Al Edwards, Financial Editor
Frankson
SOME OF the private sector bodies spear-headed by the Jamaica Manufacturers' Association (JMA) are calling on the commercial banks to lower their interest rates to foster greater entrepreneurship, which in turn should boost employment.
Only last week, the president of the JMA, Doreen Frankson, called on the financial sector to reduce its interest rate spread so that the manufacturing sector may borrow at competitive rates.
"Central to the reduction of interest rates in this country is the reduction of the spreads of commercial banks."
NO POSITION
The Governor of the Bank of Jamaica (BoJ) Derrick Latibeaudiere has repeatedly said that he will reduce rates if and when he sees fit, but that he was in no position to coax commercial banks to follow his lead. Indeed, over the last year the central bank has reduced its rates on instruments no less than 14 times while commercial banks continue to get fat on government paper.
A leading businessman, speaking under anonymity to the Financial Gleaner yesterday, said: " It is an insult that the commercial banks have reduced their prime rate by only 1 per cent. For entrepreneurship to really flourish it should come down to around 15 per cent. People who already run a business in Jamaica and those looking to do so are very unlikely to take risks with rates at 22 per cent. Since the formation of FINSAC commercial banks have been operating very much like the primary dealers. If you examine the composition of their balance sheets you will see that their loans are primarily foreign currency loans with their $J loans apply mainly to consumer goods, cars, appliances etc. Commercial banks have bypassed a complete section of Jamaica's business community."
A businesswoman in the fisheries export business also bemoaned the fact that commercial banks are of no help.
"I currently require a loan to tide me over the closed season. I earn in US dollars and I would like to expand my operations as well as get machinery to help my business. People keep telling me to go to the banks but that is a waste of time. They want 23 per cent plus my house as security for a $3 million loan. I've been with my bank for 15 years and I have a good record but when I need help I don't seem able to get it!"
Speaking at an Institute of Chartered Accountants of Jamaica (ICAJ) seminar entitled, 'National Recovery: Can Jamaica Afford It'? former managing director of NCB Group Aubyn Hill made the point that opportunities for employment and growth will no longer come from large corporations or the government, but from entrepreneurs who have the ability to create profitable businesses from untapped opportunities that are available locally..
GOVERNMENT PAPER
Another businessman noted: "Every week I read the Financial Gleaner and you see banks making these super profits but when you look at their balance sheet it's all government paper. Nowhere in the world do banks record these kind of profits on repos and such. In Jamaica it's as if loans and deposits have nothing to do with banking. I think at some point the
government should intervene, because the financial sector must be made to know it has an obligation to the country."
Ms. Frankson declared: "If we are to expand output, the small business sector, which provides the major portion of employment in any country, must be able to secure low-cost financing that will make their business plans feasible. We need a break. Farmers need competitive funding to feed ourselves as a nation."
