EDITORIAL - Stigmatising risk-takers

But for the good sense of Senator Nigel Clarke and lawyer Michael Hylton, much of what emerged at last week's sitting of the parliamentary committee reviewing the new bankruptcy and insolvency law underlined one of the significant barriers to economic risk-taking in Jamaica.

We stigmatise entrepreneurial failure.

The bill largely attempts to streamline and codify insolvency and bankruptcy proceedings. In that regard, what is on offer is better than what existed before.

But in this newspaper's view, it doesn't go far enough. This is, in part, we believe, the result of an unease, distrust even, too many Jamaicans, including policymakers, have towards people who take economic risks - the ones who invest, create jobs and ignite economic growth.

One of the provisions, under Section 205 of the bill, is to make it relatively easy for a first-time bankrupt to emerge from bankruptcy, once he has fulfilled all his obligations and there is no declared opposition to his discharge. Section 30 (9) also offers a summary path out of some cases of insolvency.

But a worry for central bank Deputy Governor Gayon Hosin is of the bill "providing for something to slip through". A discharged bankrupt, she fears, might circumvent her "fit and proper" benchmarks and become a banker.

She found support from Peter Bunting, the investment banker who is now the security minister.

While he talked around support for "dynamism and entrepreneurship", Mr Bunting wants, he said, the bar set higher "when it comes to deposit-taking institutions". Whether he means no entry to the sector for former bankrupts was not clear, although that appeared to be the implication. Nor are we aware if it matters to Mr Bunting what occasioned the bankruptcy of such individuals, what skills they would bring to the new venture, and the capital that would support these enterprises.

Important observation

In the midst of the haze, Senator Clarke offered an important observation that should be taken seriously by his legislative colleagues. The incidence of bankruptcy should not of itself lead to any special consideration for entering any specific sector. More important is the history of the individual.

He said: "People who are insolvent, or even near insolvent, or approaching insolvency, don't have a barrier, other than an economic barrier, to put themselves forward for a process. What we want is assets to always be productively employed." Those perspectives were largely mirrored by Mr Hylton in his testimony to the committee.

There is not much data on the issue in Jamaica, but we know that risk-taking in business includes high levels of failure. In the United States, for instance, one study on the longevity of start-ups for the 17-year period up to 2010 showed that about a quarter of the firms established during the period still survived. Another study indicated that only 58 per cent of finance/insurance and real estate businesses made it to their fourth year.

We suppose that many of the witherers, including those in finance, and their principals, went bankrupt. We would be surprised whether such persons were automatically barred from these sectors.

Part of the aim of the Government's current economic reform programme is to make the private sector genuinely the engine of growth. Critical to this is the unleashing of entrepreneurial energy. But we are wary of the bureaucrats talking Jamaica into a psychosis of failure.

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