Stimulus package for microfinance entities and SMEs — a possible solution

Stimulus package for microfinance entities and SMEs — a possible solution

Wednesday, July 01, 2020

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Businesses should not be expecting free cash, but with this crisis it is the small businesses that, to a great extent, will contribute to jump-starting the economy when we are over this pandemic.

Of the funding the Government is putting into the various stimulus packages announced earlier, a portion could be transferred to the Development Bank of Jamaica (DBJ) for other registered small businesses/partners. This emergency funding will assist with working capital and bridging cash flow needs during this time. For the participants/entities in good standing, the method is to make available to DBJ funding $2 billion to un-lend to affiliates/companies/enterprises at a reduced rate (3 per cent per annum) which would fall in line with present practices of the DBJ.

This will not require creating any new modus operandi, as it would fit into the DBJ's present operational requirements. The multiplier effect of this would be well worth the investment, given the pass-through to the small business sector. This will supplement the other measures already announced by the Government.

ACCOUNTABILITY

This method would have transparency and financial accountability from application to disbursement to liquidation.

What this would achieve is to keep the businesses afloat and simultaneously assist with the flow of credit to the economy at the same time.

The Government and DBJ in this arrangement would also put stipulations that would prevent the funds being used outside the objectives, such as, no significant capital expenditure except that required to retain staff and maintain other daily business activities. To meet fiduciary requirement, the security would be guaranteed by the balance sheet of the entities or other arrangements. All statutory filings and tax compliance would have to be up to date at a predetermined time.

Delroy A Josephs MBA, BBA Financial consultant


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