DBJamaica’s provides guarantees, spurs banks to lend more to SMEs

Anchored by its determination to help the SME sector grow and guided by its research conducted in 2009 on the challenges that SME faces in accessing finance, the Development Bank of Jamaica (DBJ) has implemented several SME initiatives including a partial credit guarantee program called the ‘Credit Enhancement Facility’ (CEF). The CEF addresses these challenges by providing partial loan guarantees to banks to enable them to make more loans to SMEs, and sharing loan losses on a pari passu basis. The CEF guarantees may be issued to support SME loans that either do not have sufficient collateral to meet the banks requirements or that the bank considers risky.

Under the CEF, banks may apply for partial loan guarantees up to JA$15 million (US130,000) or 50% of the value of a loan made to SME. In the case of energy efficiency and renewable energy projects, the CEF provides coverage of up to 80% up to a maximum of JA$15 million. To encourage the implementation of energy efficiency and renewable energy projects, SMEs may access up to JA$15 million or 80% guarantees for these projects, while those who are just starting a business, say a period of less than 12 months, they may access DBJ guarantees of up to 80% or JA$5 million (US$43,000) on loans below JA$6.25 million (US$54,000).

Since its inception up to December 2014, the DBJ has provided 176 CEF guarantees of JA$380 million allowing SMEs to access loans of over JA$780 million through ten (10) financial institutions (FI). The issued CEF guarantees have impacted the Agriculture, Services, Manufacturing, and Agro-processing sectors with Agriculture accounting over 50%, the Service sector 30%, and the Manufacturing sector 14% of the guarantees issued.

To further increase it utilization, the DBJ recently amended the CEF to make it more attractive by increasing the amounts guaranteed as well as improving the payouts available to banks.
DBJamaica’s “The Credit Enhancement Facility” was given a Merit Award in the 2015 ADFIAP Outstanding Development Project under the SME Development category.