Microfinance outfits take big COVID-19 hit

THE CASH-RICH microfinance sector has reportedly been hit hard by the economic fallout from COVID-19.

Many members are in need of liquidity support to remain viable, said Blossom O’Meally-Nelson, chairman of the Jamaica Association for Microfinancing (JAMFIN).

“We estimate that up to 60 per cent of portfolios would have been affected,” O’Meally-Nelson told The Gleaner on Monday.

There is an estimated $20 billion circulating in the microfinance sector.

“You can extrapolate from that that if you running 60 per cent in arrears, not necessarily bad loans but behind in the payments, then you can work out what’s at risk. And it’s the same with the commercial banks,” she added.

O’Meally-Nelson told The Gleaner that JAMFIN has been working with the Caribbean Microfinance Association to facilitate webinars that would help struggling businesses.

A number of microfinancing outfits have seen a downturn in overall business because of a fall in demand for loans.

O’Meally-Nelson said that despite the contraction, microfinanciers have been mainly concerned about trying to keep their doors open.

“They are not in an expansion or turnover mode, even to get supplies because the ports were closed,” said O’Meally-Nelson. “So it has been very difficult for the businesses themselves and many have fallen into arrears as a result.”

What the microfinance institutions have had to do, O’Meally-Nelson said, is to hold back on the issuance of new loans.

“Payday loans, which up until now account for a significant portion of some portfolios that were once relatively secure, were also at risk, as layoffs and job cuts took root,” she stated.

According to the JAMFIN chairman, many microlending agencies, financed through the EXIM Bank and the Development Bank of Jamaica, have had to ask for moratoriums, but there is generally a shortage of liquidity.

JAMFIN is reportedly working with the Development Bank of Jamaica to organise a pool of funds “separate and apart from the normal wholesale loan”, said O’Meally-Nelson.

Personal loans have fared a bit better than business loans, she said.

Niche Financing Operations Manager Sheree Cummings said that her company has managed to stay afloat despite the significant impact of COVID-19, but noted that its directors have strategically pursued contingencies.

“This entire pandemic is an extraordinary event and quite sudden, so in terms of staff retention, the process was to try and see how best we could weather the storm in order to bring the staff through the crisis,” said Cummings.

“... We do business with a wide cross section of industries and sectors, and many airport workers and security guards, for example, have been hit.”