Jamaica improved one spot to rank 42 among 55 countries in the annual global microfincance study conducted by the Economist Intelligence Unit.

The country suffers from lack of regulation and a focus on pay-day loans rather than small business financing, according to the report entitled Global Microscope on the Microfinance Business Environment 2013.

Countries were ranked based on scores from 0 to 100. Peru for the sixth year topped the 55 countries, scoring 82 per cent, while Jamaica scored 31 per cent. Dominica Republic, ranked 10th, was the highest placed Caribbean country, ahead ofm Jamaica, Trinidad & Tobago (50) and Haiti (54).

Contextually, Jamaica ranked last in the 2008 report, however only 20 countries were pooled in that survey.

The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist.

The study’s overall rankings was based on three criteria: Regulatory framework, institutional development and country stability. For each criteria Jamaica ranked 49, 28 and 4 respectively.

Jamaica’s relatively high score in stability failed to translate into an overall favourable score due in part to its lack of regulation, the study indicated.

“The industry remains underdeveloped and is composed of a small number of non-regulated non-governmental organisations (NGOs), along with credit unions (CUs), which have only recently come under regulatory scrutiny, and a few private companies and banks that offer micro-credit,” indicated the report about Jamaica.

It added that the weak state of the Jamaican economy has sparked a proliferation of small lenders. But the “line remains blurred between micro-lending for productive purposes and pay-day lenders”.

The report acknowledged that Government is aiming to introduce legislation to regulate the micro-finance sector whilst increasing its awareness of credit union activity.

“The Bank of Jamaica (BOJ) is continuing to push for tighter regulation of Jamaica’s credit unions. However, credit unions remain resistant to the reforms, as they would impose a cap on unsecured credit and minimum-capital requirements for start-up credit unions. This would set major barriers to new entrants to the market,” said the report on Jamaica. “The BOJ is actively promoting micro-lending as a means of stimulating the weak economy. This is being done through the disbursement of additional funds through the Development Bank of Jamaica, which has benefited ten microfinance Institutions to date.”

The Economist Intelligence Unit originally developed the report for countries in the Latin American and Caribbean region in 2007 but expanded the study in 2009. This report was supported by financing from the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group; CAF–development bank of Latin America; the Centre for Financial Inclusion at Accion and Citi Microfinance.