Monday
March 25
2019

Jamaica Microlenders Fear Business Fallout From Regulated Rates

By Avia Collinder

Few microfinance companies have finalised their review of the legislation that will soon police their business practices, but those who have are worried.

One of the top companies in the field, Access Financial Services Limited, warned this week that any action taken to cap micro loan rates could end up slowing the flow of capital to the MSME sector.

Sector representatives anticipate that the law when passed will lead to a curtailment of the rates they have been used to charging payday borrowers and small ventures, because of the bill’s provision tagging their rates to Treasury bill yields.

The bill known as the Micro Credit Act proposes to link loan rates to treasury bill rates and the cost of issuing micro loans. And all operators will have to obtain a licence from the intended supervising authority, Bank of Jamaica, to hang their shingles.

The rates currently charged by micro lenders, also referred to as MFIs and payday lenders, tend to range beyond 50 per cent and even beyond 100 per cent. T-bill rates by contrast are tracking just above two per cent per annum.

Photo courtesy of John Twohig.

Source: The Gleaner (link opens in a new window)

Categories
Finance
Tags
financial services, MFIs, microcredit, microfinance, microlending