Shaw cracks whip for lower interest rates
AFTER YEARS of pleading with commercial banks to lower their interest rates on loans to small, micro and medium-sized enterprises (SMEs), Finance Minister Audley Shaw last Wednesday declared that he had started the ball rolling to get those financial institutions to fall in line.
After signing a US$20-million (J$2.56 billion) credit enhancement loan programme for SMEs, to be funded by the InterAmerican Development Bank (IDB) and executed by the Development Bank of Jamaica (DBJ), at his Heroes Circle, Kingston office, Shaw explained that he had kick-started the process with an in-house directive.
“I have instructed my minister of state to prepare the instruction to my own ministry that our mark-up cannot be four per cent; it has to be no more than two per cent,” Shaw said.
He then went on to share the strategy for getting the approved financial institutions (AFIs), through which the money will be on-lent to SMEs, to follow this lead.
“We are going to be giving a very kind suggestion to the DBJ that they cannot mark up at one and a half per cent,” he said.
“Their mark-up must be no more than one per cent. And then we are going to have a very careful and friendly discussion with the AFIs and suggest to them that in the circumstances, and with our collective mission, they must mark up no more than three per cent. In which case, we can be talking about six to seven per cent money, instead of nine and a half to 10 per cent money,” the Minister said.
Even at 10 per cent, that would represent a significant break for SMEs, given the 19 per cent and upwards interest rates which have strangled many promising businesses and prevented many from even getting off the ground, Shaw said.
The money will be disbursed over five years.