By Lavern Clarke, Staff ReporterIN THE three years that the Government-financed MicroFin programme has been operational, the fund has facilitated 11,200 loans to micro enterprises that had little opportunity otherwise of tapping into commercial credit.
Disbursed through a network of lenders, the funds are spread throughout Jamaica but have largely benefited small operators in the Corporate Area of Kingston & St. Andrew.
The broad access, plus other opportunities like a lending window targeted at the disabled, are what Development Options president Maureen Webber uses to define the programme as a 'success'.
MicroFin is the successor programme to the $160 million Government of Jamaica/Government of the Netherlands four-year revolving loan scheme that was also managed by Webber.
At the end of the GoJ/GoN Micro Enterprise Project in 1998, she had built the fund to $240 million - 50 per cent more than its value at inception. In the process, the programme assisted 3,200 businesses.
Webber showed that while it was risky to lend to the uncollaterised it could be profitably done, and so Government took the decision to roll over the $240 million into another fund, giving birth to MicroFin.
The fund is now valued at $311 million, having grown almost 30 per cent since its inception in 2000 - $114 million of the total is on deposit while the other $197 million is on the road as loans, according to Development Options figures. It earns from the 11 per cent interest it charges on loans to lenders, with the exception of the $20 million facility made available to the Jamaica Exporters Association in 2001, which accessed those funds at nine per cent.
"The interest earned on the fund belongs to the fund," said Webber, speaking with Wednesday Business. Development Options itself earns four cents on every dollar MicroFin lends.
HEALTHY PORTFOLIOS
The Development Options president, having spoken up about the problems associated with the programme - she is now grappling with six defaulting companies to whom Development Options wholesales funds - said there were other lenders out there doing well at managing their individual portfolios and meeting their payments - due quarterly - back into the fund.
Aside from its traditional lenders such as National Development Foundation of Jamaica, Webber names Access Financial Services, run by Marcus James; First Union, headed by Lloyd Campbell, and Consolidated Caribbean Investments, headed by Kamran Abbas, as entrepreneurs who have kept their portfolios healthy.
The company that has the window for the disabled, Creative Ideas, is among the defaulting six. Webber indicated that this case was a bit puzzling since Creative Ideas owed a relatively small amount and was known to be in business.
The company had demonstrated one of the characteristics that MicroFin sought in its lenders - the willingness to be risk takers.
The more risk-averse formal system was extremely reluctant to allow credit to a sector that had no assets on which they could hold. The gap they left created the opportunity for a new crop of entrepreneurs to emerge.
"The programme is primarily geared at businesses without collateral, so we needed to find lenders willing to take the risk," said Webber. It also presented a risk for Development Options and MicroFin, which went into business with companies that had little or no track record.
To assist them and reduce the fund's exposure, Development Options provided some training. In cases where the business proposed to take on the risk of retailing loans in very high risk locations, that is, volatile communities, the MicroFin managers provided companies with technical and other assistance for the initial five month start up period.
Additionally, Development Options keeps track of how well the network of lenders are handling their portfolios.
"This is a model," said Webber. "We look at what works and how to adjust it." One of the adjustments has been a slicing of the cap on loan sizes from $45 million to $25 million, a portfolio that Development Options feels is more compatible with the capacity of its lenders.
