MSME Alliance wants decisive regulatory action to get banks to reduce interest rates

The MSME Alliance wants the Bank of Jamaica (BOJ) to intensify its efforts to get commercial banks to reduce lending interest rates in line with recent reductions in the central bank’s benchmark policy rate.

The association argues that the banks' persistent delays in lowering lending interest rates place an undue burden on micro, small, and medium enterprises, stifling their growth and hindering broader economic progress.

This call was made following a meeting with the president of the Jamaica Bankers Association (JBA).

According to the Alliance, the JBA has stated that it is unable to influence or set prices for individual banks and that borrowers should negotiate directly with their lenders.

However, the association finds this response inadequate and inconsistent with past practices.

It noted that in 2022, when the BOJ increased the policy rate to combat inflation, banks swiftly adjusted borrowing rates within six months, sending letters to borrowers with limited room for negotiation.

Now, despite a policy rate reduction initiated in August 2024, borrowers have yet to see a similarly proactive response, it stated.

“The six-month mark is approaching, yet no adjustments or letters have been forthcoming. Borrowers continue to shoulder the economic burden while banks report billions in profits annually. This stark inequity must be addressed. During the inflation-curbing measures of 2022, borrowers sacrificed to meet the country's inflation targets. Now that rates are decreasing, the same urgency should be applied to support borrowers and meet economic growth objectives,” the alliance stated.

While commending BOJ Governor Richard Byles for addressing the slow pace of rate reductions, the alliance is urging the central bank to take decisive regulatory action.

“Just as the central bank implemented policy measures to curtail inflation, it must ensure that the benefits of lower rates are passed on to borrowers in a timely manner. We urge the central bank to investigate the delayed rate adjustments.”

The alliance is also encouraging borrowers to remain vigilant and explore all available financial options and lending institutions, including credit unions, the Development Bank of Jamaica, and EXIM Bank.

It advised MSMEs to utilise accountants and financial experts to fully understand loan terms, including interest rates, tenures, and fees, to secure the best financing options.

Additionally, the alliance urged MSMEs to carefully consider accessing private equity or listing on the JSE Junior Stock Exchange as alternative sources of financing.

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