JMMB loan agreement with IDB to favour women-led businesses

JMMB Bank Jamaica has set aside one-fifth or $1 billion of a loan it recently signed off on with IDB Invest, as backing for small businesses led by women.

JMMB’s agreement with IDB Invest, a member of the Inter-American Development Bank Group, is its first funding deal with the multilateral agency since it entered the commercial banking sector about four years ago. It’s also the first time that IDB has approved a loan with a focus on gender in Jamaica, but the bank told the Financial Gleaner that it hopes to work with other financial institutions in Jamaica on similar developmental projects.

The US$35-million loan is repayable in five years. The rate at which JMMB Bank on-lends the funds will be determined by the risk profile of individual borrowers, the bank said.

Women-led businesses will be allotted a pool of US$7 million from which to borrow, funds that JMMB Bank CEO Jerome Smalling said would complement another gender-based lending initiative called ‘Her Wealth’ that JMMB created in 2017. The bank will on-lend the other 80 per cent of the IDB funds to other small and medium-sized enterprises across all sectors.

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 microbusinesses were largely started by women educated to high-school level. The survey also found that 72 per cent of female-operated businesses had a relationship with a financial institution and that women borrowed more than men.

JMMB Bank’s Her Wealth loan package was developed before the study, but with an eye on that trend. It offers working capital support, as well as educational, maternal and mortgage financing to women. However, the bank declined to spell out the rates at which those loans are issued, saying once again that it was based on unique risk profiles.

“This approach is to leverage the huge potential market opportunity for growth of this market segment, by catering to the unique financial needs of women and filling the gaps perceived in the financial sector,” Smalling told the Financial Gleaner.

The IDB loan also underpins the investments that JMMB Group is making in the wider SME sector as a growth area. Within the past year, for example, JMMB has opened SME Resource Centres in Jamaica and Trinidad & Tobago, an advisory service that offers guidance to entrepreneurs on marketing, taxation, accounting, writing of business plans, and other general financial management and back-office support, with the help of a coalition of partners and other organisations. JMMB Group Limited, the parent company of JMMB Bank, operates various businesses mainly in banking and investment in three markets – Jamaica, Trinidad and the Dominican Republic.

“While the purpose of our loan was not originally focused on the effects of COVID-19, it is our expectation that the financing that we are providing will alleviate some of the significant issues of JMMB Bank’s SME clients. SMEs are often the first negatively affected during difficult times, such as the present COVID-19 era,” head of IDB Invest’s financial intermediaries division, Marisela Alvarenga, told the Financial Gleaner.

In addition to the IDB Invest loan, the development bank is in the process of mobilising another US$35 million of financing for JMMB Bank.

“Part of our mandate as a development institution is to bring other investors and third parties to our operations to achieve greater impact. IDB Invest is working with other international banks to complement the funding that we are providing to JMMB with funding from those banks,” said Alvarenga.

“By mobilising an additional US$35 million in resources, the total amount will then double to US$70 million in benefit of JMMB’s SME clients,” she said.

karena.bennett@gleanerjm.com