Small lenders still unhappy with BOJ licensing regime | Business

As the July deadline for microlenders to be licensed under a new oversight regime by the Bank of Jamaica (BOJ) approaches, the group representing microcredit institutions (MCIs) across the island awaits looking forward to a meeting with the Ministry of Finance and the BOJ to discuss what it describes as “real concerns” that continue to be raised by its members. The issues are believed to be related to adequacy and adequacy rules and are the latest among several issues that have been raised by small lenders regarding the documents and operational changes needed for their business to gain approval from a microcredit license under the new legal provisions created by the passage of the Microcredit Act in Parliament last year.

The Advocacy Committee, which represents members of the two formal microlender organizations, the Jamaica Microfinance Association (Jamfin) and the Jamaica Microfinance Association (JaMFA) was unhappy with various aspects of the new legislation since it was introduced about three years ago. .

There were fears that some parts of the legislation could cause the sector to shrink, but more controversial issues such as a proposed cap on interest rates on loans were changed before the law was passed in January 2021, for the purpose of licensing and regulating MCIs that provide finance to individuals and micro, small and medium enterprises.

Microfinance associations were encouraged that efforts to link microloan rates to treasury bill rates were eventually removed from the law following their objection, but other issues such as the number of breaches possible infringements remained problematic for the industry. While changes to the law prior to its enactment appeared to have assuaged some of the concern among microfinance providers, as the July 30 deadline for submitting license applications to the BOJ approaches, MCIs are streaming cool grouse, which some people familiar with the discussions say are “very onerous” and “extensive” suitability and adequacy assessments required for people hoping to legally operate in the industry.

JaMFA President Andrew Mais did not confirm to the financial gleaner reports that the requested discussions with the BOJ and the Ministry of Finance centered on the adequacy and adequacy requirements stipulated by the BOJ, but on Thursday he said the concerns, if not addressed, could have a negative impact on the number of operators who go ahead with applying for licenses.

“It will be an important decision for the players to see whether or not they continue the process or withdraw from the process, or whether it will be much more difficult for them to succeed in the application process, even if they were to submit. We would like to see an environment in which our members have a fair chance to the extent that there is a probable chance of successful enrollment,” Mais said in an interview.

But did not reveal how many JaMFA members had already submitted applications to the BOJ, but said the majority of members were pursuing applications. Around 20 Jamfin members are said to have applied for microcredit licenses. Fewer than 100 of the estimated 200 microlenders operating in Jamaica are members of either association. Many operate informally and under the radar, a situation the licensing regime is meant to change.

There are indications that the government ministry and the regulator have agreed to meet with the microlenders. While the talks were expected to take place soon, no date was set by the Financial gleaner. It has also not been confirmed if the meetings will take place with the individual MCIs, their respective associations and with the advocacy group.

“This is a process of engagement with the respective regulator and ministry, and as these conversations unfold and positions progress, the advocacy committee would have the right to review these results and to decide on the measures that will be taken before the deadline. for registration. In the next few days, these engagement processes will begin,” Mais said.

To help microcredit businesses understand and comply with the new legal licensing requirements, the central bank has held a series of online consultations with microlenders. The most recent took place on March 23 and aimed to help MCIs understand the capacity assessment process and complete the required personal questionnaire. Another session on the prevention of money laundering is scheduled for April 13.

“Whether you are small or large, every organization should submit this tailored and appropriate personal questionnaire for significant shareholders and executives. Each organization must submit the police report, overseas and/or local, notified photo and identification, due diligence report, etc. Kevin Jones, head of the adjustment and suitability function at the BOJ, said at the forum.

During the session, some microlenders were unsure whether the fit and proper requirements extended to consultants. While responding that they would not, BOJ officials made it clear that under the licensing regime, consultants would not be allowed to hold senior management or executive positions.

“The MCI must ensure that it does not employ a consultant and then have the consultant work in the role of an officer. So, if you hire a consultant, they must be a consultant, not operate as a CEO, or hold a CFO or managerial position. If they’re playing one of those roles that needs to be assessed, then you may get a letter from us,” Jones said.

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