Bank of Jamaica opens licensing phase for microcredit companies
THE Bank of Jamaica (BOJ) is now inviting microlenders, otherwise known as microcredit institutions, to submit applications for licences to operate in Jamaica. Lenders in the industry segment have 12 months in which to become regularised and licensed.
The Microcredit Act became effective on July 30, 2021 by virtue of the announcement of this commencement date. The Act, which appears to provide room for new entrants to seek licensing, may also result in some companies ceasing operations.
The BOJ, in its invitation to licensing, said that in accordance with Section 64 of the Act, current operators who fall within the criteria set out in the Act for a microcredit institution for the offering of a microcredit service, must make an application within 12 months of the commencement date, or by latest July 30, 2022.
Persons described must apply to the BOJ for a licence to continue in business, or otherwise cease operations or discontinue lending services.
The BOJ states that the application for licence must also be done in accordance with Section 10 of the Act and using the prescribed form set out in the Microcredit (License Form of Application) Rules 2021.
The full Act, regulations and all rules and supporting information can be accessed on the Bank of Jamaica’s website.
The Microcredit Act was passed into law in January 2021 with the aim of licensing and regulating microcredit institutions (MCIS) that provide financing to individuals as well as, micro, small and medium-size enterprises.
As outlined on the BOJ website, “the Act names the Bank of Jamaica as regulatory authority, with responsibility for general administration of the Act and supervision of microcredit institutions. It also names the Consumer Affairs Commission as the body with responsibility for making and issuing a code of conduct for licensees on consumer-related matters, and the investigation of any complaint brought to it by a consumer of a microcredit service”.
Bank of Jamaica’s supervisory responsibilities for MCIS are discharged through the Financial Institutions Supervisory Division (FISD) of the Bank.
Microlenders will find application forms, fees required and documentation required listed on the BOJ website also.
Under the new Act, the BOJ is asking for full validity and sufficiency of the documents submitted in support of the application for permission to provide credit.
TRANSPARENCY, SOURCE OF WEALTH
Other requirements listed under the legislation are: the transparency of the ownership structure or legal arrangements concerning the applicant and the financial or non-financial group in which the applicant is held; the ability of the supervisor (BOJ) to independently verify the identity of the ultimate beneficial owner of the applicant.
The lender must also prove the ability of the applicant to carry on the microcredit business in accordance with the Act; indicate the financial resources of the applicant and the source of those resources; identify the source of wealth and the source of funds of the individuals who own 20 per cent or more of the applicant; and also provide the business history of the applicant and, where applicable, the professional history of the proposed officers, and how the applicant has performed over a specified period of time.
Lenders must also provide: evidence that every substantial shareholder and officer of the applicant is a fit and proper person; and details as to the the suitability and adequacy of the legal, managerial and operational structure of the applicant, including the nature of any other business operated by the applicant – either directly or indirectly – and whether any such operation is ancillary to the provision of the microcredit service.
Microcredit institutions must also indicate whether any of the ultimate beneficial owners or officers of the applicant is a PEP (politically exposed person).
OVERSEAS OWNERS
In the case of an applicant from an overseas jurisdiction, an application under Section 10 of the Act shall be subject to the prior approval or non-objection from the foreign regulator in the respective jurisdiction in which the applicant is incorporated.
It is indicated that the regulatory requirements in that jurisdiction that relate to the disclosure of financial information, including audited financial statements, financial returns and credit information, will also apply.
There are over 100 microlenders in Jamaica within a market valued at around $10 billion in annual loans. The Development Bank of Jamaica on its website states that it has lent over $11.9 billion to microfinance institutions (MFI) since its Micro Finance Window was established in 2009.