Gov’t Proposes Project to Provide Loan Financing for Small Business Sector

Finance and Planning Minister, Dr. Omar Davies, yesterday (Sept. 7) outlined a government proposal, which would enable small and medium-sized entrepreneurs to access lines of credit from a list of locally approved financial institutions.
Dr. Davies explained that the programme, which if approved, could be implemented by January 2008, would essentially, be “a loan guarantee project financed by the government, which would allow for increased access to financing by existing or start up small businesses”.
The Finance Minister, who was speaking at the launch of the Jamaica Employers’ Federation’s (JEF) 2006 Salary Survey at the agency’s Ruthven Road headquarters, detailed that the loans would be made by approved financial institutions to firms where projects have been assessed as meeting all required criteria, except for having adequate collateral.
“In other words, these are projects, which the lending institutions would have made a loan on their own, if the entrepreneur had adequate collateral,” he noted.
Under the proposed scheme, he added, the government would guarantee a percentage of the loan portfolio made by the financial institutions, thereby sharing in the risk. Minister Davies noted that, “at the level of the firm, the entrepreneur would put up some collateral, the institutions would assume some risk and the government, the rest up to maximum percentage”.
He noted however that, “we would establish an overall cap on the level of loans, which could be made under this programme, since there would be a limit naturally through the Budget on the amount available to cover this guarantee”.
Participating approved financial institutions, he said, would be given the latitude to take decisions on individual loans, “so that the bureaucracy does not slow up the approval process “.
In turn, the government will monitor the scheme through an annual post-audit process, which would serve as the medium through which the financial institutions will be assessed for continued or expanded participation. Minister Davies indicated that while details of the proposed scheme remained to be finalised with financial institutions, “many persons have projects which everybody accepts that they are viable but because they are unable to come up with the collateral to the percentage required, they are unable to step forward and so the financial institution will make that call”.
In the meantime, the Finance Minister commended the JEF for producing the 2006 Salary Survey, noting that for future publications, it might prove useful if the Federation added comparative salaries with other Caribbean islands in light of the introduction of the CARICOM Single Market. In his overview of the survey, Manager of Research Development and Cooperation at the JEF, Charles Clayton, explained that the aim was to provide a benchmark for employers and employees to negotiate compensation packages.
Additionally, the survey provides information to assist with labour market analysis and provides labour market researchers with baseline information that they can use to guide their studies.
Information contained in the survey, which was carried out in July and August this year, was culled from questionnaires and interviews with employee and employers from more than 4,000 companies within the JEF’s database.
The data received is presented in two publications, one dealing with management level and salaries, and the other with the non-management level and salaries.
Mr. Clayton said that the firms surveyed were distributed over a wide geographical area, with 27 per cent of the samples in rural areas, 34 per cent in corporate area, 14 per cent in major towns, and 25 per cent operating island wide.