THE Government plans to provide $750 million in loans to entities in the micro sector for the fiscal year which began April 1.

Yesterday, Commerce Minister Karl Samuda told Parliament during his contribution to the 2010/11 Sectoral Debate that this would bring the total amount of funds available for lending to micro, small and medium-sized enterprises (MSMEs), through both the private and public sectors, to approximately $6.7 billion.

“This means that institutions that lend to the MSME sector, such as the Jamaica National (Building Society), Nation Growth (MicroFinance Limited) and Access Financial Services will be able to access more funds and provide hope for thousands,” he remarked.

Samuda said funds have been available and disbursed through a number of institutions, including the Micro Investment Development Agency (MIDA), which aim to disburse some $171 million this fiscal year, Development Options Limited (DOL) and Pan Caribbean, which aim to disburse $186 million and $151 million respectively, while another $45 million will also be made available through the Self Start Fund (SSF) to the small and medium-sized enterprises (SMEs).

Last fiscal year, MIDA disbursed approximately $172.11 million or 877 loans, which is estimated to have created or retained a total of 1,173 jobs, according to Samuda. Additionally, the SSF disbursed 113 loans totalling approximately $27 million while DOL disbursed 3,500 loans valued at $186 million, creating and retaining a total of 3,427 jobs and Pan Caribbean distributed $115.4 million, with a total of 2,599 loans.

Last fiscal year, the Government also provided the Jamaica National Micro Lending programme with some $200 million last year for its micro-lending programme.

“That money was disbursed in two months. I am advised that the arrears rate is less than five per cent,” the Minister said. “When you consider that those loans were made without the reliance on traditional collateral, we must conclude that this is a highly successful programme and that honest small people repay their loans.”

Samuda also noted that the Development Bank of Jamaica (DBJ) and the Jamaica Business Development Corporation (JBDC) Lending Programme both contributed a total of $2.667 billion and $150 million to the SME sector respectively, during the period March 2009 to March 2010.

This involved 2,460 loans and the creation or retention of some 16,903 jobs on the part of the DBJ, and 212 loans, creating 534 new jobs through the JBDC lending programme. The arrears level was approximately four per cent.

Despite the availability of loans in the sector, many individuals are still finding it difficult to qualify for financing because of credibility issues or the absence of suitable collateral, according to the commerce minister.

He said a number of potential borrowers are unable to readily provide the necessary documentation, such as tax registration number, taxpayer compliance certificate, financial information, and formal business registration, in order to access loans.

“The Government has neither the financial resources nor the expertise to single-handedly fill the financing gap facing MSMEs,” Samuda said. “That is why we welcome the increasing involvement of the private financial institutions, including Jamaica National, National Commercial Bank, Scotiabank and others. That is why we continue to support the creation of new financial products suited to the financing of MSMEs, and that is why we have been introducing mechanisms to facilitate the institutionalised sharing of information and risk, as a means of reducing the risk and heavy reliance on collateral.”

Samuda added that it is against this background that the MSME credit bureau and the Junior Stock Exchange have been introduced.