Loan shark label unfair, says Microfinance Association
BY ARLENE MARTIN-WILKINS Associate editor -- news firstname.lastname@example.org
A culture of unpatriotism and misguided perception has beset the local microfinance sector, but even then the Jamaica Microfinance Association (JamFA) still believes that the broad brush label of 'loan sharks' is inappropriate.
As such, the association is pushing to increase its membership — a move which Executive Director Raymond Gabbidon believes can somewhat erase the negative perception of the industry, which is valued at $6-billion annually among its registered members.
Admitting that there is cause to believe that there exists some element of greed in the mix, Gabbidon maintains that the sector is too important to the economy to be maligned, though its full commercialisation is quite a departure from the original social intent of microfinance to lift the poor out of poverty.
"Yes, there are some loan sharks, undoubtedly. As you'd find in any other sector, you'd have people who probably deviate from the norm. It's the 'wagonist' mentality. Like the heyday of the used-car dealerships when everyone wanted to sell used cars, a lot of people now want to go into lending," Gabbidon told the Jamaica Observer in an interview.
"Some people are unpatriotic, they just want to make a quick money. But to characterise an entire industry as loan sharks is just not fair," he emphasised.
"That was one of the main reasons why the association came about in 2008. There was this perception problem, to some extent which still exists today, in microfinance sectors the world over," he added.
Current estimates point to approximately 120 block-and-steel microfinance companies operating in Jamaica, but Gabbidon said if you throw the "suitcase operators" in the mix that figure could double.
The association currently has only 11 members, which is expected to increase by four in short order. Explaining the reason for the small membership, Gabbidon disclosed that there is too much disunity in the sector.
"The intent was to formulate and streamline the operations to conform with international norms and best practices. But many people just want to do their own thing," he said.
Many people, he added, are afraid of scrutiny, which the association insists on.
"One thing that we consider crucial is the exemption under the Money Lending Act, which gives the Ministry of Finance some amount of regulatory authority over the sector, albeit not much, but which requires extensive reporting requirement," he explained.
"Usually what the exemption does — and by the way, banks and other financial institutions are required to have this exemption also — is that it allows you to charge an interest rate above that which the Ministry of Finance prescribes so that you are not in the usury category," he noted.
"So, therefore, we try to insist that our members have an exemption because that also allows them some level of protection of their income receivables," he said.
But while bemoaning the disunity in the sector, Gabbidon said JamFA is not about to "accept just anybody".
"You have to have an affinity to contribute to the overall development of this country. That has to be part of your purpose," he said. "It can't be about a mere perception of making quick money."