Webber
Lavern Clarke, Staff Reporter
MAUREEN WEBBER has moved against six of the financing companies to which her firm wholesales funds under the MicroFin programme it manages for Government. The court has now given her leave to wind up two of them.
Stacelaw Financial Services, run by Margaret Lawson, was given three weeks from February 14 to repay $39.7 million of principal and interest it owes to the fund; and similarly George Smart's, Smart Financial Services, which owes $25.3 million.
Petitions are also before the Supreme Court for four other companies Horace Forester's HAF and Associates, General Business Services in Portland, Creative Ideas, and Omega Bridge Financing which is principally owned by Andrew Holness, a Jamaica Labour Party (JLP) Member of Parliament. Applications for winding up the latter two companies went before the court on April 10.
Omega, which owes $4.75 million according to Development Options (DO), attempted to pay down its arrears this week, but was advised by DO that given the status of the legal proceedings, it would have to deal directly with the attorneys.
Omega director, Robert Garvin, said in response that the company was told it owed $3.6 million as at January. Omega cleared a million dollars of the debt this week, and will be seeking DO's agreement to clear the rest over a six-month period, he told The Sunday Gleaner.
Omega borrows at 11 per cent and lends, said Garvin, at 35 per cent to off-set the risk.
Late Thursday night the company's lawyer, Oswald James, said an agreement was reached that day with DO to cap the debt at $2 million, with half already paid, while the other million would be paid off over six months. Webber was off the island and could not confirm the deal, but DO representative Joan Jonas said the claim was absolutely false, and further that no deal could have been struck without Webber.
Omega has made a proposal but it would need Government approval, said DO.
Started in 2000 with $240 million, MicroFin has now grown to $311 million. Some $197 million is on the road as loans, while another $223 million representing both reflows from active borrowers and $114 million on deposit is available for lending at 11 per cent.
Each loan is now capped at $25 million, adjusted down from $45 million on Development Options' analysis that it was a more manageable portfolio, given the capacity of its lenders who themselves are small entrepreneurs. MicroFin now has six active lenders, down from its original 14.
Development Options earns four cents from each $1 it lends, amounting to over $15 million over the three years.
The Development Options president said Wednesday that $88 million of the fund remains at risk but adds that her firm was sure it could collect about a third of the total based on feedback from its receivers in response to Opposition Finance Spokesman, Audley Shaw's claim that $120 million of the monies or half the original fund was unrecoverable.
When taken as a percentage of the total $311 million fund, just about 28.3 per cent is at risk, but when matched against the $197 million in loans, the figure is 44.7 per cent.
On Tuesday, during his response to the Budget, Shaw hit hard at Development Options, claiming mismanagement of the fund, and imputing political bias in how the monies were disbursed on the ground.
AUDITED
But, the Development Options president countered that the fund is audited every two years by Deloitte & Touche, and that it was open for anyone's scrutiny, adding that her firm does not interface with the end users.
"We don't make the loans," said Webber, a known People's National Party sympathiser, "we go through lenders and we don't tell them where to lend."
According to Webber, micro financing is a high risk operation, in a sector where two of every four enterprises is expected to fail. Additionally, MicroFin has 80 per cent of its loans in what she describes as high risk locations.
Still, Garvin feels that there is too much risk associated with the programme, and that DO does not allow its lenders sufficient leeway to target the income of defaulting clients, and that they will be asking for some of the debt to be written off.
Development Options decided recently to write off $4.7 million owed by another lender, Celestial Investments, which lends 70 per cent to businesses in volatile Kingston and Montego Bay communities. Webber said the decision followed threats on the life of Celestial Investments staff when they attempted to collect.
"Twenty-five per cent of the portfolio will fall out, given the nature of the micro sector," she said. "My arrears are no higher than anyone else's."
Recently, Development Options got approval of the Ministry of Industry on a new agreement that allows it "to move in immediately" on lenders who default. Development Options reviewed the system following problems it faced getting the authorities' approval to intervene in the Smart case. Webber said it took one and a half years to get the approval, and even then the court only gave her five days to prove there were problems at the firm.
Attempts at reaching other defaulting companies met with disconnected recordings, for the operations listed.
