House in race to pass Microcredit Bill


House in race to pass Microcredit Bill

Senior staff reporter

Friday, January 22, 2021

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Minister of Finance and the Public Service Dr Nigel Clarke says that it is imperative that the proposed new Microcredit Bill be passed by the end of January.

Speaking in the debate on the Micocredit Act, 2021 in the House of Representatives on Tuesday, Clarke explained the urgency, including the need to bring microcredit institutions under the regulatory framework of the Proceeds of Crime Act and the Terrorism Prevention Act, and subject them to the Anti-Money Laundering/Combating the Financing of Terrorism policy.

According to Clarke, there are also the questions of: recent developments pertaining to the issue of de-risking, and the resultant closure of bank accounts by some commercial banks, which has implications for the microcredit industry; as well as the fact that it is also a time-bound priority for legislative reforms, which are necessary for Jamaica to remain in compliance with the Financial Action Task Force and Caribbean Financial Action Task Force procedures required to improve the country's anti-money laundering and combating the financing of terrorism framework.

“This has underscored and make even more urgent the need to formalise the microcredit industry, through licensing and regulation,” argued Clarke.

“Today we introduce a major legislation to improve access to finance for low-income households, MSMEs (micro, small and medium enterprises), those in the informal sector and those who rely on microcredit institutions,” he declared as he opened the debate on the 2021 version of the Bill, which was first introudced to Parliament in 2013.

A number of the newly elected Government Members of Parliament came out in favour of the provisions, supporting the intention to regulate the institutions.

“Laws may be technical, but this is one Bill that Parliament can relate to and as I listened to…the freshmen in this honourable House, I felt good,” Attorney General Marlene Malahoo Forte said in reaction to their contributions.

Leader of the Opposition Mark Golding noted that the Bill was tabled only last week Tuesday in the House, but that it was obvious that the Government was operating with “a sword over its head to pass it in January”.

Golding insisted that industry players were still dissatisfied with some of the proposals, and suggested that the Bill was not a “short or simple matter”.

But Clarke said the proliferation of the microcredit industry has presented certain challenges, ranging from predatory lending and other consumer-related issues, to the need to ensure that these institutions are not used to facilitate money laundering and terrorist financing.

“These concerns prompted the Government to develop a more effective regulatory framework that is designed to facilitate the growth of microcredit institutions, promote greater access to financial services by low-income groups and at the same time protect the rights of consumers and the integrity of the financial system,” he stated.

The finance minister told the House that the legislation seeks to, among other things: License and regulate microcredit institutions that provide financing to individuals and micro, small and medium enterprises; discourage microcredit institutions from lending money at excessive interest rates, that are not justified by the risk; outlaw predatory lending practices, threats and intimidation that are sometimes part of the micro lending business in Jamaica; promote greater transparency, and disclosure of pricing and terms of products that offers greater consumer protection; and reduce the risks of the industry being used to facilitate money laundering.

“In addition, the proposed Microcredit Act is important as it is expected to facilitate the provision of sustainable microcredit for informal MSMEs, and is in keeping with the Government's thrust to accelerate economic growth and create jobs for Jamaicans by, among other things, expanding access to credit to MSMEs, which are the engine of Jamaica's economy,” he added.

Clarke noted that the Bill has been through several rounds of consultation and has been revised to take into account the feedback and recommendations of key stakeholders, including the Jamaica Micro Financing Association Ltd and the Jamaica Association for Microfinancing — associations with membership from the microcredit sector.

The minister also thanked the staff from the Ministry of Finance and the Public Service, and the Bank of Jamaica, the Attorney General's Chambers, and the Office of the Chief Parliamentary Council, who provided the technical services and input to the drafting of this Bill

The Bill will be taken to the Senate today and is expected to be passed through the parliamentary process by next week.

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