DBJ raises limit for collateral support to SMEs
The Development Bank of Jamaica (DBJ) said it has raised the limit for collateral support to small and medium-sized enterprises (SMEs) requiring loan guarantees to over $30 million.
The limit previously capped at under $30 million, now sees collateral support being offered within the range of $35 million to $50 million. The measure, which took effect on June 1, 2023, is being done under the bank’s partial guarantee programme, the Credit Enhancement Facility (CEF).
This comes in the wake of the programme’s highly successful performance during the first six months of this year, when the bank delivered approximately $1.75 billion in guarantees to financial institutions lending to micro, small and medium-sized enterprises (MSME) that lack sufficient security to access much-needed financing from lending institutions.
The CEF was established by the DBJ in May 2010 to provide its network of approved financial institutions (AFIs) including commercial banks, credit unions and other financiers with credit guarantees in lieu of collateral coverage on loans made to SMEs.
Since its implementation, the DBJ has continuously expanded the fund, increasing its base by $3.4 billion with funding from the Inter-American Development Bank (IDB) and the World Bank to redesign it into a portfolio scheme, whereby financial institutions can approve the guarantees, as long as the established criteria is met, by the financial institution.
This, the bank said, has resulted in much-improved turnaround times for the approval of guarantees.
“In tandem with those changes, the DBJ also acquired a management information system to automate the processing and administration of the increased volume of applications. This has led to a steady increase in the amounts of loans backed by CEF guarantees over the last five years, moving from approximately $6 million during 2018-19 to $7 billion during financial year 2022-23,” the bank noted.
General manager for the CEF David Wan, in underscoring the continued growth of the bank’s support to MSMEs, said that almost 68 per cent of the $478.3 million in loans were facilitated in May 2023 alone and went to enterprises primarily in the services and distribution sectors, with approximately $225 million and $183 million going to those in the transportation and agro-processing industries, respectively.
“The CEF has been enormously successful. That is why we are now expanding it to larger loans to the SMEs. This is proof that the DBJ is, in fact, an impactful government organisation that facilitates economic growth by supporting the business community,” he said.
The DBJ, which last year made over 4,600 loans to MSMEs across the island, said the bulk of these were disbursed across some five key sectors led by services, manufacturing and agriculture. The organisation, mandated to facilitate economic growth and development, provides loans, grants and technical assistance for capacity-building to all levels and categories of local entrepreneurs.