Fri | Oct 28, 2016

Food exporters not eager to borrow

Published:Friday | January 27, 2012 | 12:00 AM

Avia Collinder, Business Writer

Local members of the food-exporting industry are yet to take up any of the J$100-million loan fund offered by the Government of Jamaica through the EXIM Bank to upgrade and which was put in place in September 2011.

Of the now estimated 90 companies affected by new regulations under the United States Food Safety Modernisation Act (FSMA), only one has made an application, with no funds so far disbursed.

"The bank has received an initial request from one client for J$15.5 million. No disbursements have yet been made as we are still in the assessment stage," Ann Marie Walter-Allen, EXIM's chief officer for marketing, said on Wednesday.

"The first disbursement is projected to be made in a couple weeks."

Local food exporters have been contemplating operational changes under the stricter trading regime imposed by the US, which imposed new standards on food entering the US market effective January 1, 2012.

"Discussions with our clients and food-safety experts in the field indicate that companies are still undergoing the gap analyses to determine deficiencies. We have also been advised that some companies have applied to Caribbean Export Development Agency for grant funding," said Walter-Allen.

EXIM and Caribbean Export are in negotiation to formalise arrangements and to provide loan funding to the regional agency's grant recipients, Walter-Allen said.

Caribbean Export's grants range from €5,000 to €30,000. EXIM's FSMA loan is priced at 6.5 per cent to seven per cent per annum for Jamaican dollar funds, and five per cent to six per cent for US dollars. Loans may be either short-term for 180 days, or medium-term for up to 48 months, with a maximum moratorium period of six months on principal payments only.

The Jamaica Business Development Corpora-tion (JBDC) has also promised bridging loans to MSMEs who are to benefit from the regional grant-funding initiative.

The Caribbean Export grant is reimbursable, so the JBDC, through its Financial Services Unit, has been extending bridging loans to successful applicants to complete projects, upon approval from Caribbean Export.

JBDC Financial Services Manager Paul Chin, said on the business development company's website that the idea behind the facility is to ensure that once the business qualifies for the grant, the lack of upfront funds will not be an obstacle to access. Applications for the JBDC programme closed on November 28, 2011.

It appears that EXIM is engaged in organising a similar arrangement of lending funds which can be reimbursed through Caribbean Export.

The bank indicates that funds borrowed are to be used for equipment upgrade and to improve plant and production facilities.

"Our clients have also indicated an interest in financing to conduct gap analyses, implement new food-safety systems, access to technical assistance and training of employees," Walter-Allen said.

She ascribes the poor response to the loan offer to uncertainty among companies about the steps needed to improve their systems. Some are considering finding markets other than the US.

"Some companies still don't know what they need in order to bridge the food-safety gap. We also detect some amount of apathy in the market, as some have expressed their intention of sourcing other markets. The EXIM Bank, however, continues to advise companies that there is a strong probability that other markets will quickly follow suit," she cautioned.

The sole application in-house is from the baked goods industry.