$147 million for micro businesses
A new micro finance agency, with $147.5 million to lend to eligible borrowers, was launched yesterday by the Bank of Nova Scotia Jamaica (BNS) and the Kingston Restoration Company (KRC).
The seed capital for the new enterprise, called Micro Enterprise Financing (MEF) Limited, is coming from a $88.5-million grant from the Canadian International Development Agency (CIDA) and a $59-million soft loan from BNS.
For example, no repayment will be made on the BNS portion of the loan for the first five years, and interest for the first two years will be at 4.5 per cent, increasing thereafter by one percentage point a year to a maximum of 8.5 per cent.
Lending under the programme will come on stream this September and will be targeted to four so-called “renewal zones” in Kingston and St Andrew mapped by the KRC, a private sector, not-for-profit company that has focused on inner-city renewal.
The zones earmarked for financing from the MEF include:
* Olympic Gardens
– Drewsland
– Mandela Town
– Tower Hill
– Marverly
– Waterhouse
– Penwood/Bamagie
– Cockburn Gardens
– Waltham Gardens
* Downtown Kingston (West)
– Denham Town
– Hannah Town
– Fletcher’s Land
– Allman Town
– Tivoli Gardens
– Newport East
– Arnett Gardens
– Kencot
– Jones Town
– Rose Town
– Boy’s Town
* Downtown (Central)
– Rae Town
– Southside
– Tel Aviv
– Passmore Town
* Uptown
– Kintyre
– White Hall Gardens
– Arlene Gardens
– August Town
– Papine
– Stand Pipe
– Grants Pen
The programme was developed with the assistance of the Canadian High Commission in Kingston, and according to the sponsoring organisations, lending will be to “solidarity groups … which have adequately organised and sustainable activities”.
“The groups are expected to repay loans that will be granted on defined terms,” the sponsors said in a statement. “In addition, they will be required to save a portion of the profit generated from their business.”
The ultimate aim of the programme is the establishment of a self-sustained micro-financing institution with the capacity to lend to entrepreneurs in urban communities who have no collateral.
It is expected, in the process, to help reduce poverty and facilitate inner-city renewal.
Yesterday’s launch of the programme was announced at a luncheon at which Prime Minister P J Patterson addressed the BNS board of directors and praised the new initiative.
“As we seek to encourage the physical and social renewal of urban communities, it is important that we generate economic opportunity, particularly for the residents and aspiring entrepreneurs in these zones,” Patterson said. “Many of them have skills which, unless they are productively engaged, will be used for destructive purposes. It is a risk the country cannot afford.”
On the broader economy, he repeated his government’s oft-stated claim that it had returned stability to the Jamaican economy after the financial sector collapse of the mid-1990s and had avoided the kind of melt-down which recently occurred in Argentina.
The new environment, he said, was now ready for growth — but not the anaemic levels recorded in recent years.
“What we must, as a nation, achieve without further delay, is not just a modicum of growth, but one which is sustainable at no less than six per cent over the medium-term and triggering the additional levels of job creation in order to reduce substantially the prevailing levels of unemployment,” the prime minister said.
For this to happen, it was important, Patterson suggested, for domestic interest rates to continue to fall and he appeared to imply that commercial banks had a major role to play.
Stressing that interest rates were at their lowest levels since 1984, Patterson noted that the cash reserve ratio was now nine per cent — less than half of what it was less than three years ago. Rates on central bank instruments have fallen.
“I challenge BNS to lead the pack in the reduction of commercial lending rates so that the confidence which is now abundant in the business sector can result in a take-off in local investment,” he said.