Editorial | Use finance and industrial policy to power Jamaica’s growth

Recently, both Standard & Poor’s (S&P) and the Bank of Jamaica (BOJ) have sounded a quiet alarm. Despite macroeconomic stability and strong capital buffers, credit growth has slowed – from around 11 per cent in 2023 to roughly six per cent in 2024.

S&P points to Jamaica’s low GDP and per-capita income growth as the core culprits. Weak income momentum curbs borrowing, while banks, seeing few viable projects, retreat to safer terrain – mainly mortgages and consumption loans, and reliance on fees

The BOJ 2024 Financial Stability Report confirms the pattern. Household credit – especially mortgages – rose, but business lending stagnated. The household sector now accounts for over half of all loans, while the productive sectors’ share has fallen. The financial system is stable, yes, but it’s not doing enough to finance production, exports, and technological upgrading.

This is a major weakness of Jamaica’s growth model: credit and investment are flowing sideways instead of forward. The country needs to redirect finance toward productive activity to prevent stability becoming stagnation. The challenge for policymakers is therefore not only to keep the banks safe but to make the economy dynamic – a task tailor-made for a new generation of industrial policy which this newspaper has been championing.

Credit in an economy is faith and confidence made manifest. When firms and households expect higher income tomorrow, they borrow and invest today. But when belief fades, credit growth withers – and with it, the engines of expansion. The link between GDP and credit is not accidental; it is circular and self-reinforcing. Growth breeds credit, and credit finances growth. Reinforcing this loop demands coordinated action to lift both demand and confidence in productive enterprise.

SHORT OF RISK APPETITE

Jamaican banks and financial institutions are not short of liquidity; they are short of risk appetite. In a low-growth environment, every industrial loan looks like a gamble, while a mortgage looks like a sure thing. To shift the mix, the State must share part of that risk.

Credit guarantees and first-loss facilities, especially through the DBJ and multilaterals assistance, can turn “too risky” projects into bankable ones.

A Green and Productive Credit Window at the DBJ, with support from external sources could back loans in agro-processing, renewable energy, manufacturing upgrades, and digital services – sectors with export potential and employment spillovers.

Performance-based incentives – where the guarantee increases when firms hit export or value-added targets – would align finance with productivity outcomes.

Credit cannot flow into a vacuum. Banks need projects, not promises. That means the government must continue the campaign for spatial transformation and industrial corridors - serviced land, reliable utilities, and clear titles. The Kingston–May Pen–Montego Bay Growth Corridor could become the test bed: integrate industrial parks, logistics hubs, housing, and infrastructure so that finance can see where to flow.

Think of policy as the riverbed and credit as the water. No riverbed,

Jamaica’s pension and insurance funds hold billions in long-dated assets but remain heavily invested in government securities. A prudentially managed window allowing a portion of these funds to back productive-credit securitisations or infrastructure bonds – with proper guarantees and transparency – could unleash transformative capital without jeopardising stability. Diaspora investors could join through special Growth Notes channelled to corridor projects and export clusters.

STRONG COORDINATION

Industrial policy is no longer about subsidies and protection; it’s about de-risking and coordination. Ministries of Finance, Industry, and Investment must work with the BOJ, DBJ, and the private sector to ensure that credit supports national priorities. Establishing a credible public-private monitoring body to help track: Credit-to-GDP and business-credit share, as well as lending to priority sectors.

If Jamaica can lift credit to the private sector by 7–10 percentage points of GDP by 2030 – half of it in business and export-oriented lending – the payoff could be transformative with: faster annual GDP growth, and thousands of new jobs in agro-processing, logistics, green energy, and digital services.

GREATER DYNAMISM

A keen interpretation of the S&P and the BOJ reports points to the need for a stronger, and more resilient banking system rooted in real production, not speculative churn.

Jamaica has done the hard work of restoring stability. Inflation is moderate, the exchange rate steady, and fiscal discipline credible. The next frontier is dynamism – using credit and investment to expand the country’s productive base.

Industrial policy gives us the map; finance provides the engine. If we align them over the next five years – de-risking productive credit, deepening capital markets, and building the physical and institutional corridors for investment – Jamaica can finally turn stability into momentum.

Perhaps, after years of cautious balance sheets, we can once again believe in growth and finance it accordingly.