Business

Redesigned CEF to offer $45B in 5 years

DBJ appeals for more financial institutions to come on board

BY DURRA NT PATE
Observer business reporter

Friday, November 22, 2019

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The Development Bank of Jamaica (DBJ) in conjunction with a number of commercial banks locally will be offering access to credit amounting to some $45 billion dollars over the next five years to micro, small and medium enterprises (MSMEs).

This will be done through the DBJ's redesigned Credit Enhancement Fund (CEF), which was launched yesterday at the AC Marriott hotel in Kingston. In year one some $5 billion has been allocated.

The revamped CEF has been recapitalised through funding from the Inter-American Development Bank in the amount of US$20 million and the World Bank to the tune of US$5 million. The CEF is a partial loan guarantee that helps MSMEs without enough collateral to access loans from financial institutions.

Even though the product existed before, it was recently redesigned by the DBJ to better support its lending partners, the Approved Financial Institutions (AFIs) and Micro Finance Institutions (MFIs) in serving the MSME sector.

The redesigned CEF enables AFIs and MFIs to accept non-traditional collateral and provide coverage based on the borrower's character and the future cash flow of the business.

General loans can now receive a maximum of $30 million covering 80 per cent of each loan in guarantee with small loans getting 90 per cent coverage up to a maximum of $10 million. Start-ups get 80 per cent coverage up to a maximum of $5 million.

So far agreements have been signed with Sagicor, which was the first AFI to come on board. Since them JMMB Bank, National Commercial Bank and First Heritage Cooperative Credit Union have signed onto the programme.

In the meantime, serious interest has been expressed by Scotiabank, First Global, JN Bank and COK Credit Union.

At yesterday's launch both DBJ Chairman, Paul B Scott and Managing Director, Milverton Reynolds made an impassioned appeal to the remaining banks and financial institutions to come on board in building the channels for the provision of access to credit for the MSME sector.

The Jamaica Manufacturers and Exporters Association also signed a memorandum of understanding earlier this month with the DBJ to allow its members access to the CEF.

The CEF is available to viable enterprises and projects that earn less than $425 million in revenue per annum, are tax compliant and have good credit history. The CEF supplements existing collateral, allowing MSMEs to access credit for expansion and reduces the risk for AFIs and MIFs, who are providing the loans.

The fund will be administered through an automated, electronic management information system to facilitate real-time approvals, speedy claims settlements as well as simplify administration and reporting by lending institutions.

The CEF is part of DBJs holistic business ecosystem to support the economic growth and development in KJamaica, which also includes vouchers for technical assiustance, a venture capital programme and loans to MSMEs for start-ups and expansion.


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