Following completion of the stipulated cut off point for applications since the passing of the Microcredit Act, the Bank of Jamaica (BOJ) said it has to date received just a little over 100 applications from entities seeking licence.

In an e-mailed response to queries from the Business Observer, the central bank said that of the 111 applications that it has so far received, 97 took place during the month of July, 71 of which were sent between July 29-30 (the last two days of the transition period under the Microcredit Act) with four additional applications coming after the period. As an industry largely unregulated, it is speculated that an estimated 200 microlenders or more are currently operating in the local market. MFIs, in most instances, provide financing to individuals and micro, small, and medium-sized enterprises (MSMEs), usually offering easier outlets for securing access to finance.

The microfinancing sector, most of whose enterprises were largely operating informally before the Act passed in Parliament last year, has since then been placed under the regulation of the central bank. The Act, which seeks to regulate MFIs aims to also provide greater financial inclusion, improve customer service and greater disclosure to customers.

While the BOJ did not disclose the number of approvals it has so far granted, seasoned microcredit firm Access Financial Limited last month indicated that it was among the first set of entities to receive approval for a licence from the central bank. The company which provides personal and business loans services to a large cross section of SME clients, operates across a network of over 17 locations.

The central bank in guiding the fit and proper requirements, which it uses to determine how and if licences are to be granted to microcredit institutions (MCIs), said that despite a few expressions of displeasure and some stakeholders remaining unhappy about various aspects of its licensing regime, which they have deemed too onerous for businesses, licences will only be granted on completion of some chief processes. These the central bank said must include: an acknowledgement of receipt, internal assessment of sufficiency, communication and feedback on applications and completion of an assessment within 90 days, followed by notification as to whether it will issue or not issue a licence.

Implemented in July 2021, the Act requires MFIs to become licensed and fully compliant in 12 months — this took effect in July 2022.

The BOJ said for those entities failing to meet timelines or even comply with the provisions of the Act, they run the risk of being forced to cease operations.

“In this regard, our expectation is that all microcredit lending entities which were in business prior to the end of the transition period (ended July 2022) would have applied by the deadline or otherwise exited the system.

“Of course, new enterprises which are interested in participating in the microcredit lending space are free to apply at any time,” the BOJ said in its response, further issuing warning that persons offering microcredit services without having the requisite licence to do so shall be in breach of the legislation as per Section 9(1) of the Act which recommends a number of penalties in cases where offences are liable for conviction.