PRICEY RELIEF LOANS

Almost two years after the Government offered $700 million in loans to players in the transportation and entertainment sectors hit by the COVID-19 crunch, only just over $1 million of the funds has been disbursed.

The low take-up of the offer has provoked questions of how policies are to be crafted to ensure that those targeted benefit, by casting an eye on lending terms and their prohibitive effect which impact vulnerable groups accessing these loans.

In August 2022, the Government launched the programme under the theme ‘Ready Fi Di Road Again’. Some $500 million was set aside for the entertainment industry and $200 million for transport interests such as taxi operators.

The loan has an individual cap of $750,000 and targeted persons such as bar owners and food vendors, as well as small and medium enterprise operators.

The programme is operated out of the Development Bank of Jamaica (DBJ), the State’s development finance institution, which offers the loans through approved lending entities such as microfinance institutions (MFIs).

“No transport operator received loans under this facility,” the DBJ said in an emailed response to The Sunday Gleaner on Friday.

Regarding the entertainment category, four operators accessed loans at a total value of J$1.25 million, leaving over $498 million untaken.

The funds were earmarked for stakeholders whose income-earning activities were disrupted by the COVID-19 pandemic. The money could be used for working capital, debt refinancing, and capital expenditure.

The DBJ acknowledged that transport operators had problems with accessing the loans.

“Based on consultations with members of the sector, we understand that the individual operators and associations expressed concerns which included interest rates and collateral requirements by the MFIs,” it explained.

The bank said it has “endeavoured” to address the challenges “by engaging in consultations with both the sector and the MFIs, particularly to facilitate the development of new products of a similar nature in the future”.

It added: “These initiatives involved collaborating with MFIs on loan interest rates and addressing collateral deficiencies through DBJ’s Credit Enhancement Facility, as well as extending repayment periods. This is still a work in progress, but something that we remain committed to.”

INTEREST RATE ‘TOO HIGH’

Transport operators have found it difficult to take up loans because of the inability to provide the collateral required of lenders, argued Egeton Newman, president of the Transport Operators Development Sustainable Services (TODSS).

He also complained that the interest rate is “too high”.

“When we got it, we were told it’s three per cent interest rate. We told ourselves that ‘okay, fine, maybe five or four per cent when it goes through the lending agencies’. At the end of the day, we were told 13 per cent,” Newman told The Sunday Gleaner of the offer under the ‘Ready Fi Di Road Again’ programme.

The maximum interest rate that lenders can charge transport clients is 13 per cent, the DBJ said. Loans were also set to run for up to two years.

For persons in the entertainment sector, lenders could apply an interest rate of up to 24 per cent. The tenure of the loans ranged from two to five years.

Newman said there were also other hurdles.

“The most important thing was that the red tapes to get the loan were out of reach,” he argued.

“You talk about a little man who wants $50,000 to borrow and he only has one taxi and he’s told to bring his banking information, have his income and expenditure. It was impossible … and, therefore, we could not take up the loan.”

Newman said his colleagues “need that $200 million”, but “it must be at a position where we can take it up”.

Taxi operator James Saunders said he was not even aware of the loan offer; nonetheless, he would have stayed away from it.

“Me couldn’t deal with the whole heap a paper and breed a documents dem want,” said Saunders, as he helped passengers board his Nissan AD Wagon motor car late Friday evening in Half-Way Tree, St Andrew.

“Me just run taxi, bredda, and ensure me yutes dem can go school,” he said. “Me nuh really hear anybody talk ‘bout the money there weh wi can get, but sometimes them offer things and we caa reach it.”

OPERATORS WANTED MORE

Lasco Microfinance Limited, one of the lenders involved in the ‘Ready Fi Di Road Again’ programme, said it welcomed the opportunity to participate. But it made a case for the institution to be allowed to provide the loans in excess of the DBJ’s limit by requiring operators to provide a guarantor or collateral.

Most of the transporter operators wanted amounts that were “extremely larger” than the $750,000 cap for individuals under the programme, disclosed Ricardo Thomas, assistant general manager responsible for credit and administration at Lasco Microfinance.

“Our risk appetite would not have allowed us to provide those amounts that some of the operators were interested in, in an unsecure manner,” he said, adding that operators appeared to have “some misunderstanding” over the amounts that they were eligible to get.

“Some operators wanted amounts that would allow them to purchase vehicles, which would have exceeded that $750,000, but then even within that $750,000, … you still have to apply your own risk appetite and matrix, how you are going to lend [these] funds in a responsible way. Remember it’s not a grant, so it has to be done in a manner to ensure that DBJ gets back their money, and the institution gets back theirs,” Thomas explained.

Noting that the interest rate was “not an issue” for Lasco, he also said poor credit history affected some operators. “Very few”, he added, were interested in loans less than $300,000.

‘REQUIREMENTS ONEROUS’

The Sunday Gleaner was unable to get a comment from Transport Minister Daryl Vaz on Friday.

His opposition counterpart Mikael Phillips argued that “from day one, … the requirements for persons to access it for the sector was a bit onerous”.

“It is done through commercial banks so the requirements from the commercial banks are going to be very restrictive for the operators themselves. So, instead of them trying to satisfy all the needs, they basically don’t take it up,” he said.

Phillips added, “We have to find an entity like JBDC (Jamaica Business Development Corporation) to assist individuals within the sector in formalising what they have – some accounting practices and other ethical practices – for them to regularise themselves that they may see the benefit in being regularised and applying for these loans.”

NEED MORE FAVOURABLE TERMS

On the entertainment side, the DBJ said there has been no reported delinquency among the four operators who have benefited from the loans and that stakeholders in the sector “have noted no challenges to date”.

The cap for businesses and individuals is $750,000.

A major representative group in the industry, the Jamaica Music Society (JAMMS), also pointed to “onerous” conditions imposed by the lending agencies for the low take-up. It noted that while the DBJ was offering the loan at three per cent and without collateral, the mark-up and conditions of the lenders were tough for potential takers to surmount.

“The entertainment sector was the first to close in March 2020 and last to reopen two years later. Many individuals and small business operators in the sector who would have needed assistance, more than most, went out of business totally,” Evon Mullings, general manager of JAMMS, told The Sunday Gleaner.

“At that stage in 2022 when the facility was made available, and since then, what these small operators need are easily accessible loans or grants. The onerous requirements to meet the AFIs and MFIs criteria to qualify for loans would have been part of the setback.”

The group represents over 1,500 local producers and more than 175 performers.

Mullings also said the marketing of the loan facility may not have been intended for all players in the entertainment sector but more for the smaller operators.

The JAMMS executive further said a contrast “needs to be drawn” between how government funds are to be made available to the film and television sector through the recently announced $1 billion Jamaica Screen Development Initiative (JSDI) and the undersubscribed $700 million loan programme.

“The JSDI funds are not being made available through any AFIs (Approved Financial Institutions) or MFIs. Direct applications are to be made to JAMPRO. The JSDI fund will have its own oversight board and applications reviewed by a committee, external to JAMPRO. In short, those in film and television will not be subject to the criteria of AFIs and MFIs nor face the interest rates that AFIs and MFIs set,” he said.

“These more favourable conditions, if structured similarly for the entertainment sector, may well enable stronger take-up of loan facilities intended to support the sector.”

Meanwhile, the DBJ has indicated that outside of the $200-million loan facility for transport operators, it facilitated 74 loans in the sector valued at $367.5 million under other portfolios over the 12-month period up to March 31, 2024.

It said those loans were used for operational improvements in services related to haulage, tours and taxis/minibuses.

jovan.johnson@gleanerjm.com