The Jamaica Stock Exchange (JSE) will have its annual conference this week. However, most Jamaicans have a limited appreciation of its importance and will probably ignore the event.

Although Jamaica has lost several decades to overall falling productivity and chronic low growth, there are companies that have far outperformed the average. Many of those that have succeeded, did so with the help of the stock market.

The way it works is that companies with a proven track record of good governance and a sound business plan can ask the JSE to offer shares in their company to the public. When the company receives the money from selling shares it then uses the money to expand and improve its operations. This way of mobilising financing is called public equity and companies like it because, unlike bank loans or corporate bonds, it does not require them to divert earnings to pay interest while they are trying to grow. Equity finance allows companies to wait until revenue increases before they pay dividends to investors.

As the company on the JSE grows the people and institutions that invested in their shares win as the value of those shares rises higher than they were when they bought them. This worked so well that for several years the JSE was the best performing stock market in the world. That is a testament to the steady hand and wise leadership of the long-standing General Manager Mrs Marlene Street Forrest, who will step down this year.

The fortunes of the JSE are intricately linked to Government policy. When Jamaica finally decided to abandon the failed policy of high fiscal deficits it gradually stopped crowding out private investment. As the Government took less and less loans from private investors, they had to find somewhere else to put their money and a lot of it was redirected to the JSE. Falling public debt also lowered interest rates so investors had to search for better yields and they found them at the JSE.

An important milestone in the growth of the JSE was the creation of the Junior Market. Like countries around the world, Jamaica has a handful of big, private companies that can easily get cheaper financing, influence government regulations, attract the best talent, and afford to keep upgrading their business processes. This makes it very hard for more informal, smaller companies to break into the sectors controlled by the big boys. The result was lower competition and worse results for employees and consumers.

Jamaica sought to change that by creating a special window for smaller companies, which lowered the requirements to list shares and offered smaller companies an important income tax holiday. The incentives worked and the Junior Market started to expand. However, the tax holiday caught the attention of the International Monetary Fund (IMF) and Jamaica agreed to stop providing it.

That was when Mr Audley Shaw, the then finance minister, came to the rescue. In 2016, he led the charge to find other ways to satisfy the IMF targets for increased fiscal revenue collection and retain the Junior Market. It worked, the market thrived, which led to the new initiative to create a micro market for even smaller companies.

The JSE is an important piece for growing the Jamaican economy and is one of the most effective ways to share its benefits with all segments of society. It matters to us all.