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The House of Representatives yesterday (Oct. 10) approved a government loan guarantee of $1.775 billion from the Jamaica Bankers’ Association (JBA) to the Students’ Loan Bureau (SLB) in order to facilitate tuition loans to needy Jamaicans desirous of pursing tertiary studies.
Minister of Finance and Planning, Dr. Omar Davies, explained to colleague members that the tenure of the loan was for five years at a fixed interest rate of seven per cent per annum. The loan guarantee will be repaid in nine instalments.
Participating lenders in the SLB/JBA Loan Scheme include: the Bank of Nova Scotia Jamaica Limited; the National Commercial Bank; RBTT Bank Jamaica Limited; First Caribbean International Bank; Citibank; First Global Bank; Capital and Credit Merchant Bank Limited; Dehring Bunting and Golding Limited; Pan Caribbean Merchant Bank Limited; MFG Trust and Finance Limited and Citi Merchant Bank Limited.
Dr. Davies explained that the loan facility originated some three years ago when the Bank of Jamaica (BOJ) imposed a special deposit on deposit-taking institutions for which they are paid interest rate less than the market rate.
“The commitment made by the government and the BOJ was that as soon as the situation stabilised itself, these special deposits would be released and in 2005, when the BOJ was releasing some of these special deposits, I met with the leadership of the Bankers Association and proposed to them, that since they had no idea when this special deposit would be released, they could become a contributor to this noble facility by allowing a percentage of this special deposit to be used for purposes, which we all agreed to be noble and that came to $1.775 billion,” Dr. Davies informed.
He noted that as it related to projections for the increase in the number of students seeking access to tertiary education as well as the anticipated rise in the number of students from lower-income families, “there is going to be the need for a greater pool of resources to on-lend to students”.
Responding to Dr. Davies’ presentation, Opposition Spokesman on Finance, Audley Shaw supported the motion to approve the loan guarantee and thanked the participating lenders for their assistance to the SLB.
However, he raised concerns about the interest that the SLB intended to charge students on prospective loans, noting that while the Jamaica Bankers’ Association offered a seven per cent interest rate, a further five per cent was being added with the final rate being some 12 per cent.
“The policy objective ought to be that we ought to be able to say we are lending money at a single digit interest rate,” the Opposition Spokesman argued.
Addressing this concern, Minister Davies said there was a substantive difference between a student loan and other loans as resources were being committed over a number of years, with resources added in each subsequent year.
The Finance Minister further assured that the government would continue to examine ways in which the interest rate applicable to SLB borrowers could be reduced.
The SLB was established under the Students’ Loan Fund Act of 1971 with a mandate to ensure that needy Jamaican students at the tertiary level had access to resources to pursue tertiary education at institutions approved by the Ministry of Education and Youth. Between 1996 and September 2005, the SLB provided student loans amounting to $3.5 billion and a further $463 million was also provided as grant-in-aid to borrowers who have demonstrated the need to access such funding.