The recent launching of the Development Bank of Jamaica’s (DBJ) redesigned Credit Enhancement Facility (CEF) has left financial institutions and MSMEs very excited. This, as the fund facility will supplement existing collateral, allow MSMEs to access credit for expansion, and reduce the risk for financiers providing the lending.

With much fanfare on Thursday last, the facility was launched at the AC Hotel where representatives of the micro, small and medium-sized enterprise (MSME) and banking sectors who were in attendance welcomed the move, hailing it as a game-changer for companies that require financing but lack sufficient security.

In a release sent, it was said that the CEF, which is a partial loan guarantee, will help MSMEs, usually having no collateral, to be able to gain access to loans from financial institutions.

“Even though the product existed before, it was recently redesigned by the DBJ to better support its lending partners – the Approved Financial Institutions (AFIs) and Micro Finance Institutions (MFIs) – in serving the MSME sector,” the release said.

“So far, agreements have been signed with Sagicor Bank, which was the first AFI to come on board, JMMB Bank, National Commercial Bank (NCB), and First Heritage Cooperative Credit Union (FHC). The Jamaica Manufacturers and Exporters Association (JMEA) also signed a memorandum of understanding earlier this month with the DBJ to allow its membership to access the CEF. In the meantime, serious interest has been expressed by Scotia Bank, First Global Bank, JN Bank and COK Credit Union,” the release further stated.

The revamped CEF has been capitalised through funding from the IDB in the amount of US$20 million, and the World Bank in the amount of US$5 million. The fund will be administered through an automated, electronic management information system to facilitate real-time approvals, speedy claims settlements, as well as simplify administration and reporting by lending institutions

The CEF which is a part of DBJ’s holistic business ecosystem is aimed at providing economic support and growth for businesses in the country. Support ranges from vouchers for technical assistance, a venture capital programme, and loans to MSMEs for start-up and expansion.

“Since its inception in 2009, the CEF has facilitated loans for over 550 MSMEs, totaling $7.82 billion, with over 2,250 new jobs created to date. The redesigned facility enables AFIs and MFIs to accept non-traditional collateral and provide coverage based on the borrower’s character and the future cash flow of the business. General loans can now receive a maximum of $30 million (covering 80 per cent of each loan) in guarantees, with small loans getting 90 per cent coverage up to a maximum of $10 million. Start-ups get 80 per cent coverage up to a maximum of $5 million,” the release added.

The DBJ which is a wholly Government-owned facility, is one of the lead development financing organisations that has taken on the core focus of providing financing options to entrepreneurs in their business life cycle.