Affordable development financing is extremely important in a small economy such as Jamaica’s in which commercial sources of funding are often not sufficiently expansive to provide the level and quality of funding that the productive sectors require in order to grow the national economy.
Development financing is critical for areas such as agriculture (which is susceptible to natural disasters and other negative weather-related conditions), manufacturing, infrastructure, and some services such as tourism and information technology. In addition, while partnerships with private sector entities are important and commendable to deliver development funding it is not sufficient to depend on them to reach the target audiences.
The Current Role of Development Finance in Sustainable Development
The term ‘sustainable development’ suggests that meeting the future needs of the population depends on how well current decision makers and users of a country’s resources balance social, economic, and environmental needs when making decisions today.
In Jamaica, we are very aware that our natural resources are finite and must be managed prudently to provide a better quality of life for future generations of Jamaicans. Therefore, in this regard, the DBJ has adopted a holistic approach to development finance, choosing to focus mainly on the productive sectors (agriculture, agro-processing, manufacturing, mining, tourism and services) while incorporating environmental impact assessments in all levels of our decision making before committing, approving or disbursing funds to any project.
The Bank is also aggressively marketing loans for projects that promote energy efficiency, energy conservation, alternative and renewable energy.
Finally, in the Jamaican context, development funding is often seen as Government funds and, therefore, often presents a moral hazard in terms of repayment. The DBJ’s solution to this problem is to not lend directly but to wholesale the funds through approved financial institutions – private sector partners such as commercial and merchant banks and credit unions – and micro finance institutions, who then conducts the risk analysis and on-lends to the sub-borrower. The DBJ continually reviews the loan applications and maintain reviews of the projects to ensure that Government policy in terms of lending only to the productive sectors, is being followed.
The Future Role of Development Finance in Sustainable Development
The role of development finance in sustainable development in Jamaica is of paramount importance to the DBJ and to policy makers in successive administrations. This is chiefly because without DBJ funding which is, in a sense, a protected source of funding, many business operators – chiefly the micro, small and medium-sized – would find it very difficult to access affordable funding.
To be able to maintain this state of affairs, the DBJ and the Government and its AFIs have to continually review their operations and relationships to ensure that targets are being met, the needs of their clientele – whether they are voters or borrowers – are being satisfied and the projects in which they invest have only positive impacts on the natural, social and economic lives of the country.
Finally, risk management must continue to play an important role in the development finance as an avenue for sustainable development. As a development bank certain risks are inevitable and welcomed to fulfill the mandate of facilitating economic growth, national development and an enabling business environment resulting in increased investments and job creation. We therefore place large emphasis on putting the necessary systems, policies, procedures, and analytical tools, human and technical resources to help effectively manage those risks.