost 19 percent of respondent MSMEs reported having to tip or pay extra to access public services either one time, sometimes or very often,” the report added. Its findings were based on surveys of 486 MSMEs in Abaco and Grand Bahama, which were carried out for the UNDP by the Organisation for Responsible Governance (ORG) between November 2020 and February 2021.

Correlating the findings with Transparency International’s 2018 Global Corruption Barometer study of the Caribbean, which found that 41 percent of Bahamians “paid some level of bribe to ensure they could access public services”, the UNDP report said it was “notable” that 78.2 percent of MSMEs surveyed had not “paid or tipped a civil servant to have public services rendered”.

Of the 18 percent who had experienced such practices, 9.5 percent - or more than half - said they had encountered this form of low-level corruption once, while 3.6 percent had run into it “very often”. While less prevalent than the 2018 Transparency International survey findings, the fact almost one in five businesses are still encountering such issues is still significant.

Elsewhere, almost 39 percent - close to two out of every five MSMEs surveyed - said they saw no advantages from participating in the formal Bahamian economy. “In terms of registration, most respondents MSMEs (80.3 percent) were formally registered as businesses,” the UNDP report said.

“Approximately 20 percent (20.4 percent) of these indicated having experienced challenges during the registration process. These ranged from issues with getting government approvals, difficulty completing the application and meeting the payments required to the National Insurance Board (NIB).

“Only 54 percent (54.4 percent) reported positive advantages associated with registration of their business. A combined 38.7 percent indicated that they either did not see or were unaware of the advantages of formal business registration. The main advantages for formal registration were seen as access to loans; access to favourable business locations; and eligibility for non- financial support.”

The UNDP report concluded that the Government needed to better engage with the informal economy, and educate its participants as to why they should move across to the formal side and contribute by paying their fair share of taxes.

With the informal sector estimated to account for up to 30 percent of Bahamian economic output, the UNDP report said: “These informal MSMEs are largely unregulated, untaxed and can create unfair competition for formal MSMEs. This also has implications in times of crisis, such as the current COVID-19 pandemic.

“Despite the $76m that the Government spent in providing enhanced unemployment benefits to support displaced workers during the COVID-19 pandemic, the IMF in their 2021 country report on The Bahamas estimates that some 13,000 informal workers may have not been able to access support.”

The study continued: “The need for engagement on this topic is also present among registered MSMEs in Grand Bahama and Abaco, of which almost 50 percent reported not seeing or understanding the value of registering their business. Twenty percent of formal MSMEs surveyed reported issues with the registration of their businesses.

“Government can both encourage greater MSME start-up development and support further formalisation of the segment through increasing the ease the registration process. Expansion and promotion of programmes to educate entrepreneurs on the value of formal registration could also support increased formalisation of the sector and inclusion of informal MSMES and informal workers.”

When it came to financial record-keeping, the UNDP report said: “Almost 31 percent of the MSMEs reported having a complete bookkeeping system maintained by an accounting professional.

“Over 15 percent reported not keeping written records. Twenty-four percent use a digital accounting system maintained by a non-accounting professional, and 11.9 percent use a system maintained by a Certified Professional Accountant (CPA).

“Comparatively, MSMEs operating on Grand Bahama utilise formal accounting systems more than those in Abaco - digital (20.1 percent and 12.4 percent, respectively); complete bookkeeping (26.2 percent and 15.3 percent, respectively); and an accounting system (10 percent and 6.2 percent, respectively),” it added.

“A larger proportion of SMEs on Grand Bahama (12.9 percent) also do not keep any written records in comparison to those on Abaco (7.9 percent).”