THE Bank of Jamaica (BOJ), by way of notices in the press, has issued a new warning to microcredit institutions (MCIs) about the need for licensing for the continuation of their businesses.

The BOJ, the regulatory authority under the Microcredit Act said, in its new advisory, that all applications for licences must be done in accordance with action 10 of the act, using the prescribed form set out in the Microcredit (Licence, Form of Application) Rules, 2021.

There are an estimated 260 individuals involved in microlending, with 60 of these registered with two representative bodies. The Government of Jamaica introduced regulation of the sector in a bid to reduce the possibility of money laundering and to reduce consumer-hostile practices such as loan sharking.

The BOJ, in its latest notice, said, “By way of reminder, and in accordance with section 64 of the Act, a person who at the commencement date (July 30, 2021) was operating a business which falls within the criteria set out by the act for a microcredit institution or for the offering of a microcredit service, shall within 12 months of the commencement date (by July 30, 2022) be licensed by the central bank.”

MCIs or micro financing institutions (MFI’s) affected by the new regime have been complaining about audit and compliance costs for microlenders seeking to gain licensing through the BOJ to operate as a microfinance institution (MFI) under the new Microcredit Act (MCA), 2021 are estimated at over $1 million.

Former banker Courtney Lodge, who offers consultation services to the sector, told the Jamaica Observer that “Most MFIs do not have policies and procedures, systems and tools in place to address the requirements related to the following five key areas: corporate governance; human resource management; operations, including risk, compliance, and information technology; sales, marketing, corporate communications, and business development; and finance and accounting.”

The new Act, meanwhile, indicates the Consumer Affairs Commission has been appointed to investigate complaints brought to it by a consumer of a microcredit company such as a borrower and outlines the requirements for loan agreements.

In terms of the actual application to become licensed, some MFIs have expressed a desire to be assisted with the interpretation of some of the issues outlined and to be guided in its preparation, says Courtney Lodge, whose company has developed just such a programme in collaborating with the Blossom O’Meally-Nelson-led Jamaica Association for Micro Financing (JAMFIN) to provide assistance for MFIs to get ready for, and then to apply for the required licence. One such assistance is an MFI Licensing Readiness Survey/Self-Audit that is free of cost.