Mentoring relationship and lending: evidence from a business development programme in a small state Caribbean economy

摘要

Caribbean economies typically face severe challenges in efforts to establish sources of start-up capital, both for general and youth-oriented business development initiatives. In fact, very little is known about the effectiveness of lending programmes created to facilitate access to financial resources by those with limited credit histories. Since 1996, funds provided by the Barbados Youth Business Trust (BYBT) programme have been used to provide start-up capital to youths who have been denied access to credit markets. This study uses BYBT loan application data to examine the determinants of initial financing to entrepreneurs. In the absence of credit scores and related financial information, BYBT must rely on other characteristics of applicants to assess their loan worthiness. An empirical model is used to examine the role of financial and personal information, as well as the presence of a mentoring relationship, in the loan approval process.