IDB impressed with Jamaica

Jamaica's economic reform programme, over the last four years, has impressed the Inter-American Development Bank (IDB), a top executive disclosed last Wednesday.

"We are in awe, somewhat, of what Jamaica has accomplished since 2013 in the fund programme in creating the preconditions to any kind of macro-stability. The fund programme was not easy, but it's been supported by both parties and has achieved so much in fiscal consolidation and really setting the groundwork for everything that comes forward," Julie Katzman, executive vice-president of the IDB, said.

Katzman was speaking ahead of the signing a US$20-million (J$2.56 million) credit enhancement programme for micro, small and medium enterprises (SMEs) between the Jamaican government and the IDB, at the finance ministry's Heroes Circle office in Kingston.

The programme, to be executed by the Development Bank of Jamaica (DBJ), will provide partial credit guarantees for approved financial institutions to on-lend. The estimated 200,000 local formal small and medium enterprises as well as micro enterprises, which number between 200,000 and 400,000, over the years have been handicapped by lack of access to affordable financing, due largely to inadequate collateral and high interest rates.

Milverton Reynolds, managing director of the DBJ, spoke to The Gleaner about how this programme will fundamentally transform its ability to serve this segment of its client base.

"It means that we are looking at another US$4 million per year, over the next five years, in credit guarantees. When we revamp the programme and move the guarantee from the current 50, we are looking to get to 90 per cent, over time. Can you imagine the impact that will have on the SME sector and their ability to get financing?

GAME-CHANGER

"Truthfully, collateral is such a significant drawback for a lot of SMEs. They go into the banks and most of them don't have the real estate that the bank wants and, therefore, they don't get the loan. This guarantee programme provides that security, improves the chances of them getting it. So to me, this is a game-changer, and it really is another gap that we identified in the SMEs financing ecosystem."

On this note, the IDB executive vice-president offered a word of caution.

"There is a trade-off between how much guarantee the fund provides and the kind of risk that financial institutions are willing to take, and you have to manage that carefully, and I think the intent is to go to find the space between 50 and 90,"she said.

... State to provide guidance

Finance Minister Audley Shaw has given an assurance that the Government will provide the small and medium-sized enterprises (SME) sector with the requisite expert guidance and a comprehensive network of resources to aid in its development to keep pace with the evolving economic environment.

"This includes access to equity and debt capital, a supportive regulatory framework, and tax structures that can also give small businesses a boost and better chance of survival," Shaw said.