JSE pressing for establishment of micro stock exchange

Referencing the success of the Junior Stock Exchange over the past decade, managing director of the Jamaica Stock Exchange (JSE), Marlene Street-Forrest, says the JSE will be pressing for the establishment of the micro stock market.

Street Forrest was addressing the opening of the Caribbean MSME Conference 2019 at The Jamaica Pegasus hotel in New Kingston last week.

Minister of Industry, Investment, Commerce, Agriculture and Fisheries Audley Shaw had touted the establishment of the micro stock exchange in February, targeting companies for capitalisation of between $5 million and $50 million, according to the Jamaica Information Service.

Pointing to the establishment of the Junior Market in 2009 with one listed company, an index of 100 points and market capitalisation of $750 million, Street Forrest revealed that the junior market now has an index of 3,092 points, as at March this year, and a capitalisation of $135.6 billion.

“There was some doubt that this market would be a drain on the Government’s coffers. The results put to rest the unfounded fear, as PAYE for the period under review increased from $249.9 million to $553.9 million, an increase of 121 per cent,” she disclosed.

Contributions from the market to the National Insurance Scheme (NIS) also increased from $51.4 million to $127.4 million, or 148 per cent; while contributions to the National Housing Trust (NHT) moved from $79.4 million to $188.4 million, or 137 per cent, Street Forrest disclosed. General Consumption Tax (GCT) turned over to the government from the sector, also increased from $227.1 million to $2.4 billion, or by 940 per cent.

Street Forrest added: “Revenue increased by 129 per cent and profit grew by 139 per cent.”

She stated that companies listed on the Junior Market have used the capital to expand their network across the country; retire debt; purchase warehousing; invest in bulk inventory; and to conduct backward and forward integration, among other activities.

“As we contemplate the success of the Junior Market, the JSE believes that this success can be replicated with a thirdtier market, the micro market,” she said. “We are going to persist because we feel that this is important to the MSME sector. So we are going to continue to press.”

Street Forrest concluded that small and medium enterprises need to dream big and contemplate how they can raise capital through the stock exchange. However, she pointed to challenges that businesses must overcome to support their listing on the stock exchange, including maintaining better records and preparing a thorough business plan to support their listing.

Also addressing the opening of the conference, chairman of WISYNCO, William Mahfood, said he was buoyed by the prospect of a micro stock exchange.

“This will bring needed capital to many of these small businesses,” he said.

He noted that access to credit facilities has improved over the years, supported by the junior stock exchange and the recent removal of the minimum business tax, as well as the increase in the GCT threshold. He said these initiatives, along with the favourable economic conditions, have augured well for small business development in Jamaica.

“Today, we are starting to see improved facilities in those areas. Many banks are looking, and they need to look at taking a little more risk and investing in more small businesses across Jamaica,” he advised.

NOT AS GREAT

Main sponsors of the conference, The Jamaica National Group, stressed that the risks associated with investing in micro and small entrepreneurs are not as great as many think they are.

Pointing to the experience of its member company, JN Small Business Loans, assistant general manager and chief of marketing and businesses development for the JN Group, Dr Dana Morris Dixon, noted that the risk of borrowers defaulting on their loans has been low. JNSBL is the largest lender to the MSME sector, disbursing loans valued at $5.3 billion during the 2017-2018 financial year alone to entrepreneurs.

“Through JNSBL, we have not only been pioneers, but we continue to demonstrate that small medium and micro enterprises are viable investments, which are not as risky as we tend to believe,” Morris Dixon underscored.

“Our experience has shown that if you believe in these small businesses, because they want to repay their loan, once they have been given the opportunity, they actually do. And, therefore, we have very low ratios of non-performing loans, and that says a lot about the small business sector,” she affirmed.

Beyond listing on the stock exchange, Street Forrest disclosed that a memorandum of understanding (MOU) signed with the Small Business Association of Jamaica in 2017 will also provide opportunities for micro, small and medium enterprises (MSMEs) to access equity capital. Under the MOU, the JSE will design special programmes for members of the SBAJ and assist with lobbying efforts, where possible, to raise capital. The JSE would also conduct capital market activities targeted to MSMEs.

“The Jamaica Stock Exchange understands that it’s through small businesses that we will grow the economy and raise the prosperity that Jamaicans desperately seek,” Street Forrest said.

The Caribbean MSME Con­ference 2019, which, this year, paid critical attention to the matter of technology in small businesses under the theme ‘Improving Sustainability through Resource Development’, was declared open by Minister of Science, Energy and Technology Fayval Williams.