The Bank of Jamaica (BOJ) has announced that five institutions have been licensed under the Microcredit Act, 2021 from the 112 applications received so far.

The Microfinance Act was approved in January 2021 and became effective in July 2021 with July 30, 2022, being the last day of the transition period for existing firms to apply under the regime. The Act designated the BOJ as the supervisory body to license and regulate the sector with the Consumer Affairs Commission as the body with responsibility for making and issuing a code of conduct for licensees on consumer related matters.

Firms licensed under the Act are approved to provide financing to individuals, micro, small and medium sized enterprises (SME). Firms who fail to comply with the Act or operate outside the act face the possibility of ceasing operations and legal penalties.

Access Financial Services Limited was the first microcredit firm to be licensed by the BOJ on August 1. The company which was registered in June 1995 but began operations in September 2000 had a loan portfolio, net of impairment provisions of $4.02 billion up to March 2022. Its consolidated loan portfolio stood at $4.76 billion up to the end of September. Access is the only company listed on the Jamaica Stock Exchange to date to be issued a license by the BOJ.

The other licensed firms included Kris An Charles Investments Company Limited which was incorporated in December 1991, Kingston Finance Limited which was incorporated in May 2011, Nykhana Investment Company Limited which was incorporated in February 2021 and Trublu Financial Services Limited which was registered in May 2022.

“These new licensees will have an obligation to strengthen their internal control environments to become resilient to money laundering, terrorism financing and related risks, and make the required reporting to the appropriate authorities where they become aware of illicit activities. It is also expected that, with time, licensees will benefit from the advantages that accrue as a consequence of the formalization of their business operations,” the BOJ press release stated.

The BOJ provided an update to the Business Observer recently that 97 applications were received in July and 71 were received between July 29 – 30. The licensing process as per the BOJ’s guide involves acknowledging receipt of the application, a sufficiency assessment, A decision within 90 days after receiving all information and documentation as per the sufficiency letter before a gazette is published with the registry updated.

At a Stocks on the Rocks (SOTR) appearance last Friday, BOJ Governor Richard Byles said, “We have been going through and licensing them one at a time. We intend to have about half or a little more of the industry licensed by the end of the year including some of the most popular names that you know.”

Dolla Financial Services and Lasco Microfinance Limited, a subsidiary of Lasco Financial Services Limited, are the only other two listed companies to have publicly indicated that they have applied and are awaiting approval from the BOJ on their licenses. The BOJ sent notice to Dolla that they don’t object to the firm continuing operations pending the outcome of the Bank’s assessment of its application.

Even Michael Lee-Chin Jr has applied to become licensed by the BOJ for his start up called Seed Investments Limited. Lee-Chin Jr owns 49.5 per cent and has put US$3 million into the start-up while partners Andrew Patterson and Adrian Dunkley own 24.50 per cent each. The company was registered on May 26 and became operational on October 24, but has not started to grant loans pending its application to the BOJ.

“As the governor indicated, we hope by that the end of the year, we would have had a decision on a number of entities that would account for in certain terms of asset size, a sizeable portion of the industry. The team is working assiduously. At the end of the day, a lot depends on the information that comes in and how quickly they can satisfy the information requirements,” said senior deputy governor Dr Wayne Robinson at the SOTR session.

The Microcredit Act came in light of Jamaica being placed on the Financial Action Task Force’s grey list in February 2020. The main aim of the act is to support consumer protection for individuals and business through enhanced transparency with microcredit firms, minimize the likelihood of the sector and to facilitate the development of the sector.

“The Bank looks forward to the approval of additional applicants as it recognizes the significant role played by the microcredit sector in reaching an underserved segment of the population and facilitating Jamaica in achieving its economic goal,” the press release added.