SCOTIABANK Jamaica’s CEO, Bruce Bowen, believes that mobile banking, credit bureaus and a framework that allow assets other than land and fixed assets to be used as collateral will significantly improve access to financing for micro, small and medium-sized enterprises (MSMEs).

The only thing is, the various legislation that govern these three critical areas are at various stages of development, with only one passing through the legislative process.

“(The) entrepreneurial activities of these MSMEs, including family-owned MSMEs, (will) be the catalyst for change and the real driving force that will lead to economic growth in Jamaica,” Bowen said at the Private Sector Organisation of Jamaica’s (PSOJ’s) launch and presentation of the Fambiz Project case studies on Jamaican-owned family businesses. “Many of those unable to find financing from their own pockets or from family or friends are unable to find financing from the banking sector due to the high risks associated with start-ups with no track record, coupled little or no collateral to support the request for financing.”

The Credit Reporting Act (2008) — gazetted in January — provides a legal framework for the establishment of credit bureaus, which can provide credit history of borrowers and which is expected will allow for better credit assessment and loan pricing and more credit facilities to a wider segment of the population.

Already, three companies have applied to the Bank of Jamaica (BOJ) and the Finance Ministry to set up credit bureau operations, of which one, according to Minister of Finance Audley Shaw, should be operational by next March.

Regarding a secured transactions framework, which will broaden the scope for collateral security currently considered under the current framework beyond land and fixed assets, last November cabinet approved enactment and issued drafting instructions to the Chief Parliamentary Counsel, but no timeline has been given for the completion of the green paper.

“Allowing MSME entrepreneurs to pledge movable property as security for a loan will significantly improve access to financing,” said Bowen. “By noting such property on a public electronic registry, a Secured-Transactions framework will substantially reduce the transactions cost of registering collateral interests and will enable greater access to finance and efficiency in service delivery.”

On mobile banking, the BOJ last week told the Business Observer that it has “developed a policy paper on mobile financial services (including mobile money) which is being reviewed internally”, for which a discussion paper is expected to be circulated by the end of this month.

“At the conclusion of the review process the paper will be circulated to the industry and relevant stakeholders for comments, which will inform the final policy,” said the BOJ. “The paper will also be posted to the central bank’s website.”

Bowen said he is “very excited” about the number of emerging electronic payment systems and, in particular, mobile banking, which he expects will offer MSME entrepreneurs an easy, cost-effective way to conduct bank transactions, to administer their accounts and to access customised information wherever they need it.

“It has been predicted that the European market for mobile banking services will grow from 7 million mobile banking users in 2009 to 115 million users in 2015.” said Bowen. “We cannot ignore the significance of this growth potential. The financial sector more than anxiously awaits the regulatory framework to take advantage of this enormous potential that I know will greatly assist MSME entrepreneurs.”