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Minister of Industry, Investment and Commerce, Hon. Karl Samuda, says that it is important that adequate systems are set up to determine the credit-worthiness of borrowers, while Government seeks to ensure the integrity of the banks.
Contributing to the debate on the Credit Reporting Bill in the House of Representatives Tuesday (February 9), Mr. Samuda noted that borrowers have used the same collateral to secure loans from various institutions. He said that the new Bill will guard against that occurring, and offer protection to the financial community in the offering of loans.
He said that this should lead to a more efficient system and impact on the banking rate, which is a function of the level of delinquency and loan risks.
Mr. Samuda, however, criticized the commercial banks for not investing sufficiently in the monitoring mechanisms needed to safeguard against delinquency, particularly in the area of small loans.
“In fact, it is fair to say that there is practically no monitoring that could be deemed adequate in the treatment of small loans,” the Minister said.
He explained that this is one of the reasons why there is hesitancy by commercial banks to engage in the small business sector.
“There has to be a greater investment by the banks in those mechanisms that will improve on their ability to collect on the loans that they give out,” he insisted.
He said that the Jamaica Business Development Corporation (JBDC) is looking at establishing a monitoring mechanism that can be used by banks, at a cost, to enhance their ability to offer loans with greater certainty with the implementation of the provisions of the Bill.
“So, it will have the effect of strengthening the foundation on which the entire financial community rests and, at the same time, enable borrowers to be aware of the need to be more careful in the integrity of the project that is being sought to finance,” he stated.
He described the Credit Reporting Bill as a game-changing piece of legislation, for the business community.
The Bill will allow for the sharing of credit information between specified financial institutions, and enable creditors to make better lending decisions. It also provides for the licensing and supervision of credit bureaus, and other connected matters. It will assist creditors to better manage risk and improve pricing of loans.