Microcreditors determined to push for changes to Microcredit Bill

Senior staff reporter

Wednesday, June 05, 2019

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BOTH the Government and microfinanciers are convinced that they can find adequate common ground to have the new Microcredit Bill passed this year. But, it is obvious that this will depend on how much each side is willing to give up to complete the process.

The Bill has already swung across at least three administrations, and was considered to be close to being debated and passed in Parliament this time. However, it appears that despite the latest delay, which dates began to the last Administration, there are serious issues which have persisted and have to be addressed before both parties are satisfied.

Last week Tuesday, the Jamaica Micro Financing Association (JaMFA) held its annual Leadership Forum and Breakfast Meeting at the Jamaica Pegasus in New Kingston, with primary focus on building a good relationship with the new minister of state in the Ministry of Industry, Commerce, Agriculture and Fisheries (MICAF), Floyd Green, who was special guest at the function. But, as expected, the issue of the new Bill became main topic.

Green informed the meeting that he has had discussions with Minister of Finance and the Public Service Dr Nigel Clarke, who is responsible for the Bill, and the minister was willing to meet the parties, as soon as is possible. Dr Clarke eventually confirmed the development with the Jamaica Observer.

But, at the JaMFA function, it became evident that there might be a much wider gap existing between the parties than the Government understands.

Speaking at the Leaders Forum, acting chairman of JaMFA, Andrew Mais, noted that the issues arising from the new Microcredit Bill is the latest advocacy campaign that the association is addressing. Furthermore, he confirmed, that both JaMFA, and JAMFIN which is the other microfinancing body, are working to together in opposing some sections of the Bill.

Mais identified the first advocacy challenge as the microfinanciers battle for Government agreement to allow for salary deductions for public sector workers who borrow from the micro lenders. The lenders won that battle a decade ago.

He said that second challenge was in response to the threat of de-risking of local banks who continue to do business with the microfinancing companies which, it was felt, may open them up to collusion with money traffickers.

Mais pointed out that, despite the threat of de-risking the micro lenders, only one of JaMFA's 30 members has been de-risked, although the issue still stands.

Now, according to him, the third advocacy challenge is that of the provisions of the Microcredit Act, 2019, which Dr Clarke tabled in the House of Representatives on February 26.

Mais says he is confident that, coming out of dialogue between JaMFA and JAMFIN, both associations feel that when they take their positions to the ministers, “our position will be reflected in the final Bill that is passed”.

“We recognise that there are elements of the Bill that are in theory and cannot apply in the real world,” he insisted.

“I believe that in the absence of consultations and elements the Bill is where it is, today,” he noted, in an obvious reference to the fact that having in been laid in Parliament three months ago no further effort has been made to pursue the debate.

However, he said that he was happy that both ministers Clarke and Green were willing to have dialogue and consultations with the microfinanciers.

“I believe that the microfinance sector represents one of the significant vehicles in attaining the objective of a prosperous Jamaica,” he said.

“I believe that we reach the masses in a way that is unique to microfinancing companies. I believe that other sectors that have tried are still trying. But, I believe that from a microfinance standpoint, we have a window into what is happening in the streets in such a unique way that, if the Bill in its current form is allowed to stand, it will threaten the very existence of how we operate, today,” he said.

He noted that the micro lenders have been providing not only loans to assist poor Jamaican clients, but also provide family guidance and advice on new situations that arise from time to time.

“I believe that our clients see us as more than just financiers or bankers. I believe that there is a level of trust, confidence and a relationship with the players. They come to us for direction and guidance on real life issues, and I believe that most of us have responded to the calls and I believe that because of that, we will continue to see the kind of growth that we seek and experience, today,” Mais told the audience.

The new Bill, when passed, will regulate anyone who is, or will be, operating a business which offers a microcredit service. It defines microcredit as loan facilities offered to individuals and micro, small and medium-sized enterprises (MSMEs) by a microcredit institution. A microcredit institution is defined as a company that is licensed to provide microcredit service. A microcredit service includes: (i) the granting of loans to individuals and to MSMEs; (ii) the provision of business and personal finance advisory services primarily to individuals and micro and small-sized enterprises; and (iii) any other activity designated as such.

The regulator named in the Bill is the Bank of Jamaica (BOJ), which will be responsible for the supervision of microcredit institutions. The Bill contains provisions promoting the cooperation between the BOJ and other regulators, for example, the Financial Services Commission (FSC) and Consumer Affairs Commission (CAC) and even foreign regulators.

The CAC has been identified as the body to which complaints should be made regarding the service offered by microcredit institutions.

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