Cre­ate fi­nan­cial in­clu­sion coun­cil with­out de­lay – IMF

Jamaica Gleaner - - BUSINESS - McPherse Thomp­son As­sis­tant Edi­tor – Busi­ness mcpherse.thomp­son@glean­

THE IN­TER­NA­TIONAL Mone­tary Fund (IMF) is urg­ing the Ja­maican Govern­ment to es­tab­lish a fi­nan­cial in­clu­sion coun­cil as part of the ef­forts to achieve higher eco­nomic growth by, among other things, im­prov­ing fi­nan­cial ac­cess.

Not­ing that progress should be ac­cel­er­ated to lower the cost of do­ing busi­ness and sup­port in­vest­ment, the IMF said that given the high mar­ket con­cen­tra­tion of the bank­ing sec­tor in Ja­maica, where two banks hold more than 80 per cent of to­tal as­sets, a thor­ough as­sess­ment should be con­ducted on the ad­e­quacy of com­pe­ti­tion in the bank­ing sec­tor.

The staff re­port did not iden­tify the two banks in ques­tion. How­ever, Na­tional Com­mer­cial Bank (NCB) and Sco­tia Group Ja­maica are Ja­maica’s two largest banks by as­sets.

NCB’s to­tal as­sets as at its fi­nan­cial year ended Septem­ber 30, 2015 was $523.8 bil­lion, grow­ing by 4.9 per cent or $24.5 bil­lion over the cor­re­spond­ing pe­riod in 2014. Sco­tia Group Ja­maica’s to­tal as­sets at the end of its fi­nan­cial year Oc­to­ber 31, 2015 was ap­prox­i­mately $433 bil­lion.

The IMF noted that the Bank of Ja­maica low­ered the pol­icy rate, that is, on the 30-day cer­tifi­cate of de­posit, in May by 25 ba­sis points, a cu­mu­la­tive re­duc­tion of 75 ba­sis points since April 2015.

The pass-through of th­ese rate cuts to lend­ing rates, how­ever, con­tin­ues to be weak as the his­tor­i­cal pat­tern of high spreads be­tween lend­ing and de­posit rates per­sists re­flect­ing weak com­pe­ti­tion and banks’ high op­er­at­ing costs, the Fund said.

“A fi­nan­cial in­clu­sion coun­cil should be cre­ated with­out fur­ther de­lay in or­der to im­ple­ment the fi­nan­cial in­clu­sion strat­egy,” said the IMF in its Septem­ber 2016 coun­try re­port on Ja­maica, pre­pared by the staff for the ex­ec­u­tive board’s 13th re­view un­der the Ex­tended Fund Fa­cil­ity.

Fi­nan­cial in­clu­sion refers to ac­cess to af­ford­able fi­nan­cial ser­vices such as credit, in­sur­ance and sav­ings, par­tic­u­larly for dis­ad­van­taged and low-in­come seg­ments of so­ci­ety.


The IMF re­port said that ac­cel­er­at­ing the cur­rent pro­gramme to im­prove land ti­tling would also help pro­mote credit ac­cess to peo­ple with no other col­lat­eral.

It noted that the Land Ad­min­is­tra­tion and Man­age­ment Pro­gramme, a govern­ment ini­tia­tive to help own­ers of land in Ja­maica ob­tain cer­tifi­cates of ti­tle and to up­date the in­for­ma­tion on ex­ist­ing land ti­tles, was ex­panded to St James, Trelawny, Hanover, St Ann and West­more­land in 2015-16, with 1,236 new ti­tles is­sued dur­ing the year. It added that 15,000 ti­tles are ex­pected to be is­sued each year for fis­cal year 2016-17 and fis­cal year 2017-18.

Ini­tia­tives to help small and medium-size en­ter­prises with fi­nanc­ing, in­clud­ing de­vel­op­ment of agency bank­ing ser­vices, mo­bile money prod­ucts, and fac­tor­ing and leas­ing should also be pur­sued, the Fund said.

Reg­u­la­tions per­tain­ing to agent bank­ing were slated to be tabled in Par­lia­ment by end Septem­ber 2016.

The Ja­maican au­thor­i­ties have in­di­cated that they have de­vel­oped an um­brella fi­nan­cial in­clu­sion strat­egy, with in­puts from stake­hold­ers and con­sul­tancy from the World Bank, cov­er­ing key ar­eas in­clud­ing MSME fi­nanc­ing, hous­ing fi­nance, ru­ral fi­nance, con­sumer pro­tec­tion and lit­er­acy.

“In that con­text, a fi­nan­cial in­clu­sion coun­cil will be es­tab­lished to over­see the im­ple­men­ta­tion of the strat­egy,” the Ja­maican Govern­ment in­di­cated.

Next steps in­clude es­tab­lish­ing de­pos­i­tor pro­tec­tion for credit unions and tabling agent bank­ing reg­u­la­tions in Par­lia­ment.

Ac­cord­ing to the World Bank, around two bil­lion peo­ple do not use for­mal fi­nan­cial ser­vices and more than 50 per cent of adults in the poor­est house­holds are un­banked.

“Fi­nan­cial in­clu­sion is a key en­abler to re­duc­ing poverty and boost­ing pros­per­ity,” it said.

Some 34 per cent of the adult pop­u­la­tion in Ja­maica does not have a bank ac­count, ac­cord­ing to a study un­der­taken by the Uni­ver­sity of the West Indies.

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