Obtaining credit in Ja is a burdensome task — Chuck
OPPOSITION Member of Parliament (MP) Delroy Chuck has listed the failure to put capital to work and difficulty in accessing credit among the reasons for Jamaica's inability to make reasonable economic progress.
The country is not putting capital to work, and valuable capital has been tied up and underused everywhere, and the country remains poor because it is too difficult to access credit, Chuck said in his recent contribution to the current sectoral debate in the House of Representatives.
"The Security Interest In Personal Property (SIPP) Act passed in this Parliament recently, is a major step forward. Now, citizens can use their personal properties to access credit and engage in commerce. However, what about the registration of land and the cumbersome process to get certificates of title for unregistered land, which certificates of titles can be used to access credit?" he questioned.
"Billions of dollars are tied up in these unregistered lands that, if registered, could generate an enormous amount of economic transactions and a wave of jobs and opportunities. In truth, apart from the fact that so many assets are tied up or dormant, Jamaica has far too many unregistered parcels of land in every parish," he argued.
According to Chuck, while the Land Administration and Management Programme (LAMP) is a good programme, after the signing of an agreement with the South Korean government entity, KCS, he had expected that most of the unregistered lands would be rapidly registered.
"Unfortunately, the process of registration is too slow, and so properties that could easily be used to access credit remain dormant," he stated.
Chuck said that considering estimates of over $60 billion in projects are awaiting development approval in the parish councils, it was obvious that the process needed to be expedited, now.
"Do we have to wait on the IMF (International Monetary Fund) to force us to do so? If half of these approvals were acted on, can you imagine the number of jobs and economic activities that would emerge? Growth and prosperity would be on the way! Let us get on with the speedy registration of lands and the easy approval process for property development," he said.
"To obtain credit is a burdensome task, as so many of our financial institutions are risk averse," the Opposition MP said. "The real challenge is the high cost of capital. For the free market economy to function properly, the access to credit must be readily available and reasonably cheap. Interest rates, over the decades, are not only too high but prohibitive and punishing," he argued.
"The Finsac debacle is a telling legacy of how high interest rates destroyed thousands of businesses and families. It is sad that the Finsac Report may never be published (because) there is so much that should be learnt from the collapse of
the financial and business sectors," he added.
He said that, presently, banks and other financial institutions are making huge profits, while most businesses suffer and are unable to get credit to stay afloat and/or to expand.
"How can the banks be so profitable, when most of their customers and clients are barely surviving? Loan rates need to be in single digits and remain there?" Chuck asked.
He said that even more significantly, the purchase of a home should be the natural right of every adult, but this is not really possible in Jamaica for the average wage earner for whom the purchase of a home remains a dream when it should be a reality early in their career.
Mortgage interest rates, he noted, are still too high, and real estate developments should be allowed to take off and contribute to the country's prosperity. But, for that to happen, mortgage rates need to fall to low single digits.
"If mortgage loan rates could be reduced to 5 or 6 per cent, which is actually high for most countries, the real estate market would become a major source of wealth creation and economic activity. The real estate market would benefit enormously from reduced interest rates, stamp duties and, I daresay, lawyer's fees. The bounce and buoyancy in the economy from increased real estate transactions would solve many of our social and economic problems," the MP said.