JAMAICA HAS secured a 20 million euro (J$987 million) loan from European Union (EU) for on-lending to businesses, under an agreement to finance the upgrading and capacity building efforts of private sector companies in preparation for full trade liberalisation.
The bank-to-bank transaction sees the European Investment Bank (EIB) signing with three Jamaican banks Bank of Nova Scotia Jamaica Limited (BNSJ), FirstCaribbean International Bank Jamaica (FIBJ), and Trafalgar Development Bank Limited (TDB).
The direct inclusion of commercial banks to extend the line of credit is a first for such loans and it replicates previous successful trials in Sub-Saharan Africa. Formerly, only development banks were extended the facility, which would then on-lend through the commercial banks.
The EU's Kingston office said other banks could be brought into the scheme at a future date.
The loan will be disbursed in either Jamaican or United States dollars at market rates, according to the EU. However the agency was unable to comment on the precise terms of the loan. The Gleaner failed to reach the relevant officer of the EIB in Luxembourg, and the Jamaican Ministry of Finance was still compiling its response to faxed queries.
The funds will be available on a long-term basis, and companies will only be able to access up to 50 per cent of the cost on any single investment.
Following on Friday's signing, the banks are finalising their own internal arrangements and there was no indication yet as to the final price at which the loans will reach the end users.
"The modalities are still being worked on," said BNS managing director, Bill Clarke yesterday, adding that he should be able to speak more precisely on the terms by the end of the week.
The Cotonou Investment Facility (CIF) funds are being drawn from what the EU describes as "risk capital resources" held in the European Development Fund, a Lome funding facility.
The loan marks the operationalisation locally of the CIF, agreed to in the Cotonou agreements, under which the EU has earmarked some 2.2 billion euro to promote private sector investment within 76 of its former colonies within the African Caribbean Pacific (ACP) region as those countries' prepare for more direct competition in five years.
By the beginning of 2008, ACP countries will no longer be cushioned by preferential trade arrangements, and will be forced to compete more directly on price with other producer nations.
Jamaica this year agreed to a five-year 'Country Support Strategy' with Europe which will focus on developing the private sector as a primary area of co-operation.
"Under this strategy, the European Commission intends to draw up jointly with the Government of Jamaica a new private sector support programme and - given positive results of the present intervention the EIB could extend its credit operation with additional funds, provided under the CIF," said the EU's Kingston office.
