$6 billion for SMEs
Published:Wednesday | June 30, 2021 | 12:08 AM
The International Finance Corporation, IFC, is providing up to US$40 million of funding to Sagicor Bank Jamaica, for onlending to small and medium-sized businesses, referred to as SMEs.
The funds which translate to around $6 billion in local currency are meant to assist businesses with their recovery from the COVID-19 pandemic, and position themselves for growth, the IFC and Sagicor said in a joint press release.
The two organisations cited a pre-pandemic funding gap of $2.7 billion, saying that only 27 per cent of SMEs had a loan or line of credit.
The issue of access to affordable capital for SMEs has been a bugbear for entrepreneurs and risk-takers over decades, but Jamaica banks, which previously eschewed doing business with small businesses in favour of large clients, have in the past few years been changing direction. While micro businesses still face hurdles to sustainable sources of credit, SMEs have now been tagged by the traditional banking as a growth opportunity for their loan books.
Its brought new competition to the market and is being watched by small lenders who fear the banks will eventually look to their terrain as well.
The price that Sagicor Bank is paying IFC for the funds was not immediately disclosed, nor the interest rate at which Sagicor will issue the loans to borrowers.
“This partnership with IFC will better enable us to support the recovery and growth of such businesses after what has been a challenging year for most,” said Chorvelle Johnson Cunningham, Sagicor Bank CEO, in the joint statement.
“The SME sector is extremely important to the Jamaican economy and our partnership with Sagicor Bank will not only provide much-needed support to the sector but also to the country’s recovery,” said Judith Green, IFC manager for the Caribbean.
Through studies, the World Bank has found that most SME business financing was done out of pocket by entrepreneurs, which served to slow the pace at which their businesses could develop. IFC, its private sector financing arm, is attempting to plug the financing gap by private-public partnerships with lenders, and is particularly focused on improving access to credit for women entrepreneurs.