BOJ warns illegal microlenders to get in line Loop Jamaica

The content originally appeared on: Jamaica News Loop News

With only 118 of the estimated 300 micro-credit firms having submitted applications to be licensed, the Bank of Jamaica (BOJ) is warning that companies found to be illegally operating will incur the raft of penalties stipulated by the Microcredit Act.

The BOJ has so far granted permission to five companies to operate within the space with over 100 applications now under consideration.

It has targeted covering half of the industry by way of asset value by December.

“We have been licensing a lot of the micro-credit institutions…the aim is to achieve 50 per cent of the total assets of the industry by December so we are doing a mix of the large and the small [firms],” BOJ governor Richard Byles said at the bank’s Quarterly Monetary Policy Press Conference held last Friday.

The Microcredit Act was approved in January 2021 and became effective in July 2021 with July 30, 2022, being the last day of the transition period for existing firms to apply under the regime.

The Act designated the BOJ as the supervisory body to license and regulate the sector with the Consumer Affairs Commission as the body responsible for making and issuing a code of conduct for licensees on consumer-related matters.

Speaking at the same function, deputy governor Dr Jide Lewis said while the BOJ “appreciates that coming out of an unregulated space into a regulated space is a big transition,” it will not stand for any disregard for the rule of law.

“What we have also made clear is that if you are a new player in the sector and you have made your application to the bank, even after that application is acknowledged, you’re required to desist from advertising or offering your services to the space,” Lewis said.

He continued: “We have issued letters in the public press indicating to persons that if they are found to be conducting business in that sector without being licensed then persecutions will follow.”

Under the Act, the penalty is $3 million and/or six months imprisonment for illegal operators.

“So, we really believe that it is in everyone’s interest to work with the process and to apply and provide the information necessary for us to do our due diligence and carry those applications through the process,” Lewis said.

“The BOJ has no intention to disrupt ordinary business activity in the sector as we migrate from an unregular to a regulated space,” he added.

However, Jamaica Association of Micro Financing (Jamfin) chairman Blossom O’Meally-Nelson, told Loop News that the trouble for the BOJ seems to lie in the fact that “they have no enforcement capacity so they don’t know who is out there.”

“They know that there are nearly 300 people in the sector and they have 111 applications, that is [the] problem…they need to find out who is out there operating that is not licensed,” she suggested.

Jamaica Association of Micro Financing (Jamfin) chairman Blossom O’Meally-Nelson

All JAMFIN’s clients have so far submitted their applications, she said.

But there is another anomaly.

“What the BOJ does not understand is that there were some people who were operating under trade names and partnerships and not under limited liability companies and a number of those people incorporated their operations after July 2021.”

“But because they incorporated in the one year doesn’t mean it’s a new thing…they didn’t understand that people could be operating using a trade name, which is not illegal,” she reasoned.

These operators have also submitted their applications to the BOJ, she said.

But “what the BOJ seems to want them to do is to stop operating until they decide whether they [are] licensing them or not and that can’t happen because it is a going concern and not a new business,” she said.

“The BOJ wants to consider them as new but they are not,” O’Meally-Nelson said.

Further, those operators have provided all the requested documentation as proof of their status, she said.

Pressed on whether there are operators in the industry who would now be considered illegal given the expiration of the transition period, the JAMFIN head said some operators have not been able to meet the requirements of the applications.

The matter now becomes one of enforcement, she reasoned.