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The junior stock exchange, which will provide the opportunity for Small and Medium (SMEs) Enterprises to raise capital on the equities market through public offerings, will commence operations on April 1.
Minister without Portfolio in the Ministry of Finance and the Public Service, Senator Don Wehby, made the announcement yesterday (Jan. 13), at a JSE junior market workshop at the Terra Nova Hotel in Kingston.
Senator Wehby, while noting that the small business sector is the main engine of growth in economies around the world, said that many faced challenges in trying to raise capital through commercial loans. “Typically, this industry accounts for more than 90 per cent of all firms, 60 per cent of employment, and 40 per cent to 60 per cent of output in most economies. There is no capital market facility in Jamaica for SMEs to raise equity capital, which is extremely important to have a proper capital structure, hence the creation of the junior stock exchange,” the Minister stated.
He cited the London Stock Exchange’s Alternative Investment Market (AIM), and the Toronto Stock Exchange’s Venture Market (TSX-V), as examples of junior markets, which facilitate capital injections by investors into legitimate small and medium-size companies listed on the exchange.
Senator Wehby advised that a submission was made to Cabinet last September, for the establishment of the steering committee, charged to implement the junior stock exchange within six months. This committee, he explained, comprised a wide cross section of key figures in the financial sector, adding that Cabinet was receptive of the idea.
“The Prime Minister was excited, because this is something that he has been advocating for quite some time… that the country needs a junior stock exchange to ensure equity capital in small business, hence growth. (In addition) the discussion, in terms of approval by the Cabinet, was very short and very positive. All of the Cabinet members were really committed to a junior stock exchange,” the Minister informed.
He further said that the JSE has reported favourable feedback from member dealers, with several commitments forthcoming for new listings within the first year of implementation.
Senator Wehby outlined several incentives, which will accrue to companies listing on the junior stock exchange. These include an incentive period of 10 years, which will see companies being exempted from paying taxes for the first five years, while paying only 50 per cent of statutory requirements for the remaining five years. In addition, listed entities will be exempt from paying transfer tax and stamp duties on the transfer of shares.
“I really think (that) it (listing) is a benefit that allows a company to retain cash in the business, so that they can use it for capital expansion, and that’s the mindset behind it. The cash can be reinvested in the business and, hopefully, they will have good expansion. I believe that the business, which chooses to list. will (also) benefit. from the discipline that goes along with the Jamaica Stock Exchange reporting requirements for the purpose of transparency. I am hoping that we will have a minimum of 10 (listings) within the first year,” he stated.
Senator Wehby gave the Government’s commitment to developing the SME sector, and pledged the Ministry’s support to the JSE as it works towards the April 1 implementation of the junior exchange. He also urged all key stakeholders to collaborate in ensuring the success of the initiative.