In 2013, the Jamaican Parliament passed the Security Interests in Personal Property (SIPP) Act to much fanfare that it would change the way farmers access credit for their operations. But, almost a decade later, the indications are that the new law has been of no help to farmers who have trouble accessing financing.

President of the Jamaica Agricultural Society (JAS) Lenworth Fulton is demanding that the Government revisit the SIPP Act to ensure it works as initially intended.

When the Act was passed in December 2013, it was hailed as the legislation that would allow farmers to go to a financial institution and use crops and other agricultural yields like plants, trees, land, future crops, livestock and unborn livestock as collateral for loans. However, things have not worked as smoothly as expected.

The JAS president told the Jamaica Observer that “when it comes to our banks and agriculture, they do more to kill agriculture than promote it so I don’t think the banks are very interested in [SIPP].”

Fulton explained that “what we don’t have is for a man to have a good cow or bull and then you get a loan from that from the bank. I don’t think the bank is doing that yet, because that would need to be backed up by animal or crop insurance that if anything happens to that animal or those crops then the insurance would pay. We are seeing now where some players are introducing crop insurance and farmers are buying into it but we have not heard of a programme yet where you have the animal insurance and I think that is easily done.”

President of the Jamaica Bankers Association Septimus Blake admitted that, “there still exist some obstacles that makes it difficult for MSMEs to access financing on the strength of some of these collateral. One of them, for example, is a market with established price discovery for this kind of collateral, that’s problematic. On what basis would the institution extend credit against collateral for which there is not a secondary market and pricing.”

He continued, “For example, there is an existing secondary market for motor vehicles so there is efficient price discovery with a pool of valuators which are well established. So if you notice, financial institutions are very comfortable in using motor vehicles as collateral because you get a valuation for insurance purposes, there exist very sound valuation basis, you have a sense of the kinds of resale values in respect of motor vehicle…there are very clear price parameters around that. Against that collateral one can secure your rights, your title, your claim and your interest in it and we can realise the collateral in the event that we have to do so. Just think about that with a cow now?”

Fulton, however, pointed out that there are many instances of contract farming happening across the island. He said that’s where “private companies give you the planting material and technical guidance and you do the rest and they take on the finished crop from you so you have a guaranteed market and you’re certain of your money. The bank knowing very well that you are going to get this money will use that contract as a sort of security and then you can get a loan to buy a motor vehicle, equipment and so on. It is sort of a revived crop lien programme, because this programme existed for years with sugar and banana but somehow it fell apart when those markets fell apart.”

But if the SIPP Act is to work for farmers in the way it was intended, the JAS president is convinced that more radical and strategic action must be taken at the policymaking level.

“The banks don’t even give you agricultural loans and that is why from I began my presidency I am calling for an agricultural fund that will work like the National Housing Trust and the other funds. We really don’t have a bank in Jamaica that supports agriculture, absolutely none!” Fulton argued.

The JBA president noted, however, that “I don’t think that anything is wrong with the Bill itself, I think that maybe the expectation that it was going to be a silver bullet may have been a challenge that it was going to solve every problem we had in terms of the extension of credit.”

At the same time, Fulton pointed out that “at the Development Bank of Jamaica they generally put the whole agricultural development into small business. Although it’s a small business, it’s a different type of business from somebody who’s retailing goods. We have a serious problem with financial institutions and agriculture which needs to be fixed and I think it could be fixed more so by government policy.”

With that, he’s urging the Government to do more consultation with agricultural stakeholders to ensure that laws benefit those it is intended to help.

“A lot of the time when policymakers make rules and laws in Jamaica it is narrowly defined based on their knowledge. We are not a country where you pay a man like Don Anderson to go out there and do a poll and get a wide view from our people before you put it into law. Our Parliament is woefully weak with how they make laws or amend laws and so on. I do think a lot of work is needed on that to bring farmers to the centre. You can bet they’ve gone doing these things, how many farmers have they spoken to? Very little!”

He’s urging private companies to get on board as well in helping to adequately finance the agricultural sector, “we need much more work from government and the private sector into how we get money to the farmers and what we will use as collateral. I am hoping that the private companies will step up their insurance effort since we know that the world has shifted to a point where you won’t get a loan if it is not back up by insurance.”

Like the JAS president, Blake agrees that there needs to be more involvement at the private sector level to move the conversation forward.

“I think there is room for innovation to take place by private interests. I don’t think anyone can legislate a market,” said Blake.