Banks Urged to Increase Private-Sector Credit

State Minister in the Ministry of Finance and Public Service, Hon. Fayval Williams, is calling on banks to increase credit to the private sector in order to help grow the economy.

Mrs. Williams, who was making her contribution to the Sectoral Debate in the House of Representatives on June 22, noted that bank credit to the private sector is approximately 30 per cent of Gross Domestic Product (GDP), well below the 52 per cent average among countries in Latin America and the Caribbean.

She noted that local banks are adequately capitalised to accelerate credit creation.

“The Bank of Jamaica, in its (2015 annual) report, said that capital adequacy ratios remained above the 10 per cent minimum benchmark,” she informed.

Turning to another indicator of a bank’s capacity for capital creation, Mrs. Williams said that loan quality, determined by the ratio of non-performing loans to total loans and to private-sector loans, has improved to 4.1 per cent and 4.2 per cent respectively, at the end of 2015.

This, she pointed out, is close to the international benchmark for non-performing loans of five per cent.

Mrs. Williams said Jamaican banks are also shown to have a 20 per cent pre-tax profit margin at the end of 2015 and a return on average assets of 2.1 per cent, which is double that of all United States banks.

“There is room for banks to accelerate credit creation to help the economy to grow. Capital creation comes from profits that companies make, but a more important source is capital creation through bank credit,” Mrs. Williams said.