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DBJ welcomes banks’ new approach to small businesses

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Monday, June 09, 2014    

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MANAGING director of the Development Bank of Jamaica (DBJ), Milverton Reynolds, says that the DBJ has detected a change in attitude among commercial banks, in terms of financing small and medium-sized businesses.

Reynolds told members of the Micro, Small and Medium Sized Enterprises (MSME) Alliance, at their recent general assembly meeting and expo at the Jamaica Public Service Company Sports Club, Ruthven Road, Kingston, that in recent times the commercial banks have shown a willingness to grant loans to the MSMEs.

"We have seen the willingness, and one of the reason for this is that the days when the banks could park their money in government security and make huge amounts of profits are gone. So now, they themselves have to be retooling their operations to be able to do some real banking, which is to assess loans that come before them for productive purposes," Reynolds said.

The DBJ head was responding to questions from members of the alliance about the reluctance by commercial banks to lend money to small enterprises and farmers.

Reynolds said that last year the DBJ successfully filtered more than $2 billion into the sector, through the commercial institutions, including private and PC banks, which are known as approved financial institutions, compared to micro-finance institutions. However, MSME Alliance member and former MP for South East St Elizabeth, Lenworth Blake, said that the funds were not visible in his parish, and questioned why they have to be funnelled through the approved institutions.

"I don't feel it among the small farmers (in St Elizabeth), and this year it will be $3 billion and one sector could hog it up. [For] those with connections, let us look at the various sectors and allocate it according to sectors or else we could end up with two sectors sharing the whole $3 billion," Blake commented, in response to Reynolds' announcement that the DBJ has increased its funding to the sector from $2 billion in 2013/14 to $3 billion in 2014/15.

"The agriculture sector is one of the key sectors benefiting from the loans, most of which flow through the PC Banks, which exist in every parish," Reynolds pointed out. However, he said that some areas may get more than others. For example, poultry, which benefits from a well-structured business environment, is supported by the broiler companies.

"The testimony to this is the fact that the agricultural sector is the fastest-growing sector in the country, and it is the DBJ, through the PC banks and some of the commercial banks, which provides the bulk of the funding for agriculture in this country," he pointed out.

Reynolds said that it was not possible for the DBJ to lend directly to the businesses, because it does not have the infrastructure in place to do the lending.

"The banks already have it. They have branches in all of the parishes...while we would have to build in the cost of that level of administration into the loans," he noted. "What I think that we have to do together is to force the banks to make the funding available to the MSMEs. I think if we work together we can get this done and, as I have said, we have seen the willingness," the DBJ head said.

"To be honest with you, a number of the banks and especially some of the major ones have indicated a willingness to work with us in this regard, so let us work together to push them a little further," he suggested.

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