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Scotiabank programme proves small businesses are worth the risk – DBJ

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Hon. Anthony Hylton, Minister of Industry, Investment and Commerce, engages, from right, Claudine Tracey, the DBJ's General Manager of Strategic Services; Professor Rosalea Hamilton of the University of Technology, and Patsy Latchman-Atterbury, Scotiabank's Executive Vice President, Retail Banking, at a seminar marking the closing of SERMaF, a risk assessment study on small businesses in Jamaica, held at The Courtyard, Mariott Hotel in New Kingston on January 19. Hon. Anthony Hylton, Minister of Industry, Investment and Commerce, engages, from right, Claudine Tracey, the DBJ's General Manager of Strategic Services; Professor Rosalea Hamilton of the University of Technology, and Patsy Latchman-Atterbury, Scotiabank's Executive Vice President, Retail Banking, at a seminar marking the closing of SERMaF, a risk assessment study on small businesses in Jamaica, held at The Courtyard, Mariott Hotel in New Kingston on January 19.

The Development Bank of Jamaica (DBJ) announced recently that the Scotiabank enterprise-wide risk management and financing program, (SERMaF) has done a sterling job in producing the first Caribbean risk assessment tool.

DBJ’s General Manager of Strategic Services, Claudine Tracey, told business owners and other stakeholders at SERMaF’s closing ceremony, that the psychometric risk-rating model will help the DBJ shape its policies and programmes for MSMEs.

Tracey said the model can advance the DBJ’s aim to provide Jamaican entrepreneurs with capital, collateral and capacity building and increase access to financing for MSMEs in Jamaica.

The technical analysis was spearheaded by consultant Professor Vanus James using a study that collected data from over 1,000 SMEs in a stratified random sample that included all parishes.

The model is meant to implement an upgraded business and risk-rating system for MSMEs, but to later include medium-sized and large businesses. Two key findings, according to Professor Vanus, are that MSMEs are well represented among top performing firms and that the smaller businesses that are not growing are asset constrained, and they can’t grow unless they get access to credit.

The DBJ partnered with Scotiabank and the University of Technology (UTech) on SERMaF in May 2014 and provided $13.6M in grant financing to expand the project.

At yesterday’s ceremony, Professor Rosalea Hamilton, SERMAF’s Project Director and Vice President for Development at UTech, thanked the DBJ for doing the heavy lifting in supporting the programme.

“We couldn’t have done it without you,” she said.

The DBJ and Scotiabank have partnered in the past on MSME initiatives. In 2015, the DBJ loaned more than $785 million to 50 MSMEs through Scotiabank. Seventyone Scotia business customers got financial statements business plans and other services through DBJ’s voucher for technical assistance programme.

The VTA is a DBJ capacity development grant that gives MSMEs access to specific business development products and services from an accredited list of business development organizations. The DBJ finances 70% of the cost up to $500,000 so that business can better access credit to grow.

Tracey explained that Scotiabank issued DBJ’s first voucher, to Norsai Distributors, for a loan of $30 million. Norsai was then able to hire 60 fulltime and 130 part-time employees.

“The DBJ will use the psychometric and business data derived from the firms to better position our intervention programmes to help MSMEs to expand, be more efficient, profitable and sustainable,” says Tracey. “We expect Scotiabank will use the psychometric credit scoring tool to enhance its credit appraisal system for MSME lending.”

Other project partners in SERMaF include the Inter-American Development Bank (IDB) and the Institute of Law and Economics.

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