The Microcredit Act, 2021, that aims to license and regulate microcredit institutions that provide financing to individuals and micro, small and medium-sized enterprises (MSMEs), was approved in the Senate on Friday.

The legislation, which was passed with 12 amendments, seeks to, among other things: discourage microcredit institutions from lending money at excessive interest rates that are not justified by the risk; outlaw predatory lending practices, threats and intimidation; promote greater transparency and disclosure of pricing and terms of products; and reduce the risk of the industry being used to facilitate money laundering.

Minister of Foreign Affairs and Foreign Trade Senator Kamina Johnson Smith, who piloted the Bill, said it is another initiative by the Government to create more financial opportunities for Jamaicans and protect them as they access those opportunities.

She said that the rapid expansion of the microcredit industry in Jamaica has given many low-income households the opportunity to become a part of the financial system, and has enabled micro and small businesses to access financing to grow or stay afloat.

She noted, however, that the industry has been largely unregulated and underdeveloped and is in need of legal and regulatory reform.

“So, as legislators, while we promote the growth of the industry, we must also protect their customers from predatory lending practices and also ensure that microcredit institutions are not used to facilitate money laundering and terrorist financing,” she pointed out.

Senator Johnson Smith, who is leader of Government Business in the Upper House, said that the Act is timely in light of recent developments pertaining to the issue of de-risking, and the resultant closure of accounts by some commercial banks, which has implications for the microcredit industry.

She noted, too, that the legislative measure is necessary for Jamaica to remain in compliance with the Financial Action Task Force and Caribbean Financial Action Task Force requirements aimed at combatting money laundering and the financing of terrorism.

Other senators who contributed to the debate were: Natalie Campbell Rodriques, Sophia Fraser Binns, Leslie Campbell, Dr Saphire Longmore, Peter Bunting, Don Webhy, and Damion Crawford,

The Bill was passed in the House of Representatives with six amendments on January 19.