By Ashford W. Meikle, Staff Reporter 
Hughes (left) and Shirley (right)
THE FINANCE sector has recorded a decline of almost two per cent, according to statistics from the Planning Institute of Jamaica (PIOJ).
Speaking at the state agency's quarterly briefing, Director General Dr. Wesley Hughes said the finance and insurance segment of the country's gross domestic product (GDP) experienced a decline of 1.6 per cent. "Undoubtedly (Hurricane Ivan) did have an impact," said Dr. Hughes.
And the situation gets worse. The PIOJ is forecasting a negative 1.4 per cent growth for the industry for the calendar year. The statistics come as no surprise because the previous quarters have seen the sector returning disappointing results.
For the first quarter there was a 1.6 per cent decline. In the April to June quarter the decline exacerbated in fact doubled by 3.1 per cent. No growth was recorded for the third quarter. Dr. Hughes attributes the sector's decline to two principal factors, the decline in interest rates and the moratorium on interest payments on loans granted specifically for post Ivan reconstruction.
CONTRACTING
President of First Global Financial Services, Sandra Shirley, told the Financial Gleaner that she prefers to view the industry as "contracting... because of mergers and acquisitions," which have occurred during the year. Her comments are instructive because a number of high profile mergers such as Manufacturers Sigma Merchant Bank with Pan Caribbean Financial Services and Life of Jamaica with First Life -- readily come to mind.
Elaborating, the career banker noted, "A lot has to do with consolidation and increased efficiencies in the marketplace and interest rates have remain fairly stable."
An industry source who prefers to remain unnamed shares a similar view. "The main reason is because of interest rates falling ... and companies are in the midst of readjusting their businesses, diversifying their income streams to be less dependent on
interest income."
MERGERS AND ACQUISITIONS
But, the source pointed out, "mergers and acquisitions do not decrease income in the industry. If anything the income base should grow since costs should be reduced since duplication of services would be removed. Look at Pan Caribbean's merger with Manufacturers, its income has gone up."
Another factor identified by Ms Shirley is the "payout in the market as people try to recoup from Hurricane Ivan." A few weeks ago the Financial Gleaner revealed that the banking and insurance industry hardly benefited from any boom in business (vis-a-vis loans) after Hurricane Ivan. Although most banks offered 'reconstruction' loans it seems there were few takers. Industry personnel indicated that people were more willing to delve into their pockets as Assistant Vice-President of Operations at Victoria Mutual Building Society, Gavin Lowe, indicated.
But, those in the industry remain optimistic. "I think the industry is going to expand beyond the borders of Jamaica," a source reflected. "Eventually, companies are going to look outside to increase profitability and to depend less on interest income. And you will be seeing more innovations and new products in the marketplace."
