Albert Gray, director at the Development Bank of Jamaica, says SMEs sometimes are forced to borrow at 100 per cent interest. - Photo by Noel Thompson

Noel Thompson, Freelance Writer

A director of the Development Bank of Jamaica (DBJ), Albert Gray, has castigated local banks and other lenders for failing, he said, to provide significant loan portfolios to boost the small and medium enterprise (SME) sector.

Gray who was participating in a panel discussion entitled 'Provision of Appropriate Financial Tools for SMEs', aired his grouse Wednesday during a question and answer segment at Euromoney's two-day Caribbean Investment Conference, at The Ritz-Carlton Hotel in Montego Bay.

Risk sharing

But some members of the panel disagreed with Gray, including Emma Lewars, DBJ's assistant general manager for credit operations, who said there was a reasonable number of 'cash rich' SMEs.

Lewars said her organisation provides risk sharing to viable developmental projects, which cannot provide the full collateral support to the commercial or merchant banks.

"We sought funding for the National People's Cooperative Bank from the National Insurance Fund (NIF), along with the Bank of Nova Scotia (BNS), and have approved over J$150 million at an interest rate of 7.875 per cent - the lowest rate in over three decades," she said.

Lewar's latter reference was to a $600 million pool of funds onlent to the development bank for loans to small hoteliers and farmers.

That programme, however, got under way only after the finance ministry intervened with a subsidy to settle a quarrel between the DBJ and BNS on the spreads that DBJ would be allowed to administer the funds.

DBJ, which is itself a wholesaler of funds, normally lends at about nine per cent on which banks add a markup, with the loans usually reaching the end user at about 13 per cent.

But Gray, a past president of the Small Business Association, maintained his stance, saying he had studied the entire financial landscape of what is claimed to be assistance to small businesses and had found that qualifying for credit was onerous and required SMEs to meet the same criteria as major conglomerates.

Lip service

While not directing his criticism to any individual or any institution specifically, Gray said the financial institutions were paying only 'lip service' to the SMEs.

He said even where financing small businesses did not require excessive collateral, the funding pool was small and did not offer the level of credit to sustain the businesses over a prolonged period, particularly businesses that are required to make weekly loan repayments.

"They are not being loaned sufficient capital to allow them to invest significantly in equipment and machinery," said Gray.

"It is just a matter of keeping people sustained by buying and selling on a small scale," he stated. "The sector will never grow."

In some cases, interest rates on those funds top 100 per cent, when annualised, he said.

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