MICROCREDIT financial institutions seeking licensing are grappling with prolonged wait times for the approval of their licensing applications – a result of the new regulations implemented in 2021 to combat scams and money laundering. While these regulations are crucial for the industry, entities aiming to comply are facing an exhaustive application process.

“The last time we spoke to the BOJ they had over 200 people and applications in the queue to review,” shared Shudene Ramsay, director of Ramsay’s Professional Services Limited, a business consultancy service. “We asked them what are we looking for our clients for this year, and they told us straight: ‘Do not look for anything this year.’ “

Ramsay, who has filed over 20 microfinance applications for her clients since last year, emphasised the extensive delays in the approval process. On average, she states that the application process for the microcredit licence has taken six months to a year for Ramsay, with the majority of her applicants who submitted over a year ago just getting approved.

“You can’t anticipate requiring a licence to operate the business and when [these] businesses try to do things the right way they have to wait a year,” she told the Jamaica Observer.

She pointed out that during these prolonged wait times businesses face challenges such as being unable to open a business bank account, which she describes as the enforcer of compliance. However, she highlights a lack of knowledge among applicants on how to assemble the application as the primary reason for the delays.

“They reach back out to the person to say, ‘Hey, you need to submit this,’ and what it means for that person is that their application goes back down into the queue,” she says. The cycle continues, and the wait is extended.

Ramsay stressed that the application process, with its numerous requirements, poses another significant challenge for those applying independently, including requirements for things such as a compliance manual, which many small businesses lack.

“My clients come in and they say, ‘I don’t have these documents; I just registered. What is a compliance manual? What is a policy and strategy analysis?’ These are documents mostly large companies have; small businesses don’t even know the first step, sometimes, [regarding] how to get these documents,” expressed Ramsay.

Recognising that many microcredit finance institutions are also micro businesses, she says the requirements pose a risk to the legitimacy of businesses seeking to get licensed.

“This application is forcing people to lie; it’s forcing people to put together things they don’t have together as yet. At best, speak figuratively to say, ‘I would like to do this,’ probably a strategy plan,” she suggested.

The Bank of Jamaica has acknowledged these concerns and has taken a two-tier approach to licensing. Dr Jide Lewis, deputy governor of the Financial Institutions Supervisory Division, explained to the Business Observer that the BOJ has less stringent requirements for smaller enterprises with a book of business of less than $50 million, and more stringent requirements for larger businesses.

Despite the challenges, the BOJ has granted 26 licences out of 143 applications received as of November 2023. Dr Lewis assured that the bank is working to improve turnaround times and the processing of applications. He also reminded those operating in the microcredit space to submit their applications so as to ensure compliance. Those who applied before the end of the transition period must complete their application by the end of the year, or they will be required to exit the system.

“If they have not sbmitted the requisite information within the time specified in the writing, they will be required to exit the system,” warned Dr Lewis. “Persons operating without a licence will be subject to the sanctions stipulated under the Microcredit Act, including monetary sanctions and infringement penalties.”