Mission Statement & Objectives Mission Statement To deliver innovative and accessible credit in a timely and profitable manner to micro and small entrepreneurs in Jamaica who have limited access to loans from traditional banking sources. Objectives • To support the development of the Jamaican micro-enterprise sector • To assist micro entrepreneurs to increase their income and improve the quality of their lives. • To create new jobs and maintain existing ones in the Jamaican economy
Background • Began operations in October 2000 as JN Micro Credit. • A micro-credit portfolio was purchased from FINSAC by Jamaica National Building Society • Portfolio at that time consisted of 2,039 loans for a principal value of $37.9 million • Staff complement of 13, of which 8 were field officers • Operated from 7 locations in two parishes-Kingston & St Catherine • In 2003 the company’s name was changed to JN Small Business Loans Ltd.
Target Audience Persons between the age group 18-65 years who: • own and operate a business in the micro informal commercial sector and need capital injection of between $60,000 and $1 million to expand their businesses • own and operate a Small Business and need up to $3 million to improve or expand their businesses • are in the tourism industry or supply at least 30% of their products to the tourism industry • Individuals who need a personal or education loan up to $250,000 • Individuals who need a motor vehicle loan up to $2 million
Loan Products Loan
Collateral Accepted for micro loans • Bill of Sale over household appliances with serial numbers (e.g. refrigerator, television, component set) • Motor vehicles • Bill of Sale over tools with serial numbers (e.g. sewing machine, band saw) • Bill of Sale on assets financed with loan funds • Third party guarantees.
Qualification Criteria for micro loans • Must be at least 18 years old • Must be in business for at least six months • Must have a tax-payer registration number (TRN) • Must be able to show evidence of paying bills on time. • Must be of good character
Required Documents • Proof of identification- • either a passport, a driver’s license, or the National ID card • A TRN card • 2 recent passport-sized photographs • 2 written recommendations, one of which must come from either: - Justice of the Peace - School Principal - Senior Police Officer - Minister of Religion • Completed JNSBL Pre-application Form
Bizboost loans for small and medium sized businesses • To finance the purchase of fixed assets and to provide working capital support for small and medium sized businesses engaged in value added activities. • Loan amounts between $500,000 and $3 million • Interest rate 22% on the reducing balance
Loans to Small and medium sized businesses • Collateral • Real estate • Motor vehicles • Equipment • Hypothecation of deposits • Third party guarantee
Loans to small and medium sized businesses • Requirements • A business plan • A clearly established market • Prior experience in the type of business
Tourism Enhancement Fund (TEF) Development Loan Offered to individuals, partnerships and companies (including new businesses) which provide goods and services to the tourism sector. A minimum of 30% of the business must be committed to providing goods and/or services to the tourism sector.
Tourism Enhancement Fund (TEF) Development Loan • Maximum loan: $5 million • Interest rate: 5% per annum • Maximum term: 5 years • Moratorium: 6 months (maximum) on the principal • Collateral: Guarantee of Directors PLUS any of the following: • A first charge over any asset purchased with loan funds • Real estate • Motor vehicle and/or equipment • Any other assets owned by the applicant
Milestones (cont’d) Total = 280,823
Milestones (cont’d) Total = $13,028,933,600
Milestones (cont’d) Employment created and maintained since inception - 74,715
TEF Loan Scheme • Committed from the TEF - $310M • No. of loans disbursed – 120 • Value of loans disbursed - $288.75M • Number of loans in the portfolio – 106 • Value of loans in the portfolio - $180.32M
Strategic Alliances Loan Funds Loan funds Loan funds, loan disbursements, collections and Information Technology support National Investment Fund Loan funds Collections through post offices in Linstead, Bog Walk, Greater Portmore, Waterford, Crofts Hill, Kellits, Albert Town and Lluidas Vale Loan funds Technical assistance and pending loan financing
Implementation of GIS Technology The GIS technology is used to: • Map & locate our clients, offices and payment locations • Conduct vulnerability assessments on the location of our clients’ businesses and homes • Locate areas for expansion/areas without any loans • Discover patterns/characteristics associated with delinquent clients
Implementation of a Disaster Mitigation Programme (DMP)? • The DMP is designed to acquire non financial information about clients to determine how susceptible they are to various hazards especially hurricanes, landslides, flooding and earthquakes. • Information on clients’ locations and building structure are collected to determine their vulnerability to these hazards.
Disaster Mitigation Programme Information collected is matched with our GPS waypoints on a map to give a graphical picture of our clients’ vulnerability.
Implementation of the Smart Campaign • A three-year initiative being undertaken by a broad coalition of microfinance institutions and other entities around the globe to protect micro clients from potentially harmful financial products and to ensure that they are treated fairly. • It embodies six core Client Protection Principles setting the standard for all providers of micro finance worldwide.
CHALLENGES • Very little information about potential clients resulting in difficulty in assessing credit risk • Acts of God- hurricanes and flooding • Potential clients have no bankable collateral • No accounting records or documentation on income and expenses • No separation between business and household cash
Challenges • Social Unrest • Collateral Issues- no bankable collateral and proof of ownership of appliances and furniture • Client selection and retention-building a culture of on time repayment • Financing portfolio growth – sourcing appropriate funding
How we have adapted to the market • Full responsibility of the Field Officers for their portfolios • Field Officer gets an incentive which includes a bonus for the loans disbursed and the portfolio outstanding and is discounted for poor loan quality • Field Officers are audited regularly and bear consequences for infringements
How we have adapted to the market • Developing a close relationship with the clients by creating constant access to financial services. • Graduation principle – client is rewarded if they show good repayment behaviour-bigger loans and better conditions • Analysis of Debt Capacity which takes into account business and family expenses
How we have adapted to the market • Analysis of clients’ character by obtaining verbal and written references. • The terms of a loan depend firstly on the financial and risk analysis and secondly on collateral • Purposes of collateral are to induce the client to repay and to cover losses of the organization
How we have adapted to the market • Clients need to fear that they will lose something valuable (psychological pressure). • Repayments are monitored daily • Enforcement measures are strict and fast as possible • Bad repayment disqualifies a client from further loans
How we have adapted to the market • Good repayment qualifies clients for bigger loans and better terms • Approval and disbursement of loans are approved by a Credit Committee that guarantees compliance with procedures, transparency and high quality decisions
How we have adapted to the market • Acts of God – provide disaster recovery loans, provided grants to those worst affected, rescheduled loans for those with adequate repayment capacity, and write off of loans where clients have lost both business and home
Strategic Initiatives 2012 • Roll out of the new loan underwriting methodology • Partner with the Jamaica Business Development Corporation to support the craft industry • Implement mobile finance in conjunction with JNBS and JN Foundation
Strategic Initiatives 2012 • Develop and implement a new loan underwriting application • Continue the growth of the micro credit portfolio by increasing the number of Field Officers and locations • Continue the growth of our branch network