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The House of Representatives has approved a Government guarantee for a loan of $600 million from the Bank of Nova Scotia to the Development Bank of Jamaica (DBJ), for on-lending to the agricultural and tourism sectors.
Minister of Finance and Planning, Dr. Omar Davies, who moved the resolution on January 23, explained that $250 million of the amount would go toward the agricultural sector, while $350 million would be for tourism. The sum is payable over seven years, with the interest charge on the loan for the agricultural sector being 7.625 per cent per annum, payable quarterly, while the interest rate for the tourism sector loan is eight per cent per annum, payable on a quarterly basis.
“What is significant about this loan is that in addition to the contribution of the Bank of Nova Scotia, the government, through the DBJ will be subsidizing the loan, such that the on-lending rates to the farmers and to the entrepreneurs in the tourism sector, will facilitate them having access to loans at single digit rates,” Dr. Davies explained.
“As regard the agricultural sector loan, although the rate of interest is 7.625 per annum, the DBJ will be lending this money at a rate of 5.75 per cent to the People’s Co-operative Bank, which will then on-lend to the beneficiaries at 7.875 per cent per annum, and hence the Government of Jamaica will be providing a subsidy of two per cent per annum on the agricultural sector loan, but will give the PC Banks the spread. So in other words, the government is actually paying the PC Banks in order to on-lend at those interest rates,” he added.
The maximum available to any one small farmer will be $5 million, while the minimum will be $100,000.
In terms of the loan for the tourism sector, there will be a maximum of 50 per cent of market value available for: acquisition of new capital equipment for renovation of properties; acquisition of used equipment; re-engineering, including environment and enhancement; modernisation of technology; and the acquisition of soft furnishing. For this sector, the maximum available to each applicant will be $15 million and a minimum of $2 million.
“The loans to these two sub-sectors represent just a part of the comprehensive attempt to provide support for productive sub-sectors, in particular the expansion which is taking place in tourism. The unprecedented construction of new rooms in the tourism sector has stimulated the overall market for tourism. With the record last year of three million visitors, the tourism sector is very much alive,” Dr. Davies told the House.
He further pointed out that with the expansion of this magnitude in this sector, there were opportunities for persons in the agricultural sector to provide the hotels with a wide range of products.