Billions in concessionary DBJ loans available but no takers

BY ALICIA DUNKLEY Observer senior reporter dunkleya@jamaicaobserver.com

Sunday, February 13, 2011

WITH $2.5 billion available at concessionary interest rates to the productive sector, why aren't more persons running to the Development Bank of Jamaica, (DBJ) for loans?

This was the question that on Thursday, caused members of the Economy and Production Committee of Parliament to call for changes to the country's monetary policy.

In fact, Members of Parliament were concerned that commercial banks may have been sidelining concessionary funds available through the DBJ for loans to the productive sector, in order to grab higher profits.

"Why isn't the manufacturing sector going to the DBJ to take up some of these small loans?" Opposition Committee member Lisa Hanna wanted to know.

"Two point five billion available at concessionary interest rates to the productive sector and we have our producers languishing for more concessionary funds?" a clearly put-out opposition colleague Fitz Jackson queried.

Representatives of the DBJ, appearing before the Committee, sought to explain.

"The take-up is not as good as we would have expected and quite honestly, one of the difficulties is that in this particular environment, if a bank has an opportunity to use their funds to lend at their interest rates, they clearly stand to make more money by doing that rather than utilising the DBJ credit facilities.

"The low take-up of our funds is as a result of the reluctance on the part of the commercial banks to truly make the funding that's available through the DBJ, (available) to the productive sector," Managing Director of the Development Bank of Jamaica Milverton Reynolds admitted.

"I have to be honest, we are having some challenges in the commercial banks making available these credit facilities to their customers. We have met with the Bankers' Association and other approved institutions. We are working with them," he said when pressed further.

This, however, was small comfort to the MPs.

"To put it bluntly, you are too mild and you are too diplomatic and it's not taking us anywhere. You have been marketing and you have been interacting, (but) there is nothing to deliver. When I look at the spreads, it's simply saying that because the banks are making much larger spreads from their own funds, they are not interested in yours," Jackson said.

"We hear about a lot of discussions you are having,(but) it's not translating on the ground. You have all of this money here and nobody is taking it, and people are bawling for money to invest," he added.

In the meantime, Reynolds said there were several reasons the DBJ operated through approved lending institutions, one such being that it "does not have the kind of infrastructure in place that would allow it to lend directly to a large number of clients". He further noted that the track record of repayment to government financial institutions that do direct lending "has not been very good".

"We have at the DBJ a portfolio of non-performing loans that is quite significant. The repayments just did not happen," he said.

He, however, noted that some financial institutions such as the EX-IM Bank and the credit unions have been supportive of the DBJ's credit facilities.

Thursday, President of the Jamaica Manufacturers'Association, Omar Azan, who in his presentation had outlined the challenges facing the productive sector, said it was obvious that the "commercial banks need competition". He suggested that the DBJ and the EX-IM Bank should collaborate or merge to do direct lending.

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Billions in concessionary DBJ loans available but no takers