Thursday 9 April, 2020

DBJ’s credit facility exceeds expectations, over $10b committed

Milverton Reynolds, Managing Director of the Development Bank of Jamaica.

Milverton Reynolds, Managing Director of the Development Bank of Jamaica.

Since its re-launch in November last year, the Development Bank of Jamaica’s (DBJ) redesigned Credit Enhancement Facility (CEF) has secured over $10 billion in commitments, more than doubling the original projections of $5 billion, for the first year from its network of partnering financial institutions.

The partial loan guarantee is one of the DBJ’s flagship products and is being embraced as an effective risk-sharing tool and game-changing option for micro, small and medium-sized enterprises (MSME) seeking loans.

This is underscored by the commitment of the 10 financial institutions which have signed on to the programme to date.

The CEF will be utilised by financial institutions that include Sagicor Bank Jamaica Limited, Jamaica Money Market Brokers, National Commercial Bank (NCB), First Heritage Co-operative Credit Union, COK Cooperative Credit Union, CIBC First Caribbean, Jamaica National Fund Managers, First Global Bank, Jamaica National Bank and Scotiabank.

NCB, Scotiabank and Sagicor Bank have committed to the lion’s share of approximately 68 per cent of the funds. Since January 2020, NCB, Sagicor Bank, FHC and COK have been the first movers of the product, issuing guarantees valued over $125 million, which supported over $366 million in MSME loans.

“The commitment by these financial institutions is a clear indication that those who are on board are fully committed to serving the MSME community and intend to significantly increase funding as a part of their strategic thrust this year,” said Edison Galbraith, DBJ’s General Manager of Loan Origination and Portfolio Management.

“Each of them has requested a certain amount for the year based on the levels of MSME loans they expect to grant to their clients who may need collateral support.”

Whereas the previous version of the CEF provided 680 guarantees valued $3.5 billion allowing MSMEs to access $8.0 billion in loans between 2009 and 2019, the re-designed CEF is expected to support MSMEs with over $25.0 billion in guarantees in four years.

The improvements in the CEF also include increases in guarantee coverage from $15 million to $30 million and in coverage from 50 per cent to 80 per cent of the loan amount.

Moreover, the applications are now being administered through an electronic platform that facilitates immediate approval once the MSME client meets the eligibility criteria. The CEF is available to MSMEs with viable projects that earn less than $425 million in annual revenues, are tax-compliant, and have a good credit history.

It supplements existing collateral, reduces the risk for the financial institutions and allows MSMEs to access much-needed credit. The facility may be accessed through the Business Banking units of the financial institutions mentioned above.

The DBJ also intends to activate its communication machinery to build awareness as it continues its mandate to provide opportunities to all Jamaicans to improve their quality of life through development financing and capacity building.

In that regard, DBJ’s Managing Director Milverton Reynolds said: “The DBJ will also increase its support to MSMEs seeking to improve their bankability or become investment-ready through our Voucher for Technical Assistance and other capacity-building initiatives that are widely available.”

The DBJ is the lead development financing organisation in the country, with a core focus of providing financing options to entrepreneurs through all phases of development and the business life cycle.

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