Movable assets as collateral a good idea -Buchanan
Daraine Luton, Senior Staff Reporter
WITH BANKS last year declaring the Security Interests in Personal Property (SIPP) Act is insufficient for them to accept movable assets such as a refrigerator, jewellery, art, writings, or even crops and livestock as collateral to secure loans, Paul Buchanan, a government backbencher and first-time member of parliament, has declared that the legislators might have been off the mark in framing the law.
"The SIPP is a good idea. We should have discussed it a little more with the banks rather than do it after the fact," Buchanan said during a Gleaner Editors' Forum last Thursday.
"How do you get BNS to accept a cow, for example, as security?"
Industry Minister Anthony Hylton, subsequent to the passage of the bill, said he would be having discussions with the banks to find solutions to issues raised by them which pointed to, among other things, the need for a framework infrastructure to treat with movable assets.
"Where it is easy to register a car and track that car, and if we are to recover it and sell it, it's easy. You could put it on a car mart and sell it and you get back the proceeds. There is no such infrastructure for the movable assets," Jacqueline Sharp, president and CEO of Scotia Jamaica, said last September.
But Thursday, Arnaldo Brown, the junior foreign minister, parted company with Buchanan on the suggestion that the approach to implementing the SIPP should have been dealt with after greater dialogue with the banks.
"I don't know that consultation didn't take place prior. There is a culture that we are talking about with the commercial banks, and putting the legislation in place is not going to change that culture overnight," Brown said.
"What we are finding, and where the challenge is, (it) is really a culture. If you take interest rates, for example, when there were high interest rates, there was a lot of diet for (government) paper.
"Now the interest rates have come down. They have not shifted to the productive sector. No, what they are now offering is commercial loans, if you want to buy vehicles or credit cards," the East Central St Catherine MP said.
Buchanan, meanwhile, agreed that the commercial banks have a certain culture of not lending graciously to the productive sectors such as to agriculture and the small-business sector. He, however, maintained that another approach could have been used with the SIPP.
"There is a monetary remedy that we could have used to get this micro and small business loan mechanism. We could have used the 110 per cent mechanism where we lend 10 per cent over the feasibility amount and amortise it against that," Buchanan said.
He added: "The aggregate of that 10 per cent would mean that there is a pool of funds to pay out the loan, whether they default or not, so we would not need to go to the cow."
Dr Lynvale Bloomfield, the MP for East Portland, said he was supportive of the legislation but argued that creative measures have to be brought to the fore to ensure it worked.
"We need strong backbone now to look at this situation we are in ... . How many people have a cow? Some of them don't have a file. We just have to get creative," he said.
Such creative juice, Dr Dayton Campbell feels, can come from copying existing models rather than creating new ones.
The South West St Ann MP feels Jamaica should adopt the Grameen Bank model. This is a community development bank started in Bangladesh.
"Based on that model, they have a 99 per cent repayment, and I believe that is something that we need to look at," Campbell said.