COMPETING views are emerging on what continues to block access to financing for Jamaica’s small and medium-size enterprises (SMEs): Is it high interest rates, burdensome documentation, or commercial banks sidelining low-interest loan facilities?

That debate took centre stage at the Re-align Business and Investment Conference, held last week at Jamaica Pegasus hotel in New Kingston, where business stakeholders dissected the persistent challenges undermining SME growth, despite the presence of several funding initiatives.

“I’m appealing to the banks to reduce their interest rates. When you reduce interest rates, more people will borrow more money. So we’re joining the call with the minister of finance and the Ministry of Industry, Investment and Commerce to reduce interest rates so that our struggling SMEs will be able to pay their bills,” said Small Business Association of Jamaica President Garnett Reid.

Reid, who initially identified high interest rates as the primary barrier to accessing financing, revealed that he has spent the past nine months lobbying commercial banks to lower their rates. To date, however, no reductions have been implemented.

However, notwithstanding interest rates as a common concern for many entrepreneurs, the issue of business compliance and readiness was brought to the fore, particularly the problem of incomplete paperwork that disqualifies businesses from accessing financing in the first place. According to Dr Kesha Christie, CEO of KCLH Full Business Solutions, this is largely due to a lack of education and understanding among entrepreneurs about the documentation requirements.

“It’s a bit onerous to get all the requirements in to access the loans,” she said.

With many small business owners only discovering their tax and filing obligations when applying for loans, Christie called for a closer examination of lending policies, particularly those affecting micro businesses. While institutions such as the EXIM Bank offer loans with interest rates as low as 4.2 per cent, she pointed out that preparing an audited financial statement alone can cost a small business upwards of $600,000. Although it is common for SMEs to turn to microfinancing institutions to cover the cost of documentation, Christie argued that this approach only compounds the debt burden.

“Before they even get a dollar, they’re already in debt by over a billion,” she lamented.

She also pointed to structural issues in the lending system, including tax-related bureaucracy and red tape that hinder micro businesses from entering formal markets.

“We have to look at policies as they relate to micro businesses and access to financing. You find that we have to go above and beyond when it comes to them accessing financing,” said Christie.

Even though the Development Bank of Jamaica (DBJ) was established to support businesses through loans, it is not without its challenges. Economic and financial analyst Ralston Hyman, who moderated the discussion, noted that in some cases, funds allocated to the DBJ have been returned to the national budget due to underuse. However, when the Jamaica Observer contacted the DBJ for clarification, the institution reported that less than one per cent of the $5 billion allocated under the SERVE Jamaica Loan Programme in August 2021 was returned to the Consolidated Fund in 2022. Similarly, funds from the PPV Transportation Loan Programme, launched in July 2022, were repaid in instalments due to lack of uptake, with final repayment completed by July 2024.

“The DBJ’s primary loan funding for the MSME sector is sourced from the organisation’s proprietary capital or from facilities provided by multilateral and international development partners, without reliance on the Consolidated Fund,” the bank stated in a written response to the Business Observer.

Still, the perception that DBJ loans remain underutilised was linked to how commercial banks handle loan offerings. Reid argued that DBJ-backed products are not being prioritised.

“When the SME goes to a commercial bank, the banks are offering their loan and put the DBJ loan on the back burner,” Reid said.

According to the DBJ, 8,792 MSMEs accessed capital through its programmes in the 2024/25 fiscal year. Approximately 80 per cent of DBJ loans were disbursed through approved financial institutions (AFIs) and microfinance institutions (MFIs), with the remaining 20 per cent handled directly by the DBJ.

Another financing avenue under consideration is the creation of a micro stock exchange by the Jamaica Stock Exchange (JSE). Reid said the Small Business Association would lead the education component to prepare members for listing in the next fiscal year. However, no further details were provided on the planned campaign or support strategies.

In the meantime, Christie is encouraging small businesses to register and formalise their operations ahead of that time and called for greater collaboration within the business ecosystem to improve access to grants and essential information.