National Commercial Bank (NCB) is committing J$3 billion in the first year of the Development Bank of Jamaica (DBJ) redesigned Credit Enhancement Fund (CEF) for small businesses which was launched last week.
The revamped CEF is a partial loan guarantee that helps small businesses without enough collateral to access loans from financial institutions. Financial institutions like NCB will now accept non-traditional collateral and provide loan coverage based on the borrower’s character and the future cash flow of the business rather than actual collateral.
General loans can now receive a maximum of J$30 million, covering 80 per cent of each loan in guarantee with small loans getting 90 per cent coverage up to a maximum of J$10 million. Start-ups get 80 per cent coverage up to a maximum of J$5 million.
“Once we are able to satisfy ourselves about their ability to repay then it will be that much easier to make (credit) advances to MSMEs.”– Senior General Manager at NCB, Brian Boothe
Possible increase in J$3 billion facility
Speaking in an interview with Caribbean Business Report, Brian Boothe, Senior General Manager at NCB, disclosed that the $3 billion funding facility could be increased depending on the take-up.
“We expect that the take-up will be good and as the programme progresses, we will adjust the amount to meet the needs of the Micro, Small and Medium Enterprises (MSME),” Booth stated.
When asked about the specifics of the loan programme such as interest rates, Boothe explained that NCB’s pricing will be risked-adjusted so that MSMEs will get loans at different rates; some at seven per cent and others even lower. He was quick to point out that MSMEs must meet certain basic criteria before they are able to access this special DBJ-driven credit facility, which is offered through Approved Financial Institutions such as NCB.
These include the ability to repay which would be shown in the financial documents required for accessing the CEF. To the extent that DBJ under this programme will provide guarantees up to 80 per cent of the loan, Boothe said “security should no longer be the kind of constraints than it was in the past,” in MSMEs accessing business loans.
Boothe said, “Once we are able to satisfy ourselves about their ability to repay then it will be that much easier to make (credit) advances to MSMEs.”
He pointed out that when NCB received the invitation by the DBJ to be part of the CEF programme, it did not hesitate to come on board committing $3 billion in year one.
He acknowledged that the CEF will provide NCB with the opportunity to expand its portfolio to MSME’s pointing out that the programme is a catalyst in helping to boost growth and productivity within the MSME sector.