IN AN effort to expand credit to the micro and small enterprise sector, reform the borrowing culture and ensure that there is adequate technology to expand credit to them without having problems when repayment stalls, the Government's Self Start Fund has launched the Government of Jamaica/European Union Credit Bureau.
The Bureau, a computerised loan delivery application has features that can check, for example, if a potential borrower's collateral has been used before for another loan.
Complete information is stored on each applicant, including credit rating and credit information that can always be accessed.
The database will reside in Kingston with access both locally and overseas to "track and sanitise the whole idea of a loan."
The Self Start Fund currently helps persons in the MSE sector with credit and technical assistance, for example those who have creative and viable projects that will provide employment but have a difficulty accessing credit from traditional credit institutions when using non-traditional collateral.
"It is well appreciated that micro enterprises often do not have adequate equity to grow their businesses and therefore have to rely on credit," said Industry Commerce and Technology Minister Phillip Paulwell.
"However credit to the micro sector is often constrained by the perception of risk, inadequate or non-existent traditional collateral and high administration cost per dollar loaned for small loans."
The Fund suffers from the perception of its beneficiaries that Government run credit programmes are 'soft loans' or 'pork barrel' interventions. In order to expand credit to micro enterprises, circumvent the traditional collateral barrier, and minimise the moral hazard, says Paulwell, the Ministry took a policy two years ago to develop a credit bureau.
"It's a policing mechanism. It helps to trace people, as a major concern of ours has been the high fallout rate with those who borrow and don't repay," he said.
"The policy decision is that the repayment records of all borrowers under Government supported MSE credit programmes would be provided to the various MSE credit institutions that are members of the Credit Bureau. The objective is to avoid persons borrowing Government funds from one institution, defaulting and then borrowing from another institution."
He said the agreement that the Government has with their three wholesalers - Trafalgar Development Bank, MIDA and Development Options - is that no borrower who defaults under one programme can receive a loan under another programme.
Any wholesaler that permits this would be in breach of their wholesale agreement. The limited funds have to be loaned to those persons who can borrow and successfully repay so that countless needy persons can get their turn.
