Speaking recently at the launch of the new Jamaica Micro-financiers Association Limited (JaMFA), Minister of Finance Audley Shaw said that Jamaica’s microfinan-ciers apply too big a markup to the credit that they issue to borrowers, and that they should look to lower their rates or get left holding their cash while the productive sectors seek viable financing elsewhere.
Micro-financing agencies typically price their loans at one per cent and two per cent per week, which works out, Shaw indicated, to 52 to 100 per cent interest per year (depending on how the loan was structured). Meanwhile, in the broader market, the cost of capital is averaging 13 per cent but some loans also range beyond 20 per cent.
Mr. Shaw said “while there is a place for it (short-term, high-cost loans), there is a certain type of enterprise that will exclude itself from such loans. It excludes critical areas of the productive sector that might ultimately form an important part of the restructured economy.” Ultimately, he said, such rates were not sustainable for entities that wish to grow.
JaMFA executives have reportedly said that the high rates quoted throughout the sector were under self-examination.
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