National Commercial Bank (NCB) has committed $3 billion in the first year of the Development Bank of Jamaica (DBJ) redesigned Credit Enhancement Fund (CEF) for small businesses, which was launched last week.

The revamped CEF is a partial loan guarantee programme that helps small businesses without enough collateral accessing loans from Approved Financial Institutions (AFIs). AFIs like NCB will now accept non-traditional collateral and provide loan coverage based on the borrower’s character and the future cash flow of the business rather than actual collateral.

For general loans, the guarantee coverage is 80 per cent of the loan up to a maximum of $30 million, while small loans get 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.

Brian Boothe, senior general manager at NCB, disclosed that the $3-billion funding facility could be increased depending on the take-up.

“We expect that the take-up will be good and as the programme progresses, we will adjust the amount to meet the needs of the micro, small and medium enterprises (MSME),” Booth stated.

Speaking in an interview with the Caribbean Business Report, the NCB senior general manager was quizzed about the specifics of the loan programme such as interest rates. He explained that “NCB’s pricing will be risk adjusted so that MSMEs will get loans at different rates; some at seven per cent and others even lower.”

He was further quizzed on the criteria for assessing loans under this special DBJ-driven credit facility, which is offered through Approved Financial Institutions such as NCB.

In his response, Boothe underscored that MSMEs “must meet certain basic criteria, which we want to see such as the ability to repay, which will be evidenced by the financial information that they provide to us.”

To the extent that DBJ under this programme will provide guarantees up to 80 per cent of the loan, Boothe contended that “security should no longer be the kind of constraint than it was in the past” in MSMEs accessing business loans.

According to the NCB senior general manager, “once we are able to satisfy ourselves about their ability to repay, then it will be that much easier to make advances (credit) to MSMEs.”

Boothe pointed out that when NCB received the invitation by the DBJ to be part of the CEF programme, it did not hesitate to come on board, committing $3 billion in year one.

“We (NCB) are a firm believer that the private sector is the engine for growth of the economy and the MSME represents a significant number of those companies within the private sector, so this programme provides us with the opportunity to expand our (loan) portfolio to the MSME,” Boothe said.

He acknowledged that the CEF will provide NCB with the opportunity to expand its portfolio to MSME’s, pointing out that the programme is a catalyst in helping to boost growth and productivity within the MSME sector.