Pictured: Dr. Jonathan Rodgers, OMNI’s founding partner announced expansion plans Tuesday as the financial group readies itself to bring a new financial product, accounts receivable financing (factoring), to the local market. (Dupuch Photo/Tosheena Robinson Blair)

OMNI Financial Group Ltd, powered by a $1 million loan from the Inter-American Development Bank (IDB), is set to deliver an innovative financial solution to un-banked and under-banked businesses specifically those in agriculture and fisheries, manufacturing, processing and other cottage industries in The Bahamas.

“The IDB is focused on creating opportunities for the private sector so that the private sector plays a stronger role in the development of The Bahamas. We believe in a more innovative private sector, in a more risk-taking private sector, a private sector that can do business in a more efficient and effective way,” said Florencia Attademo-Hirt, the IDB’s Country Representative.

The new accounts receivable financing (factoring) product expands access to finance for small and medium-sized enterprises (SMEs). It was launched at a press conference Tuesday at the IDB’s East Bay Street office. Prior to this project’s approval the Multilateral Investment Fund (MIF, the private sector arm of the IDB) had never provided a credit facility to a private Bahamian company.

The initiative is a culmination of five years of collaboration between the IDB and OMNI – a multi-faceted financial services company providing money transfers, micro loans and an electronic payment platform via a network encompassing a 67-strong workforce and 12 locations, with a new location set to open in Freeport next week.

Established in 2006, OMNI operates three companies under its umbrella: Sun Transfer Holdings Limited trading as Omni Transfers, OMNI FlashCA$H and Transfer Solutions Providers Limited Trading as Mango.

Last December, the MIF approved the $1 million contingent recovery loan to OMNI Financial Group marking the first time MIF approved an instrument that is not a grant in The Bahamas.

“This is evidence of our evolving partnership. It is also evidence of the maturity that the OMNI Financial Group has accomplished in the last five years,” said Hirt of the financial group whose partnership with the IDB developed from a call placed to the development bank back in 2013, to gain information on the number of money transfers that were leaving The Bahamas at that time.

The IDB subsequently engaged OMNI in a dialogue. In 2013, the MIF provided a non reimbursable $150,000 grant to OMNI to improve the transfer solutions they provide to Bahamians and to support their creative use of technology. OMNI’s corporate governance, its history of financial reporting, overall track record and its commitment to the Bahamian society paved the way for the partnership to blossom, according to Attademo-Hirt.

The OMNI factor
Factoring, commonly referred to as accounts-receivable-financing, is a financial transaction in which a business sells its accounts receivable to a third party at a discount. In a factoring arrangement, the client (business) makes a sale, delivers the product/service to the vendor and generates an invoice.

The factor (a funding source) buys the right to collect on that invoice by agreeing to pay the invoice’s face value, less a discount. The factor pays a certain percentage of the face value of the invoices immediately, and the remainder, less the discount, when the vendor pays.

Because factors extend credit not to their clients, but to the clients’ vendors, the vendors’ ability to pay is more of a contingency of the client factor-funding. That means a company with credit-worthy customers may be able to receive funding, even if it cannot quality for a loan from traditional banks.

Essentially, factoring assists with cash flow by slashing the wait time for SMEs to collect outstanding cash from larger institutions processing payments slowly.

“This is a financial instrument very much used in other countries relatively common for other sector environments, but is the first time in The Bahamas a product of this kind will be made available to entrepreneurs and the general public,” said Attademo-Hirt.

“The IDB has worked with us and encouraged us to find innovative ways to provide financial services for the un-banked and under-banked sector of the communities we serviced and so today I am indeed pleased we have been able to take that to the point where we can be signing a loan agreement for $1 million,” said Harvey Morris, OMNI’s Chief Executive Officer, who oversaw the company’s growth from a small operation with one location and two employees.

“This agreement would not have been possible if not for the cooperation of the Bahamas Agricultural & Industrial Corporation (BAIC) in developing this new product. Factoring is going to be geared towards its SMEs.”

Financial discipline
Tuesday was the first leg of the journey culminating in the actual disbursement of funds. The second leg requires further engagement for benchmarking and developing a client profile.

“The signing does not mean the IDB will disburse $1 million to us and we are going to be lending funds tomorrow. It requires a lot more due diligence,” said Morris.

“One of the great things IDB has brought to our company is the discipline…in making sure everything is documented and likewise to the persons we are going to do business with, they have to follow that pattern so we expect at the end of this journey not only would OMNI have benefitted from the strict discipline from the IDB but our SMEs who many times are not disciplined enough…that discipline will be brought to this exercise.”

OMNI’s goal is to help SMEs who may need $5,000 or $10,000 but can not qualify under existing bank guidelines.

“We’ll look after the money just as carefully as we do our own,” assured Donald Tomlinson, OMNI’s chairman.

According to Dr. Jonathan Rodgers, OMNI’s founding partner, plans are in the pipeline to expand to the Family Islands where commercial banks have withdrawn.

“With the help of the IDB and the blessing of the Central Bank we’ll be providing banking-like services for residents of the Family Islands,” he announced. “We plan to do this in each Family Island over the next 18 months, provide the services that we are already providing as well as cash management services.”

Hirt pointed to the current status of the financial sector in The Bahamas where some commercial banks “for reasons one could understand” are closing branches in the Family Islands.

“Finding a trusted partner like OMNI to be able to channel resources to get to that group of people is incredibly important for us as a development institution,” she said.

Pictured: (from left) Donald Tomlinson, OMNI’s Chairman; Harvey Morris, OMNI’s chief executive officer; Florencia Attademo-Hirt, IDB Country Representative; Michelle Evans, a private sector analyst with the IDB and Michael Alexiou, a director at OMNI. (Dupuch Photo/Tosheena Robinson-Blair)