DBJ Guarantees Over $1 Billion in Loans to MSME’s

Photo: Contributed Photo Account Executive, Loan Origination and Portfolio Management Department, Development Bank of Jamaica (DBJ), Hugh Grant

Story Highlights

  • The Development Bank of Jamaica, through its Credit Enhancement Facility (CEF), has facilitated loans of over $1 billion to operators of micro, small and medium-sized enterprises (MSMEs) through the issuing of some 200 guarantees.
  • Established in 2010, CEF has been a lifeline for small business operators, many of whom are unable to access loans from financial institutions, as they are perceived to be high risk.
  • Businesses can access 50 per cent of the general loan up to a maximum of $15 million. The bank also provides guarantees for up to 80 per cent on small loans of $6.25 million or less, for a maximum of $5 million.

The Development Bank of Jamaica, through its Credit Enhancement Facility (CEF), has facilitated loans of over $1 billion to operators of micro, small and medium-sized enterprises (MSMEs) through the issuing of some 200 guarantees.

This is through partnership with a network of Approved Financial Institutions (AFIs), including commercial banks, credit unions and other institutions.

Businesses in the areas of agriculture, services, manufacturing, agro-processing,  distribution, among others, have benefited from the loan guarantees.

Established in 2010, CEF has been a lifeline for small business operators, many of whom are unable to access loans from financial institutions, as they are perceived to be high risk.

A partial loan guarantee, the facility assists MSMEs without the necessary collateral to access loans from AFIs by guaranteeing up to $15 million of their loans.

“So if the (business owner) needs a loan for $10 million and they only have collateral for $7 million, so they have a shortfall, they can access this product to provide collateral. It’s a form of loan insurance,” explains Accounts Executive, Loan Origination and Portfolio Management Department, DBJ, Hugh Grant.

Businesses can access 50 per cent of the general loan up to a maximum of $15 million. The bank also provides guarantees for up to 80 per cent on small loans of $6.25 million or less, for a maximum of $5 million.

Provision is also made for energy loans, where the operator is purchasing energy savings equipment, or is involved in the energy sector as a distributor, provider of energy equipment, among other things.

The DBJ provides a guarantee of 80 per cent on these loans up to $15 million.

Mr. Grant tells JIS News that the CEF gives AFIs the confidence and extra security they need to lend.

He points out that in the event that the MSME defaults on the loan, the AFI can then submit a claim under the guarantee programme for repayment.

He notes, however, that in the five-year existence of the facility, the DBJ has only had two claims “which we think is very good for our claim history.”

This, he attributes, to the assessments done by the AFIs to determine the ability of the entities to repay.

“This product is really for collateral support and they (SMEs) would’ve had an existing cash flow, which says they can repay the loan, it’s just that they wouldn’t have the required security to back the loan,” he explains.

In the meantime, Mr. Grant points to a new development under the facility, where AFIs can issue a loan and access a guarantee from DBJ.

“An AFI can give a loan from their funding as well as access the guarantee from DBJ and they are able to use the same limit as on the DBJ loan. They can access up to the maximum $15 million on the SME loan,” he informs.

There is an annual fee to access this guarantee. On an agriculture loan, it is one per cent of the loan amount; while on the SME general loan, it is two per cent.

JIS Social