May 26, 2022

IDB and Jamaica government sign US$20 million loan to increase access to credit for MSMEs

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From Caribbean News Now

KINGSTON, Jamaica — The Inter-American Development Bank (IDB) and the government of Jamaica signed an agreement on September 6, for a US$20 million loan that will facilitate increased access to credit for micro, small and medium enterprises (MSMEs) in Jamaica.

This credit enhancement programme for MSMEs will capitalize the credit enhancement facility (CEF) established in 2009 and managed by the Development Bank of Jamaica (DBJ), which provides partial credit guarantees to incentivize approved financial institutions to increase their lending to MSMEs in Jamaica.

The loan will allow the CEF to guarantee larger loans – a maximum of J$50 million (US$385,000), up from J$15 million (US$115,000) – and guarantee a larger portion of the loans – 80 percent, and 90 percent in special cases, up from 50 percent, and 80 percent in special cases. These partial credit guarantees provided by CEF are expected to compensate for MSMEs’ inability to meet collateral requirements, thereby addressing one of the key challenges constraining their access to finance.

Speaking at the signing ceremony held at the ministry of finance and the public service, Julie Katzman, executive vice president of the IDB, noted that the challenges faced by MSMEs in Jamaica are not uncommon. MSMEs have difficulty in accessing quality finance that allows them to borrow for multiple years, and MSMEs are challenged to find rates that are both fair and affordable.

Katzman commended the approach of the DBJ in establishing the CEF in the first place, since partial credit guarantees have been shown to be a way to bridge that divide.

Katzman expressed the hope that the provision of partial credit guarantees will not only encourage financial institutions to take that risk of lending to MSMEs in the short term.

She further noted that it will lay the foundation for enhanced willingness and capacity to lend to the MSME sector in the long term and without the need for partial credit guarantees. This will strengthen MSMEs in Jamaica by facilitating relationship-building between financial institutions and the sector, as well as by promoting the development of the skill-set to assess creditworthiness.

Katzman also took the opportunity to congratulate the government on the tremendous strides made towards macroeconomic stability in recent years, stating, “We (IDB) are in awe” of Jamaica. She also highlighted Jamaica’s improved bond rate which has reduced significantly to four percent.

Audley Shaw, minister of finance and public service, reiterated the government’s commitment to increasing its share of private sector credit to 11 percent by 2020, as outlined in the recently launched National Financial Inclusion Strategy.

Noting that “the IDB continues to give strong support to Jamaica,” Shaw thanked the IDB for its invaluable contribution aimed at paving the way for more sustained and inclusive economic growth.

“I am particularly proud of the relationship Jamaica has developed with the IDB,” he added.

Milverton Reynolds, managing director of the DBJ added that in addition to the loan to scale up the CEF, the IDB will provide US$250,000 in technical cooperation to the DBJ to improve and streamline its CEF operations, in particular, by improving the information management system and transaction flow of the CEF’s processing and reporting functions.

IMAGE:

Julie Katzman (R), Executive Vice President of the Inter-American Development Bank (IDB) and Audley Shaw, Minister of Finance and the Public Service sign an agreement for a US$20 million IDB loan which will facilitate increased access to credit for micro, small and medium enterprises (MSMEs) in Jamaica.

For more on this story go to: http://wp.caribbeannewsnow.com/2017/09/13/idb-jamaica-government-sign-us20-million-loan-increase-access-credit-msmes/

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