Updated: 16-08-2024 - 12:00PM 3 12 CLOSED
Sep 30, 2016
Minister of Finance and Public Service Audley Shaw says that two new commercial banking licences have been granted to local financial institutions.
However, he warned that the granting of the licences were in keeping with the new Government’s policy of competitiveness in the financial sector and a policy of financial inclusion, which will include small and medium-sized businesses.
“I say to the commercial banks: look out, because I am pushing for competition,” Shaw told yesterday’s ninth annual pensions seminar staged by Prime Asset Management Ltd in association with the Private Sector Organisation of Jamaica (PSOJ) at the Jamaica Pegasus hotel, New Kingston.
The two licences have been granted by the Bank of Jamaica to Jamaica National Building Society (JNBS) and Jamaica Money Market Brokers (JMMB).
Shaw said the new banks will mean “more competition and lower rates”.
“That is what is going to happen,” he declared to loud applause from the audience.
Shaw vowed to continue the battle he said he began in his first term as minister of finance and the public service (2007-2011) to bring down interest rates to much more affordable levels.
He noted, as an example, that a World Bank loan programme for Jamaica’s small and medium enterprises (SMEs), which should have been passed on to them at “the best and most reasonable rates” after being acquired by Jamaica at the Libor rate (about half a per cent), was currently reaching the SMEs at about 10 per cent interest.
He explained that the loan was marked up by three-and-a-half percentage points by the ministry, another one-and-a-half a percentage points by the Development Bank of Jamaica (DBJ) in passing it on to the commercial banks, which added a further four-and-a-half percentage points.
“So, what happens is that the small business gets it at 10 per cent or 11 per cent,” Shaw pointed out.
“That is defeating the purpose for which those loans were intended. So, I have a memorandum to be signed on my desk now, to instruct my financial secretary to sharply reduce the rate to maybe one and a half to two per cent,” he said.
“I told the DBJ to take off half a percent and I am going to have a conversation with the commercial banks and I am saying to the commercial banks, come on, enough is enough, because the commercial banks are already insisting on a spread on private and public loan rates of between 12 and 15 per cent in this country, when in the Caribbean region the average spread is four to six per cent and in developed markets the average spread is two to three per cent,” the finance minister stated.
“Where do we get off? I must say to the commercial banks, on this particular initiative, I want the small businesses to get that money at seven per cent and I am saying to the commercial banks, as well, look out because I am pushing for competition (within the industry),” he said.
Source:
BY BALFORD HENRY
balfordh@jamaicaobserver.com
Senior staff reporter
Jamaica Observer
Friday September 30, 2016