Mon | Sep 25, 2017

Create financial inclusion council without delay - IMF

Published:Wednesday | September 28, 2016 | 9:00 AMMcPherse Thompson
Insert your card carefully. Different ATM machines have different positions of entry. If the machine 'eats' your card, report it to the relevant bank immediately.

The International Monetary Fund (IMF) is urging the Jamaican Government to establish a financial inclusion council as part of the efforts to achieve higher economic growth by, among other things, improving financial access.

Noting that progress should be accelerated to lower the cost of doing business and support investment, the IMF said that given the high market concentration of the banking sector in Jamaica, where two banks hold more than 80 per cent of total assets, a thorough assessment should be conducted on the adequacy of competition in the banking sector.

The staff report did not identify the two banks in question. However, National Commercial Bank (NCB) and Scotia Group Jamaica are Jamaica's two largest banks by assets.

NCB's total assets as at its financial year ended September 30, 2015 was $523.8 billion, growing by 4.9 per cent or $24.5 billion over the corresponding period in 2014. Scotia Group Jamaica's total assets at the end of its financial year October 31, 2015 was approximately $433 billion.

The IMF noted that the Bank of Jamaica lowered the policy rate, that is, on the 30-day certificate of deposit, in May by 25 basis points, a cumulative reduction of 75 basis points since April 2015.

The pass-through of these rate cuts to lending rates, however, continues to be weak as the historical pattern of high spreads between lending and deposit rates persists reflecting weak competition and banks' high operating costs, the Fund said.

"A financial inclusion council should be created without further delay in order to implement the financial inclusion strategy," said the IMF in its September 2016 country report on Jamaica, prepared by the staff for the executive board's 13th review under the Extended Fund Facility.

Financial inclusion refers to access to affordable financial services such as credit, insurance and savings, particularly for disadvantaged and low-income segments of society.

 

BETTER CREDIT ACCESS

 

The IMF report said that accelerating the current programme to improve land titling would also help promote credit access to people with no other collateral.

It noted that the Land Administration and Management Programme, a government initiative to help owners of land in Jamaica obtain certificates of title and to update the information on existing land titles, was expanded to St James, Trelawny, Hanover, St Ann and Westmoreland in 2015-16, with 1,236 new titles issued during the year. It added that 15,000 titles are expected to be issued each year for fiscal year 2016-17 and fiscal year 2017-18.

Initiatives to help small and medium-size enterprises with financing, including development of agency banking services, mobile money products, and factoring and leasing should also be pursued, the Fund said.

Regulations pertaining to agent banking were slated to be tabled in Parliament by end September 2016.

The Jamaican authorities have indicated that they have developed an umbrella financial inclusion strategy, with inputs from stakeholders and consultancy from the World Bank, covering key areas including MSME financing, housing finance, rural finance, consumer protection and literacy.

"In that context, a financial inclusion council will be established to oversee the implementation of the strategy," the Jamaican Government indicated.

Next steps include establishing depositor protection for credit unions and tabling agent banking regulations in Parliament.

According to the World Bank, around two billion people do not use formal financial services and more than 50 per cent of adults in the poorest households are unbanked.

"Financial inclusion is a key enabler to reducing poverty and boosting prosperity," it said.

Some 34 per cent of the adult population in Jamaica does not have a bank account, according to a study undertaken by the University of the West Indies.

mcpherse.thompson@gleanerjm.com