NCB/ USAID signs MOU to bolster financing for Caribbean SMEs


NCB/ USAID signs MOU to bolster financing for Caribbean SMEs

US$25-million loan injected to provide funding for small business expansion and more

Business Reporter

Friday, November 01, 2019

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Another avenue for access to finance has been made possible, this time through the National Commercial Bank (NCB) and the United States Agency for International Development (USAID), who through a Development Credit Authority (DCA) Loan Portfolio Guarantee Agreement, will provide capital valued at US$25 million or $3.4 billion to finance medium and long-term loans to small- and medium-sized enterprises (SMEs) in Jamaica and other parts of the Caribbean.

At the official signing of a memorandum of understanding (MOU) in Kingston yesterday, stakeholders said that the loan will provide well-needed funding support to the SMEs s ector.

Brian Boothe, senior general manager of the corporate, commercial and consumer banking division, said that the signing represents a momentous occasion of regional importance, one that will directly impact the future of several businesses, families and communities throughout the Caribbean.

“This agreement will assist those Caribbean SMEs with collateral constraints, to access financing for energy saving projects, clean energy production projects and other projects such as investments in machinery, equipment facilities, business expansions and small-scale irrigation systems, he said.

Through the DCA, lending will be guaranteed to registered SMEs operating in Caribbean countries such as Barbados, The Bahamas, Dominican Republic, Grenada, Guyana, Jamaica, St Kitts, St Lucia and Trinidad and Tobago.

“In addition to Jamaican entities, there may be SMEs in other jurisdictions that want access to funding as well, so we are making the funding available as well, not just to [local] companies but to businesses in other parts of the Caribbean. We are fostering growth not just locally, but growth across the region,” Boothe shared with the Jamaica Observer.

Boothe in responding to the questions of proportionality and how the funds will be distributed across the region said that the resources will be allocated on a first-come first-served basis, dismissing assumptions of preferential treatment.

“We will make the funding available to entities that come in, operating on a first-come first-served basis; so if Jamaicans are there we're going to make it available to them as well. We are committed to building not just a better Jamaica but also the wider Caribbean as we are well aware that any long-term sustainable financial growth will rely on the success of our SMEs, he further told the Caribbean Business Report.

The senior general manager further added that the initiative is one that is aligned to his bank's objective to accelerate regional expansion and to expand credit for SMEs in the Caribbean region with the hopes of enabling them to move faster and become nimbler in providing unique value propositions to the marketplace.

SMEs that will qualify for loans are those with no more than 250 employees and having accumulated gross annual sales of up to US$20 million or its Jamaican equivalent.

NCB said that they will provide a 50 per cent guarantee on the loan amount through their SME Development Loan Fund, which will make the initial offer twice sweeter.

SMEs are therefore urged to capitalise on what they deem a unique offer. The loan fund is open to customers of NCB and other banks, providing access to loans totaling up to US$5 million with guarantees of up to US$2.5 million and interest rates at 7 per cent for Jamaican dollar loans and 5 per cent on US dollar loans with up to 15 years to repay.

John Barsa, administrator for Latin America and the Caribbean Bureau of USAID said that the partnership is geared towards developing investment in energy projects across the Caribbean; a move which is critical to building resilience and helping countries to become more self-reliant.

“The guarantee reduces NCB's risk to exposure and enables it to use its own resources to increase lending for energy investments not only in Jamaica but across the Caribbean. This is the first such loan guarantee which is regional in scope. It will allow NCB to increase lending to individuals, households, small businesses and companies that are seeking to invest in small-scale, non-oil energy projects such as renewable energy, power generation distribution and energy efficiency. We will also provide small businesses with financing for working capital, machinery, equipment, facilities, business expansion and other investments,” he added.

The formalisation of this DCA loan guarantee for SMEs in the Caribbean comes on the heels of the recent signing of another private equity fund which was launched last week between the Small Enterprise Assistance Fund (SEAF) in partnership with Sagicor Investments.

The aim of these funding mechanisms is to facilitate business expansions across the region and to give multilateral support to SMEs who are considered to be the heartbeat of a vibrant economy.

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