Sun | Jan 20, 2019

Poor take-up forces better terms for NIF $1.5b loan facility

Published:Friday | September 26, 2014 | 12:00 AM
Audrey Deer-Williams, senior director of investments at the National Insurance Fund.

Avia Collinder, Business Reporter

Parliament has appro-ved the extension of the $1.5 billion line of credit from the National Insurance Fund (NIF) by four years, from an end date of April 2018 to April 2022.

The loan limit has been hiked from $5 million to $15 million, and the life of the loan extended from five to seven years.

The financing window for SMEs was launched in Septem-ber 2013 and in that one year, had take-up of just $250 million, according to NIF senior inves-tment director, Audrey Deer-Williams. The new conditions are meant to make the facility more attractive to businesses.

The NIF funds are made available to financial institutions for on-lending through the Development Bank of Jamaica (DBJ) and is the second such facility to be backed by the state-operated pension fund.

"We had to make it more attractive so it can act as the stimulus we intend it to be," said the NIF official. The original loan limit, she noted, was set in 2006.

The NIF manages the proceeds of national insurance con-tributions and disburses pensions to retired contributors. The fund is now valued at approximately $70 billion, having regained lost ground during the national debt swap last year, which had reduced the fund to $63 billion.

"We have significant resources denominated in US dollars as well as appreciation in real estate values," Deer-Williams stated, explaining the ball-park growth of 11 per cent.

SMEs borrow at rates of up to 10 per cent under the credit line. The NIF earns about four per cent from the facility.

The credit line is intended for small and medium enterprises in five sectors - agriculture, agricultural processing, manufacturing, manu-facturing services, the services sector, the trading sector, and a category described as work study.

The four per cent return to the pension fund is the same as that earned on the first NIF credit facility of $934 million in 2006 when the agricultural sector received the major share of the disbursements - 33 per cent.

The line operates as a revolving fund with amounts repaid made available to the market again during the life of the facility.