Scotiabank Jamaica yesterday announced the launch of a $1 Billion fund dubbed the "Scotia Jama-ica Production Fund".
This Fund is aimed at providing loans at a concessionary rate fixed at 9.5 per cent, to small and medium-sized businesses, with priority towards export-related activities and job creation. "Scotiabank has consistently provided strong leadership in the financial sector and this initiative is another indication of our unreserved commitment to Jamaica.
In this 115th year of Scotia-bank's operation in Jamaica, this Fund is, in our judgement, a tangible contribution to the growth and economic development of our country," says Managing Director, William 'Bill' Clarke.
The maximum loan for any project under this program is J$22.5 million and the minimum is J$7.5 million. Loans will have a maximum term of seven years, with a two-year moratorium on principal.
The primary objective of this program is to assist small/medium-sized enterprises that would otherwise not be able to secure affordable financing to expand or sustain their businesses. Funding will be deliberately focused and prioritised for activities such as:
Acquisition of new capital equipment 'Used' equipment may be considered under special circumstances, with a maximum of 50 per cent financing of the acquisition cost
Re-engineering of production processes including environmental enhancements
Re-tooling of facilities in the manufacturing and agro-industrial sectors
Modernisation of technology
Replanting and resuscitation of crops in the agricultural sector
The application/approval process for facilities under this program will be subject to BNSJ's normal credit standards, and the final decision will be at the absolute discretion of the Bank. Prospective borrowers will be required to satisfy Scotiabank's normal credit risk assessment and be up-to-date with all statutory obligations, such as Tax Compliance Certificates, property tax payments and filing of annual returns with the Registrar of Companies. In addition, it is a condition precedent that beneficiaries will be required to maintain all their banking relationships with Scotiabank.
Borrowers will be required to provide a proper business plan, cash flow projections, audited financial statements and adequate documentation to support the feasibility and viability of the project. The Bank will require a minimum equity injection of 25 per cent (including existing buildings suitably equipped with functional plant and production equipment, with values to be determined by independent valuation at the discretion of the Bank). Borrowers must be able to demonstrate that competent management resources are in place, with a proven track record or specific technical skills. Provided all conditions of the credit are met and relevant documentation are duly executed, the maximum time for approval of applications is 10 working days.
PROVIDING SOLUTIONS
The program is aimed at providing solutions for viable, export-oriented, competitive production operations that may have problems accessing affordable financing. Scotiabank will observe strict guidelines to ensure that funds are disbursed for the purposes intended. The program will not advance funds for the financing of motor vehicle purchases (including luxury pick-ups), except for trucks and tractors. Start-up ventures and individuals will not qualify under this program; neither will companies and their subsidiaries that were beneficiaries under the 1998/1999 Scotiabank Economic Growth Fund.
Consolidation and refinancing of existing debt will be specifically excluded. "Our objectives are, to create new jobs, encourage sustainable growth, build capacity and increase production in the small/medium-sized business sector, therefore we will be vigilant in ensuring that these concessionary loans are used to the maximum benefit to achieve these goals, for the good of Jamaica", explains Bill Clarke.
INTEREST RATE REDUCTION
Scotiabank also announced a reduction of 2 per cent in the base lending rate from 22.75 per cent to 20.75 per cent, effective May 1, 2004. According to Bill Clarke, "Scotiabank did not increase lending rates when the Central Bank undertook an aberrant spiking of interest rates in March last year. With the exception of credit card interest rates, the actual lending rates across the BNSJ's suite of lending products were below the risk free Bank of Jamaica one year Repo rate and the 180 days Treasury Bill rate from March 2003 to August 2003.
It must be emphasised that interest rates are market determined. Consequently, we must carefully examine the economic fundamentals before effecting reductions to ensure sustainability, market confidence and most importantly, our credibility as a financial intermediary.
Scotiabank is making a reduction in our base lending rate at this time based on our assessment of the current economic conditions".
