MSME Alliance welcomes TOOL programme, but wants loan rates retooled
Published:Wednesday | July 24, 2024 | 12:06 AMLuke Douglas/ - Senior Business Reporter
A new programme under which tradespersons can acquire tools for their occupation will provide financing at interest rates as low as nine per cent, but the MSME Alliance, while endorsing the initiative, believes it’s too pricey and is pushing for around a three-point reduction.
The group, which speaks for micro and small businesses, also wants the loan cap raised to three times its present amount, over time.
A total of $100 million has been allocated by the Development Bank of Jamaica to the Tradesperson Ownership Opportunity Loan programme, called TOOL, under which persons in a wide range of trades can borrow up to $500,000 to acquire tools for the trade.
“The loan facility is designed to support a minimum of 200 tradespersons at the maximum $500,000 per applicant; however, we expect that most applicants will not need the maximum loan amount and as such the number of beneficiaries will be higher,” said DBJ’s Acting Managing Director David Wan.
In addition to being able to access up to $500,000 as individual loans, DBJ will fund up to 90 per cent of the project cost and loan tenures will range from six to 24 months, with the maximum interest rate for borrowers set at nine per cent per annum.
President of the MSME Alliance Donovan Wignall, while welcoming the initiative, suggested that the interest rates could be lower.
“The thought behind the TOOL programme is absolutely great. The DBJ is being creative and how they assist MSMEs to get up and running. The interest rate I think is on the high side as it’s close to what the banks and the credit unions are offering. I think an interest rate of six per cent would be ideal,” Wignall said.
Trades targeted for the programme include but are not limited to plumbers, tilers, masons, electricians, carpenters, painters, general contractors, HVAC or heating, ventilation and air conditioning technicians, bus operators, barbers, hairdressers and maintenance technicians.
Wan said the TOOL programme has already begun with borrowers now approaching DBJ’s microfinancing partners to apply for loans. He said all tradespersons, whether receiving a TOOL loan or not, will also have access to financial literacy training and registration in the HEART/NSTA Trust skills bank.
The microfinancing firms partnering with the DBJ include JN Bank, Lasco Microfinance, Bull Investments and Regions Financial Services. Another partner is the EXIM Bank Jamaica. These entities will offer eligible sub-loans to tradespeople, facilitating the purchase of essential hand tools, power tools, and specialised instruments. All loan processing will be done by the microfinancing partners.
“The programme is designed for a swift approval process to ensure borrowers can access the funds and procure the necessary tools promptly,” Wan said. The tools will be accessed upon approval and disbursement of the loans by the microlender.
Tool suppliers who have already confirmed their participation in the TOOL programme include Delta Supply Company, Total Tools, K-Ban Hardware, National Supply Company, SCL Jamaica, Rapid True Value, and Hi-Pro.
The DBJ said the programme is designed to support the growth and formalisation of independent contractors by providing them with the financial means to enhance their capabilities and improve their quality of work.
Wignall said the loan ceiling of $500,000 might be low for some MSMEs looking to acquire vital pieces of equipment.
“Tools can range from a hammer to a table saw for a carpenter, a welding plant for a welder, or a ride-on tractor for someone doing landscaping. A ceiling of 500,000 is good but for someone operating a printery, for example, one piece of equipment may cost a lot more. Based on the take up of the loan, the ceiling could be increased to $1.5 million down the road,” the MSME Alliance president said.