Hard hit by the slowdown in the economy, and with some in the sector facing bankruptcy, microlenders are seeking a lifeline from Government in the form of $8 billion of cheap credit.
Blossom O’Meally-Nelson, chairman of the Jamaica Association for Microfinancing, or JAMFIN, says they are looking to source capital from the state at interest of 2 per cent or 3 per cent for onlending.
Typically, microfinancing companies, which are also known as payday lenders, price their loans at an annual rate of around 50-70 per cent, and higher, but the life of such loans are short term and usually counted in weeks, not years. If JAMFIN gets the Government to agree to wholesale funds to the sector at three per cent, O’Meally-Nelson said microlenders could in turn lend the funds to their clients at single-digit interest rates.
JAMFIN has been making the case that it has a role to play in helping with the recovery of the Jamaican economy. In an op-ed last week, O’Meally-Nelson noted that the sector is responsible for some $20 billion of loans revolving in the financial system – a suggestion that as a block their participation in the loan market packs substantial punch.Microfinance firms, whose loans are often unsecured and therefore high risk, have seen a spike in loan defaults since the pandemic, to the extent that both JAMFIN and the Jamaica Microfinancing Association, JamFA, say have been pushing some firms towards bankruptcy.
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