Entrepreneurs can follow the example of Bill Gates by forming a successful company amid the gloom of a recession, according to economist Craig Simmons.Mr Simmons said seismic changes are taking place in the way local and international businesses operating, offering an opportunity to those looking to start a new business.He said Microsoft, formed by Mr Gates and Paul Allen in 1975, is one of many extremely profitable businesses created during difficult economic circumstances.The Bermuda College lecturer spoke out to give hope to Bermudians as he reflected on figures showing increasing numbers of people are unable to make loan repayments to the bank.He warned the economy has not yet turned the corner towards recovery, but continued: “Despite the uncertainty, this is a time of entrepreneurial opportunity.“Microsoft, Apple and Krispy Kreme Donuts were all started during recessions.“Similarly, local entrepreneurs have an opportunity to take advantage of the seismic changes occurring in the way local and international businesses operate.“The outsourcing trend is one manifestation of the change. It is especially pronounced in the provision of back-office, marketing and human resource services.”Earlier this week, Bermuda Monetary Authority announced banks accumulated a $73.9 million loss charge for bad debt in the second quarter of 2012 — more than quadruple the $12.8 million figure for the first quarter.This suggests banks are increasingly writing off debts to people and businesses, and attempting to reclaim their cash through other assets.Asked what this says about Bermuda’s economy, Mr Simmons replied: “Rising non-performing loans (NPLs) suggest that the economy has yet to turn the corner into the recovery stage.“In other words, we haven’t hit the bottom of the business cycle. In fact, the ratio of NPLs to bank capital is a good leading indicator of what is to come.“It is difficult to see how a recovery is possible without this ratio declining over several quarters, in the first instance, and then remaining below 20 percent, in the second.”The US economy enjoyed a relatively quick turnaround partly because of the notion of creative destruction, he said, with Americans accepting economic growth requires change and the destruction of old methods of production.In Bermuda, many at-risk loans were made on real estate purchased between 2005 and 2008, only for property prices to drop by around 25 percent during the recession.Mr Simmons continued: “As expected, the funding gap, the Bermuda dollar loan-to-deposit ratio, continues to grow.“Deposits will likely decline to below $3.5 billion by year’s end as more people are forced to live off their savings, whilst outstanding loans (private debt) remain above $5 billion.“The banking sector is between a rock and a hard place. If banks try to reduce lending, they risk deepening and extending the recession, which is what they did between 1988 to 1991.“If they provide much needed private sector stimulus, they will have to borrow more US dollars, further widening the funding gap, which puts an individual bank and indeed the entire banking system at greater risk of insolvency.”Mr Simmons said there are no indicators to suggest how long the recession will continue.“The local macroeconomy and the broader global economy is a complex web of activity driven by a myriad of not-well understood incentives,” he said.“Humans and economists — they can be mutually exclusive — are terrible at prediction and planning. The best one can do is to keep an eye on the main indicators.“NPLs is one leading indicator. Once we see NPLs falling over several quarters, that will signal that a recovery is underway.“At that point, banks will have greater confidence to lending, which in turn will provide the financing necessary for business and residential investment, the most flighty component of economic activity.“Most local indicators lag behind the business cycle: they tell the story after the fact. The retail sales index is a case in point. It is a proxy for consumer spending, the largest component of economic activity.‘Similarly, the receipt side of the current account on the balance of payments tells an evocative story of the health of the tourism and international business sectors in terms of the foreign currency earned.”The lack of indicators mean politicians often provide plenty of rhetoric but little in the way of solutions, he said.“Incumbents are having a tough time justifying their economic policies because no living policymaker has a frame of reference.“There is little economic data from the Depression era for a Ministry of Finance policymaker to call upon.“It must be frustrating for the man in the street because the truth is that no economist and especially no politician knows how to navigate in these uncharted waters.“There are significant economic, social, and political risks to cutting Government spending in a depressed economy. There are also significant risks to not cutting spending.“It’s difficult for politicians to admit that they don’t have a solution and so political challengers are long on rhetoric and short on details.“In many ways, the stimulus-austerity debate is about justice or rather, intergenerational justice between present and future taxpayers.“In other words, how determined is the present generation to maintain its standard of living through generous pension schemes, public sector pay or social assistance?”Also yesterday, HSBC Bermuda responded to the BMA’s Banking Digest report on soaring bad debt at the banks.“Bermuda continues, as other jurisdictions, to experience a period of unprecedented economic challenge that has impacted residential and commercial property values and revenues in retailing, leisure and construction,” said a spokeswoman.“HSBC Bermuda certainly has been, and continues to be, available to help guide customers through financial challenges successfully.“We continue to work with our customers, encouraging them to contact us when faced with challenges, so we can understand the specifics.“We have specialists available who are willing to work with customers, to look at their financial budgeting and help them to understand the options that are available to them.“Circumstances are assessed, and alternatives that will help the customer are considered.”* Have you set up a small business? Do you know someone who has shown the entrepreneurial spirit? E-mail news@royalgazette.bm.