Philip Bernard, General Manager of JN Small Business Loans Limited (JNSBL) says that faster, but efficient loan application processing and disbursement by approved financial institutions will improve micro entrepreneurs’ access to credit and protect them from loan sharks.
Speaking against the background of a Caribbean Policy Research Institute (CaPRI) forum at The University of the West Indies held last month on access to financing for the micro small and medium enterprises, the JNSBL General Manager said suppliers of briefcase loans were taking advantage of micro entrepreneurs’ need for quick access to credit, and imposing interest rates as high as 10 percent per week.
“Currently loans take, on average, between one to two weeks to be processed and disbursed,” he said, “and, as a result of this ‘timing,’ some entrepreneurs accept loans at high interest rates of up to 10 percent per week, from suspect briefcase loan providers, who, invariably are more focused on the return on their investment, rather than the personal development of clients.”
He said that JNSBL is further rationalising its processing and disbursement window to provide loans on a timelier basis, because the faster turn-around time would position micro operators to procure stock, equipment and other items, on an “as needed” basis.
In addition, Mr. Bernard noted that an inclusive framework was needed to provide micro entrepreneurs with more options to collateralise loan funds; and he declared that JNSBL was one of few microfinance institutions that accepted appliances and equipment used in the business to secure micro loans.
He said, “A broader legal structure is needed to holistically address the issue, pointing to the proposed Secured Transactions Act, which will be brought to Parliament for implementation this year.” The Act is among a suite of legislations, which are to be implemented as part of Government’s pact with the International Monetary Fund.
“However, as a complement to this legislation we also urge Government to consider establishing an electronic registry for household appliances and equipment,” he argued, noting that the registry will assist financial institutions, which accept these items as collateral to corroborate ownership of equipment and process loans faster and accurately.
The CaPRI public forum on access to financing for the MSME sector also featured presentations from Professor Rosea Hamilton, Imemdiate Past President of the MSME Alliance and Edison Galbraith, General Manager, Development Bank of Jamaica; and was moderated by Dr. Christopher Tufton, Co-Executive Director of CaPRI.
