DENNIS JOSLIN, the man who heads the Jamaican operations of the US-based collecting agency for the non-performing loans of FINSAC, has some harsh words for the high interest rates policy of the 1990s.
Mr. Joslin heads Joslin Jamaica, the local subsidiary of Dennis Joslin Company, a firm which specialises in purchasing non-performing loans for collection. The Jamaica operation has got off to a fair start and has seen some significant progress in just a few months. From experience in many countries, Mr. Joslin has observed that once the debt is taken out of government's hand and placed in the private sector, debtors realise that action will be taken if their obligations are not honoured.
The firm, using the approach of realistic rescheduling as "work-out artists" has already collected US$50 million with a 75 80 per cent compliance rate. Debtors are mostly opting to restructure their debts under the terms that Dennis Joslin (Jamaica) Company is offering rather than going to a commercial bank to borrow money to pay their debts. The highest rate the company has charged to date is 19.7 per cent which is comparable to the lowest bank rates.
Acknowledging that he was likely going to be quoted, Dennis Joslin did not mince words in addressing Kingston Rotarians last Thursday: the high interest rates policy "was just stupid" and is largely responsible for many companies and individuals being unable to honour their debts today.
The broad contours of the history of fiscal management since about 1990 and its consequence are quite clear: Fiscal policy early in the period pushed the inflation rate into double digits which the Government then sought to control and reduce by a long-drawn-out high interest rate policy.
This policy was intended to curb consumer credit spending - to "mop up liquidity" in the lingo of economists - but had its most savage impact on the productive sector and on the financial services sector. The productive sector could not borrow to produce profitably at rates which sky-rocketed to as high as 70 per cent. And at those rates the lending institutions, which make their money from providing credit, could not find enough borrowers outside of short-term consumption to lend the growing intake of cash, which the high rates on deposits were attracting.
Inflation may have been tamed, as the Government likes to boast as a solid achievement, but many businesses were ruined and the financial sector had to be FINSACed to be saved. As a result we now have the Dennis Joslin Company here to collect the bad debts and the principal of the company to tell us that the high interest rate policy was stupid and destructive to the economy. If Mr. Joslin is smart enough to make money in several countries from bad debts he probably has a point.
