IN the microfinance industry, even the best-positioned institutions eventually run into difficulties obtaining funding. Particularly in the Caribbean, where the strength of microfinance institutions varies widely, having access to stock market funding is no minor feat. This is why many lenders in the region look to the example of Access Financial Services Limited (AFS), the Jamaica-based provider of micro-, small- and medium-sized business loans and personal loans, now listed on the stock exchange.

AFS was founded ten years ago with initial funding from Development Options Ltd (DO), a Jamaica-based consulting firm. In 1999, DO entered into an agreement with the Government of Jamaica to be the apex institution for MicroFIN/JA, a US$7-million fund established to encourage new lenders to enter the microfinance sector. It was the first such programme in which lending rates were not capped by the government

Gradually, AFS moved on to more sophisticated sources of funding. “Eventually, we got a revolving line of credit to fund loans from PanCaribbean Financial Services Limited and the Development Bank of Jamaica,” says founder and CEO Marcus James. In 2006, the Jamaica-based financial advisory and brokerage firm Mayberry Investment Limited bought a 49 per cent stake in AFS, paving the way for its IPO on the Jamaica Junior Stock Exchange in late 2009.

Seeking for capital

With JM$594 million (US$7 million) in total assets as of 3Q10, AFS is larger than its peer JN Small Business Loans Limited (JNSBL), a subsidiary of the Jamaica National Building Society (JNBS), which expected to close 2010 with JM$122 million (US$1.4 million) in assets — additional information was not available when closing this article.

However, since AFS has a significant portfolio of personal loans, JNSBL is possibly larger in terms of its microfinance activities.

Regardless of size, AFS has certainly set an example for other companies in the microfinance sector. JNSBL is considering following its steps and listing on the Stock Exchange as well, says general manager Frank Whylie.

The Jamaica Stock Exchange is not only a source of relatively cheap capital in a market where six-month Treasury bills pay about nine per cent. Its Junior Stock Exchange, launched in 2009, offers benefits like a 100 per cent tax break for five years after listing.

In terms of microloans, AFS charges an interest rate of one per cent a week plus a processing charge of one per cent of the loan. The majority of its microfinance customers are traders, and almost 80 per cent are women, classical clients of microfinance worldwide.

Everywhere — and everyone

Most microfinance institutions operate in urban areas but AFS is expanding into rural areas — a market underserved even in more developed microfinance markets, such as Latin America. There, AFS has clients such as chicken farmers and producers of cash crops.

“We pretty much lend for economic activities, also including services and manufacturing,” James says. “Our portfolio reflects the way that the economy is structured in Jamaica.” AFS has expanded the number of branches, especially in rural parishes, to 13 throughout Jamaica.

The company’s objective now is to continue to expand its market share while maintaining profitability. It might also consider the option of expanding abroad. As interest rates fall further, it could finance further expansions by issuing bonds, taking advantage of the fact that it is a listed company.

Net income for the nine-month period ending September 30, 2010 increased to JM$195 million (US$2.3 million) — or 195 per cent — compared to the same period in 2009. James’ background in the banking industry may be what gave AFS a head start in the financial market. But the key to continuing strong performance after ten years in a market where most competitors fail to survive, he says, is prudence in the company’s approach to business.

First published by the IDB. The IDB Group is not responsible for the editorial content. Opinions and standpoints belong solely to the author and quoted sources.