DBJ makes loan concessions to spur business

Development Bank of Jamaica (DBJ) has cut interest rates for agriculture, energy and the small and medium-sized enterprise (SME) sector by up to two percentage points to spur lending, and will be distributing up to J$30 million in grants to fund business development.

The interest-rate adjustments cuts the DBJ's most expensive loan to the end-user, the business, to 11 per cent, from 13 per cent.

The development bank said the measures are meant to place more affordable credit in the market so that producers can access capital to reinvigorate businesses hit by tropical storms Nicole and Tomas.

The DBJ has reviewed its cost of capital "chiefly as a result of the implementation of the Jamaica Debt Exchange and the general reduction in local-market interest rates", the bank said in a statement.

"The aim is to reduce interest rates across its lines of credit in order to stimulate the Jamaican economy."

Rates are being reduced for credit sold through DBJ's retail-lender network of affiliated financial institutions or AFIs, as well as end-user clients, who the bank refers to as 'sub-borrowers'. The adjustments are as follows:

cost of funds under the DBJ regular credit line to AFIs falls to eight per cent from 10 per cent, for onlending to the sub-borrower at 11 per cent interest, down from 13 per cent;

the Caribbean Development Bank Agricultural line is now available to AFIs at 4.0 per cent, down 4.25 per cent, and the sub-borrower will access the funds at 9.5 per cent, down from 9.75 per cent;

DBJ energy loans to AFIs are now priced at 6.5 per cent from 6.75 per cent, while the sub-borrower will access those loans at 9.5 per cent, down from 9.75 per cent; and

credit on the DBJ/SME line to AFIs falls to 6.5 per cent from 7.0 per cent, for onlending to the sub-borrower at 11 per cent, down from 12.5 per cent.

The new rate structure puts interest rate spreads within a range of 3.0 to 5.5 per cent, the same as it was under the old structure.

The only difference is that the SME line has seen a one per cent reduction in the allowable margin to AFIs, from 5.5 per cent to 4.5 per cent.

Moratorium

The DBJ has also announced a six-month moratorium on principal payments for all existing agricultural loans made through AFIs, designed, it said, chiefly to assist farmers who were adversely affected by the recent heavy rains from recent storm systems.

A technical-assistance grant of J$30 million is also available for the agricultural and micro, small and medium-sized enterprise (MSME) sectors, sourced from a Special Reserve Fund for Technical Assistance at the DBJ, to be distributed through the National People's Cooperative Bank network, J$10m, for technical assistance and capacity building; the Ministry of Industry, Investment and Commerce, J$8m, of which J$5m is earmarked for JAMPRO's new export initiatives; Ministry of Agriculture, J$5m, "to be used to strengthen the functions of the Rural Agricultural Development Authoriy"; and through The MSME Alliance and the Institute of Law and Economics (ILE), J$7m.

On June 9, the DBJ signed a memorandum of understanding with the ILE and the MSME Alliance to provide entrepreneurial training and business support services to micro, small and medium-sized enterprises.

Referred to as the Business Entrepreneurial Empowerment Programme (BEEP), the training programme is intended to assist MSMEs in streamlining business activities and improving standards in legal compliance, taxation, bookkeeping and accounting, business planning and management, marketing, financial literacy and, computer literacy, among other areas.

The BEEP promises to provide participants with at least 24 hours of training.

The DBJ is also now offering to finance certified energy audits, covering up to 90 per cent of the cost for SMEs and 75 per cent for large clients.

business@gleanerjm.com