No money in Self Start Fund
Employees of the Self-Start Fund (SSF) will be laid off and its headquarters likely placed on the auction block as the agency tries to dig itself out of the red while scaling back operations.
Delinquent borrowers will also be pursued and their "properties possessed and sold" in the hope of recovering sums owed, permanent secretary in the Ministry of Industry, Commerce and Agriculture, Donovan Stanberry, told Wednesday Business.
The SSF was set up in 1983 with funding from the United States Agency for International Development to be the Jamaican Government's prime retailer of funding to MSMEs, but is now collapsing under bad debt.
"The thing has ground to a halt," Stanberry said.
The SSF was due to be merged with the Jamaica Business Development Corporation (JBDC) and the Micro Investment Development Agency (MIDA), but to date, the blueprint has not been completed.
The decision to combine the agencies, which was approved by former industry minister Anthony Hylton, was meant to eliminate duplications in the roles of the state entities serving the financing needs of MSMEs.
Five of the SSF's seven employees will be cut to "help stop the haemorrhage".
"We have now reached the point where we are not generating enough interest income to even pay them ... so what we have done is to ask Cabinet to make some of the officers redundant and just leave a skeleton of about two," Stanberry said in a telephone interview.
The remaining two employees will be housed at MIDA's office at 12 Camp Road in Kingston.
"Their job is to collect whatever arrears there is," the permanent secretary said.
For borrowers who are in arrears and unable to pay, "their properties are to be possessed and sold". Self-Start's own building at 10 Parkington Place in Kingston may likely be sold as the entity liquidates fixed assets, he added.
The permanent secretary was unable to say the total amount owing to the SSF, only that "there are no funds right now to lend anybody".
A query to SSF chief accountant Dwayne Dacres on the status of the fund was met with the comment: "I'm not telling you anything".
In January 2014, state news agency JIS reported that in the five years prior, the SSF had disbursed 617 loans valued at more than $200 million.
At the time, the SSF was projecting to lend as much as $100 million in the 2014/15 fiscal year.
But Wednesday Business has learnt that within the last two years, only four loans were disbursed from the fund, with administrative costs dragging on the capital budget.
"The fund lacks capital. It wasn't lending much in the last couple of years," Stanberry said.
These issues, among others, may have given rise to the resignation of two board chairs in the last few months.
Last August, businessman and former president of the Jamaica Manufacturers' Association, Brian Pengelley was appointed chairman of the combined board instituted to oversee the merger of SSF, MIDA and JBDC, but quit just a few months into his tenure.
Pengelley was replaced by businesswoman Yaneek Page, who also quit after just a few months.
Neither Page nor Pengelley would speak to Wednesday Business on the issues that arose during their tenure or why they resigned, with Page saying only that she served "for a very short time". Pengelley did not return calls for comment.
Sandra Shirley was tapped as chair following Page's stint. But with the recent general election and the resultant change in administration, Shirley's mandate is reportedly on pause while a pathway is carved out for the cash-strapped SSF.
Wednesday Business has been unable to speak with Shirley, with whom contact was being made through the industry ministry.
Cabinet has since approved the scaling back of the SSF "in order to scale back its operational losses".
"It's not a matter of mothballing the thing; it's looking at how we can emerge with a stronger entity, either by itself or joined with MIDA and JBDC," said Stanberry.
The permanent secretary insisted that the rethink of the SSF does not mean that the Government will be offering fewer services to the MSME sector, but he also said a clear decision on whether the State should be involved in such financing now needs to be made.
"The scaling down must be viewed in the wider context of Government looking on its role in relation the financing of MSMEs should the Government be in the business of providing loans?" he reasoned.
The Government is deliberating that matter now, as well as the form the revamped SSF will take, Stanberry said.