The Development Finance Institute Canada (DFIC) Inc, operating under the FinDev Canada brand, recently announced a US$20-million loan to JMMB Bank (Jamaica) Limited.
The loan is intended to support Jamaica's small and medium-sized enterprises (SMEs) seeking capital to assist them in the creation and retention of jobs and to scale their businesses.
The loan to JMMB Bank is repayable in five years. The rate at which JMMB Bank on-lends the funds will be determined by the risk profile of individual borrowers; however, the bank said it will lend in line with its competitive and affordable positioning in the market.
Micro, small, and medium-sized enterprises are considered as the backbone of the national economy, providing over one million jobs and about 80 per cent of employment in the country. However, some 40 per cent of firms in Jamaica consider access to financing to be a major constraint and only an estimated 27 per cent of businesses have a loan or line of credit from a financial institution, well below averages for other Latin American and Caribbean economies.
“This funding to JMMB Bank, our first transaction in the Caribbean, should give a significant boost to Jamaican SMEs looking for capital to expand operations, and retain or create local jobs,” said Paulo Martelli, VP and chief investments officer of FinDev Canada. He said, “This loan represents another example of our COVID recovery strategy to provide capital resources to financial institutions so that they can directly fund businesses within the markets they know best.”
The loan will enable JMMB Bank to increase its financing to SMEs, contributing to growth and job creation in Jamaica. This is seen as particularly beneficial given that overall employment in Jamaica has declined by at least five per cent since the beginning of the novel coronavirus pandemic. In this context, JMMB said it will increase its support to SMEs by creating SME Resource Centres in Jamaica and Trinidad and Tobago and expand its suite of financial solutions and processes to better serve SME clients in achieving their business objectives.
Jerome Smalling, CEO of JMMB Bank, shared, “This partnership underscores our commitment to assist SMEs to scale and grow their businesses by providing holistic solutions to support them throughout their business life cycle, as we recognise that access to affordable financial solutions play a key role in business operation and growth, which will augur well for the country's development.” Further noting that this move is in line with the group's strategy to add value to SMEs and builds on previous agreements with international partners, such as the IDB Invest, to bolster funding to SMEs.
At least 30 per cent of the funds will be earmarked for women-owned or led SMEs (WSMEs), which are important contributors to the country's gross domestic product and job creation. A study commissioned by the Development Bank of Jamaica in 2019 found that Jamaica's micro and small business sector was dominated by women, and that microbusinesses were largely started by women educated to high-school level.
Last year, JMMB Bank signed an agreement with the IDB that would see the bank off-lending 20 per cent of the funds, or US$7-million loan, to back small businesses led by women. Smalling noted, “this agreement complements another gender-based lending initiative dubbed 'Her Wealth,' created by JMMB Group in 2017; with the optic to leverage the huge potential market opportunity for growth of this market segment, by catering to the unique financial needs of women and filling the gaps perceived in the financial sector.” Currently, JMMB Bank has approximately 34 per cent women-owned SMEs as part of its loan portfolio.
This loan to JMMB Bank is eligible to be qualified in the 2X Challenge, an initiative to increase capital directed at investments that contribute to women's economic empowerment.
This transaction supports FinDev Canada's contributions to the United Nations Sustainable Development Goals, in particular to Gender Equality (SDG 5) and Decent Work and Economic Growth (SDG 8).