Sunday, April 21, 2024

Shaw promises new regulatory environment for micro credit companies

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KINGSTON – Minister of Finance and the Public Service Audley Shaw says that the Government is in the process of creating a new regulatory environment for the microfinancing sector.

He said that currently the process involves the reviewing of the most recent revisions to long-delayed draft of the Bill, which will next be sent to the Cabinet for approval.

Shaw was speaking at last Tuesday’s bi-annual microfinance leadership forum staged by the Jamaica Microfinancing Association (JaMFA) at Hotel Four Seasons in St Andrew.

Microfinance represents a source of financial services for entrepreneurs and small businesses lacking access to banking and related services. It also includes a broad category of services, such as microcredit, which is the provision of credit services to people lacking the resources to access banking credit.

Shaw told the forum that his Administration has continued work on the finalisation of the Microcredit Bill which was being drafted under the previous Government.

He said that in addition to the Bill, consideration is being given to consequential amendments to existing legislation, including the Money Lending Act, the Credit Reporting Act, the Proceeds of Crime Act, and the Terrorism Prevention Act.

“It is important to note that the new legislation and regulatory framework will protect the sector against money laundering,” he told the forum.

“Legislative requirements, such as customer due diligence, record keeping and suspicious transactions reporting, will allow members of your association to protect themselves against being abused by money-laundering operations,” Shaw said.

He added that the establishment of credit bureaus was crucial to the development of the microfinance sectors, as the bureaus will furnish the financial entities with credit information to assist their assessment of the credit-worthiness of customers.

Shaw said that the current Administration is committed to establishing the appropriate economic and regulatory framework to support the growth and development of the microfinance sector.

“We recognise that access to credit can play a pivotal role in economic growth. Microfinance institutions such as yours provide the credit access and financial services needed to fill the gap within the financial services industry, by offering loans to small entrepreneurs, many of whom are unable to access conventional loans services,” he said.

He noted that the Government has demonstrated its “strong” support for microcredit and microfinancing with initiatives such as the establishment of a special programme, within the Development Bank of Jamaica, to lend funds to microfinance institutions providing financing to micro, small and medium-sized enterprises.

“Equally important is your lending to low-income households, enabling them to raise their income levels and improve their living standards and economic welfare,” he stated.

He said, however, that over the years the micro credit business landscape has changed significantly, evolving into microfinance institutions and companies that are becoming more complex, and which are rapidly expanding the line of services offered to consumers and businesses.

He said that anecdotal evidence suggests that the number of privately owned lending institutions has increased significantly over the past 10 years, and the mushrooming of these institutions has presented new challenges to conventional regulation.

He explained that this is mainly due to their lending modalities, which do not fit easily into existing legal and institutional structures, and require more up-to-date legislation for monitoring their operations.

Outgoing chairman of JaMFA, Hurshell Cyrus, praised Shaw’s support for the sector and the assistance he has provided to the companies through both tenures as Jamaica’s minister of finance, since 2007. Cyrus is being succeeded by former Vice-Chairman Sandra McDonald Spence, chairman of McKayla Financial Services Limited.

Participants were welcomed to the forum by executive director of JaMFA, Raymond Gabbidon.

The event was supported by a number of microcredit firms, including Worldnet, OBF Finance Company, Loan World, COK, Lasco Financial Services, Sure Financial Services, McKayla Financial Services, Firm Financials, Xcess Cash, Paradigm Solutions, Tari Solutions, and Cool Cash. (Jamaica Observer)

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