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Energy funds for small businesses

Published:Monday | February 7, 2011 | 12:00 AM
All the electricity in Morris Hutchinson's Portmore home is provided by solar and wind energy with two solar trackers with a total of 18 panels and wind turbine providing the power. Hutchinson's company, Alternative Energy Plus, is a leader in providing comprehensive service in the renewable-energy sector. file

The Development Bank of Jamaica (DBJ) has embarked on a three-pronged initiative to promote its small and medium-sized enterprises (SME) energy-loan facility, which is financed by the PetroCaribe Fund.

The initiative, to be undertaken over a 24-month period, will include a market study to determine demand for renewable energy projects; strengthening of the technical expertise to support project development and implementation by targeted sector interests; and a public-education campaign, to showcase energy efficient, energy conservation and renewable energy projects already implemented.

Yvonne Lewars, general manager of DBJ's Approved Financial Institutions Relationships (AFI) Division, said the initiative will be jointly financed by the Inter-American Development Bank (IDB) and the DBJ. She said the project would cost US$807,000, or approximately J$68.6 million.

Lewars said the decision to pursue the initiative primarily arose from the "sluggish" response to the energy fund by targeted stake-holders since 2008. These include commercial and industrial entities, energy-service companies and manufacturers of energy-efficiency equipment and devices.

Over $500 million, provided by the PetroCaribe Fund, has been committed by the DBJ to finance the development and implementation of energy efficiency, energy conservation and renewable energy projects.

The funds are on-lent to sub-borrowers, primarily business entities interested in pursuing such projects, through AFIs affiliated with the DBJ, at an interest rate of 9.5 per cent per annum.

AFIs include commercial banks, merchant banks, the National People's Co-operative Bank, the EXIM Bank and microfinance institutions.

Lewars says $68 million was set aside for project development in the manufacturing, agro-processing and services sectors, and the balance of approximately $432 million earmarked for SMEs and tourism interests. A maximum of $15 million per entity is provided for SME projects which, on average, equates to some 90 per cent of the DBJ's funding input to borrowers.