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JMMB Bank adds US$20M to SME loan pool

Published:Wednesday | January 26, 2022 | 12:07 AM
CEO of JMMB Bank Jerome Smalling.
CEO of JMMB Bank Jerome Smalling.

JMMB Bank has struck a US$20-million loan agreement with Development Finance Institute Canada, or FinDev, the first in a series of funding initiatives the bank will embark on this year to grow loans to entrepreneurs operating small and medium-sized businesses.

The rate at which JMMB Bank will on-lend the funds will be determined by the risk profile of individual borrowers, CEO of JMMB Bank, Jerome Smalling, said. However, Smalling said the bank will seek to lend in line with its “competitive and affordable positioning” in the market.

Across the commercial banking sector, the most recent data compiled by the central bank puts the average commercial lending rate at 9.37 per cent as of November 2021. However, bank credit is usually more expensive for SMEs than big businesses.

Its targeted focus on the SME market dates back to 2019 when the bank launched its SME Resource Centres in Jamaica, and later in Trinidad & Tobago, while expanding its suite of financial solutions and processes to better serve SME clients.

In 2021, JMMB struck deals worth US$68 million for deployment to SMEs, through partnerships with financing institutions like the Development Bank of Jamaica, the National Export-Import Bank of Jamaica, and IDB Invest, an arm of the Inter-American Development Bank.

The FinDev funding, which JMMB Bank says has no predetermined limit, can be used for COVID-19 recovery purposes, to facilitate business expansion, working capital support and debt consolidation.

“SMEs add significant value to the country’s gross domestic product via production and employment, while this sector gets a small percentage of financing ... JMMB Bank sees this as an opportunity to serve this segment in a deliberate way,” Smalling told the Financial Gleaner.

In Jamaica, studies indicate that 40 per cent of firms consider access to financing to be a major constraint and only an estimated 27 per cent of businesses have benefited from a loan or line of credit from a financial institution, well below averages for other Latin American and Caribbean economies.

Over recent years, JMMB and other commercial banks have actively been chasing business in that market segment as a way to reinvigorate loan growth.

Amid their target of the wider SME market, there has been special focus on women-led businesses.

A study commissioned by the Development Bank of Jamaica in 2019 found that Jamaica’s micro and small business sector was dominated by women, and that micro businesses were largely started by women educated to high-school level.

JMMB Bank will be carving out 30 per cent or US$6 million of the FinDev funds to lend to female entrepreneurs. But its interest in that segment dates back to 2017 when it rolled out a gender-based lending initiative called ‘Her Wealth’, a year after receiving its commercial banking licence.

Currently, women-led businesses account for 34 per cent of JMMB Bank’s loan portfolio.

Prior to its partnership with FinDev, JMMB Bank signed an agreement with the IDB Invest in 2021 which allowed for the financial institution to lend 20 per cent of the funds, or a US$7 million loan, to women entrepreneurs.

FinDev’s arrangement with JMMB Bank marks the Canadian institution’s first transaction in the Caribbean.

JMMB Bank will repay the loan over a five-year period.

Paulo Martelli, VP and Chief Investments Officer of FinDev Canada, anticipates that the loan agreement will give Jamaican SMEs looking for capital a “significant boost” to expand operations, and retain or create local jobs.

“This loan represents another example of our COVID recovery strategy to provide capital resources to financial institutions so that they can directly fund businesses within the markets they know best,” Martelli said.