This article is inspired by our Prime Minister in ways that may not yet seem obvious. I was so moved by an interview that she granted an international audience early last week that I had no choice but to write. I’ll paraphrase the occasion, but when asked about why she didn’t pursue being the Secretary General of the United Nations, Prime Minister Mottley gave, in my opinion, an unexpected reply. She believed that “they” weren’t ready for the things she had to say. I found that rather amusing and poignant on my behalf. I felt seen. I felt reinvigorated. This article is nothing more than a symptom of such. I salute you, Madam PM!
There is something almost circular about the factoring announcement made recently. Government owes a small business money. The business cannot wait indefinitely because wages, suppliers and, perhaps most importantly in our import-dependent economy, the next shipment still have to be paid for. Government therefore helps establish a facility through which that business can receive the money earlier, at a discount, while somebody else waits on Government.
I smiled at the irony. I also understood the economics.
Factoring is not particularly exotic. A business supplies goods or services and issues an invoice, creating an account receivable. Instead of waiting thirty, sixty or ninety days for payment, it sells or assigns that receivable to a financial institution—the factor—which advances most of its value immediately. The factor earns a fee or discount and is subsequently repaid when the customer settles the invoice. Depending on the arrangement, the seller may retain the default risk, called recourse factoring, or the factor may accept it.
This becomes especially useful for small businesses because their problem is often not profitability but timing. A company can have $100,000 in invoices outstanding and still struggle to make payroll on Friday. Small businesses generally have less collateral, less bargaining power with banks and fewer customers over which to spread risk. In small open economies that can be compounded by dependence on imported inputs. Cash trapped in a receivable cannot purchase the goods needed for the next job. Research on MSMEs similarly identifies dependence on relatively few customers, late payments, working-capital shortages and collateral constraints as recurring vulnerabilities.
So there is an argument for government involvement. I would not stretch it too far though. Government should not become a factor simply because a market is small. Intervention makes more sense where weak collateral frameworks, limited private provision or slow public-sector payments leave otherwise viable firms starved of working capital.
Other small economies have tried variants of this. Mauritius, for example, injected Rs70 million into an SME factoring scheme in its 2014 Budget. More interestingly, its Ministry of Finance issued detailed instructions governing payments to suppliers using factors: records were to identify the supplier and factor, assignments could not be made to multiple parties and payment information had to be maintained centrally. Jamaica’s state-owned EXIM Bank currently offers receivables financing of up to 75 per cent for as long as 90 days, with a stated seven-working-day turnaround where conditions are met. There is a lesson there. The money matters; the plumbing matters more.
We should remember that Barbados has been down this road before.
The 2009 Budget proposed a Central Bank-facilitated Trade Receivables Liquidity Facility of up to $15 million, allowing businesses owed by Government to receive advances of up to 90 per cent through participating financial institutions. It was subsequently launched publicly as a factoring programme for small businesses supplying Government and promised qualifying invoices could be honoured within seven days.
The promise, however, met administration.
By 2014 eight small businesses obtained financing under the facility and seventeen guarantees worth approximately $1.38 million were approved. The Central Bank itself reported that difficulty obtaining certification from ministries had reduced the number of applications reaching it. Usage thereafter was hardly encouraging: four businesses used the facility in 2015, three in 2016 and two in 2017. Importantly, that does not demonstrate that factoring itself failed, nor that the facility generated large losses. It demonstrates something more mundane and perhaps more useful—an administrative bottleneck can render sensible finance almost irrelevant.
Barbados even extended the principle in 2015 with a VAT Receivables Liquidity Facility, under which the Central Bank guaranteed advances by financial intermediaries against certified VAT refunds owed to qualifying businesses.
This history is why I find the new $3 million facility interesting but not novel. Government announced it in the 2026 Budget, BERT 2026 refers explicitly to a factoring framework for small suppliers dealing with Government, and the Prime Minister recently indicated that the Central Bank would meet with the Small Business Association to advance the arrangements.
My concern is therefore not whether factoring can work. It can. It is whether we have fixed what stopped it working well enough before.
Certification should be electronic and subject to a published deadline. There should be one invoice registry, preventing duplicate factoring. Ministries should report average certification and payment times. Most importantly, the Central Bank and Ministry of Finance should tell us precisely where the financial risk sits.
Is the Central Bank purchasing receivables? Is it guaranteeing commercial banks as under the older arrangement? Is the $3 million simply Government money being administered by the Bank? Those are not accounting niceties. They determine who ultimately carries a loss if an invoice becomes disputed or remains unpaid. Under the earlier TRLF, the Central Bank explicitly provided guarantee coverage to participating financial institutions, and its accounts subsequently disclosed outstanding guarantees.
Quarterly reporting should therefore show the facility’s authorised size, amounts factored, outstanding guarantees or receivables, ageing, repayments, provisions, losses and concentration by ministry or public entity. We do not need the names of businesses. We do need to know the taxpayer’s—or Central Bank’s—exposure.
The old programme teaches us something useful. Creating liquidity is the easy part. Getting Government to certify what it owes, pay when promised and account publicly for the risk is harder.
Otherwise we may simply factor the invoices while multiplying the problem.