The Development Bank of Jamaica (DBJ) is bracing for a rush on the lender from entrepreneurs wanting to break into the market in the wake of a boost in loan funding and tax cuts that take effect on Monday.
Finance Minister Dr Nigel Clarke announced in his Budget presentation on March 7 that $1.8 million in loans would be offered to the micro, small and medium enterprise (MSME) sector in the 2019-20 fiscal year.
Approximately $263 million of credit will be accessible under the Foundation for Competitiveness and Growth Project, a joint venture between the finance ministry and the DBJ.
“We certainly expect an increase, as there’s a certain confidence and positive outlook for the future, particularly in the MSME space,” said Milverton Reynolds, managing director of DBJ, a prime on-lender, in an interview with The Sunday Gleaner.
“We are very, very confident that there will be an increase, and truthfully, when you look at what we are doing, and it’s not only us – there are other institutions as well, such as the Jamaica Business Development Corporation – it’s really to ensure that we move the sector, so that they can, in fact, create the jobs and we can see the economic growth in the country.”
The DBJ has 23 approved financial institutions that have networks all across the island. Over the last 10 years, it has lent about $21 billion to more than 2,000 borrowers. There are also 13 accredited microfinance institutions through which funds are provided for lending. For the current financial year, which ends today, the DBJ projected to on-lend approximately $1.8 billion to the microfinance sector. Over the last decade, the development bank has on-lent roughly $8.4 billion to the micro sector.
“If the MSME sector is the engine of growth in this country, and that’s where the jobs are going to be created – I think that we all agree to that – then it means that as a development bank, we have to make sure that we are facilitating the development of this sector, so we see ourselves as filling all of the gaps,” said Reynolds.
Microbusinesses are categorised as enterprises that have an annual turnover of $15 million per year; small enterprises, $75 million per year; and medium-size entities, $425 million a year.
The DBJ said that in the new fiscal year, it would embark on major programmes to address every single gap in the MSME ecosystem.
“There are a number of things this coming financial year to increase outreach to the MSME community, for instance, the guarantee programme. We’re working with the IDB (Inter-American Development Bank) and the World Bank who have put in US$25 million to expand this programme, so we’ll be able to provide guarantees up to $4 billion a year targeting up to a thousand MSMEs at a time,” said Edison Galbraith, general manager of loan origination and portfolio management at the DBJ.
General manager for the strategic services division, Christopher Brown, said usually funding that they have earmarked are taken up.
“There’s a new product that we’re going to be introducing that we’re going to introduce to the market called reverse factoring, which is going to allow a supplier who normally waits 90 days to get paid to receive payment within five or three days, in some instances, so that will allow for them to get their money much quicker.
“We have another programme that is supporting supply chains. This is a grant to buyers and suppliers to allow them to invest in increasing their productivity, so we want to increase your output from the same level of input, and that is something that is supposed to ensure more sales, more products within that particular supply chain,” said Brown.
The DBJ said that the message it wants MSMEs to take away is that they really shouldn’t have any issue accessing financing.
“Once they have a viable business, we will be able to provide the help they need to be able to access the financing … . We also provide the collateral support, so really there should be no difficulty with an MSME going forward to be able to access financing.
“We’re going to continue to work on this, and this is going to be a major thrust of the DBJ, as it is a major part of the Government’s growth strategy and job-creation strategy,” said Reynolds.