JN crowdfunding platform goes live in August
JN Small Business Loans Ltd's crowdfunding platform, ISupportJamaica.com, plans to start distributing loans to business start-ups at the end of August.
The ISupport initiative was developed by JN and first unveiled in June, but as is typical for crowdfunding arrangements, the funds for lending will be sourced from individuals.
JN says it continues to solicit donations to seed the loan pool, but is already receiving contributions for the 'give' component of the initiative targeted at non-profits and non-governmental organisations, according to project manager Saffrey Brown.
JN will operate as lender and administrator of the loans, which are targeted at individual entrepreneurs as well as small and medium enterprises.
Brown also said that the interest paid on loans will accrue to JN Small Business. The persons putting up capital - whom Brown refers to as donors - will earn nothing, she said, other than the satisfaction of providing assistance.
"We are offering people a way to get involved. These are people with a social mission and who want to do their part," she said.
The loans will be priced at the same rates as credit issued by the lending institution in its normal course of business, she said.
ISupport will lend small sums ranging from US$500 to US$5,000 - which converts at current rates to J$51,000 to J$501,000.
Loans are repayable in six months or under other terms to be negotiated, and payback is likely to include the administrative cost of the loan, Brown said.
ISupport applicants will be pre-approved by JN Small Business.
The business lender currently charges one per cent per week or 52 per cent per year on loans of J$30,000 to J$500,000; 40 per cent for sums ranging from J$501,000 to J$1 million; and 35 per cent on loans above J$1 million to J$3 million, Brown said.
The risk for ISupport loans will be borne fully by donors; however, Brown notes that the borrowers of micro funds tend to have a low default rate.
For Jamaica's microfinancing sector, "the default rate is in the region of five per cent," the project manager said.
Crowdfunding has its origins in the concept of crowdsourcing, which leverages small contributions from many parties.
JN, in its pitch for the ISupport initiative, said it offers an easy and creative way for Jamaicans at home and abroad to provide financial support to micro enterprise and non-profit projects.
"Thousands of small entrepreneurs and grass-roots communities are unable to realise their true potential because of their inability to access financing from traditional sources," said JN in a statement.
"The inherent perceived risk and the lack of adequate collateral are cited as the primary causes of this problem. ISupportJamaica.com will become the Caribbean's premier crowdfunding (peer-to-peer) platform."
Principal sums donated will be returned, if requested by the donor, once the loan is repaid in full. It can also be rolled over for lending to other loan applicants, Brown said.
ISupport will also make donations to local charities and community groups, and it is possible that start-ups will receive part of the funding as a grant, she told Wednesday Business.