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Commercial bank loans to agriculture and production accounted for a combined $13.2 billion dollars in May 2010, 5.3 per cent of the total loans in that month and almost twice that given in the same period to those sectors last year, data from the Bank of Jamaica (BOJ) reveals.
In May this year, commercial bank loans to agriculture increased by $2.8 billion over last year to $6.68 billion, a 42.9 per cent increase year on year. Similarly, loans for production increased 48 per cent to $6.5 billion this year, $3 billion more than the same period in 2009.
The increase in loans to productive enterprises may signal a move by the banks to offset losses on interest income following the Jamaica Debt Exchange (JDX) which took place in February this year. Additionally, with the JDX, bank lending rates have trended downwards, though slowly, in tandem with the reduction in Treasury Bill rates, making loans more attractive for businesses.
To sweeten the deal, there has also been efforts by commercial banks to provide special rates for agricultural businesses. Both the National Commercial bank (NCB) and Scotiabank, the two largest commercial banks in Jamaica have collaborated with the Ministry of Agriculture and Fisheries on FARM loan programmes to assist small farmers to plant cash crops.
NCB in March launched its FARM programme, which provides single digit financing to farmers who grow onions, Irish potatoes and hot peppers. The rate of the loan at nine per cent attracted a lot of attention from local farmers.
In April, Scotia launched its FARM programme at a rate of 9.95 per cent. The firm said the aim of the $100, million loan fund was to provide short term, non-revolving loans to financially viable farming projects with the goal of stimulating increased farming activities and reducing the use of foreign exchange on the imports of products that can be produced locally.
"We expect that this loan will ease the pressure on our farmers' cash flow and help them to manage their crops better so that they can get the best yields and better quality products coming from the farm," Patsy Latchman Atterbury, VP for small business banking at Scotiabank said at the launch of the programme.
"Improved yields and better quality means better profits which will grow the business further," she added.
Bernadette Barrow, assistant general manager of NCB's SME Unit, said at the launch of her firm's loan programme: "Agriculture has been one of the cornerstones of Jamaica's economy and we are pleased to contribute towards its resurgence. A robust agricultural sector will boost Jamaica's productivity and will help to correct our balance of payment problem by reducing our reliance on imports. NCB is happy to invest in the sector and to participate in supporting our nation's farmers."
The productive sector also got a nudge in the direction of increased loan take-up when, in May, NCB extended its NCB Nation Builder Credit Line, which offers companies as much as $15 million in financing at a single digit rate of nine per cent for up to seven years. The programme was due to have closed on April 30, 2010 but was extended until June 30. NCB said the move was to signify its commitment to the productive sector.
Last year, Scotiabank also made a 9.95 per cent loan facility called the Scotia Productive Sector Growth Fund available specifically for Jamaica's productive sector.
Former senior banking executive, Aubyn Hill, said among other benefits the JDX has brought to Jamaica is a change in the outlook of bankers to the viability of investing in productive enterprises instead of government paper.
"The JDX has brought many benefits to the country in terms of low interest rates and one of the greatest benefits is that it's forcing bankers to look at operating businesses," he said recently.
However, a $13 billion combined loan offer in May to agriculture and production is still dwarfed by loans to other types of investments including construction and land, $20.2 billion, and government services, $33.65 billion.
And while loans to the agriculture and production sectors have increased, loans to other productive enterprises including manufacturing, down 5.6 per cent, sugar, rum and molasses, down 89 per cent and food, drink and tobacco, down 35 per cent, have signalled the effect of a global economic recession on the demand for some consumer goods and the fall off in loans to the sectors.
http://www.jamaicaobserver.com/busin...--p---_7860417
In May this year, commercial bank loans to agriculture increased by $2.8 billion over last year to $6.68 billion, a 42.9 per cent increase year on year. Similarly, loans for production increased 48 per cent to $6.5 billion this year, $3 billion more than the same period in 2009.
The increase in loans to productive enterprises may signal a move by the banks to offset losses on interest income following the Jamaica Debt Exchange (JDX) which took place in February this year. Additionally, with the JDX, bank lending rates have trended downwards, though slowly, in tandem with the reduction in Treasury Bill rates, making loans more attractive for businesses.
To sweeten the deal, there has also been efforts by commercial banks to provide special rates for agricultural businesses. Both the National Commercial bank (NCB) and Scotiabank, the two largest commercial banks in Jamaica have collaborated with the Ministry of Agriculture and Fisheries on FARM loan programmes to assist small farmers to plant cash crops.
NCB in March launched its FARM programme, which provides single digit financing to farmers who grow onions, Irish potatoes and hot peppers. The rate of the loan at nine per cent attracted a lot of attention from local farmers.
In April, Scotia launched its FARM programme at a rate of 9.95 per cent. The firm said the aim of the $100, million loan fund was to provide short term, non-revolving loans to financially viable farming projects with the goal of stimulating increased farming activities and reducing the use of foreign exchange on the imports of products that can be produced locally.
"We expect that this loan will ease the pressure on our farmers' cash flow and help them to manage their crops better so that they can get the best yields and better quality products coming from the farm," Patsy Latchman Atterbury, VP for small business banking at Scotiabank said at the launch of the programme.
"Improved yields and better quality means better profits which will grow the business further," she added.
Bernadette Barrow, assistant general manager of NCB's SME Unit, said at the launch of her firm's loan programme: "Agriculture has been one of the cornerstones of Jamaica's economy and we are pleased to contribute towards its resurgence. A robust agricultural sector will boost Jamaica's productivity and will help to correct our balance of payment problem by reducing our reliance on imports. NCB is happy to invest in the sector and to participate in supporting our nation's farmers."
The productive sector also got a nudge in the direction of increased loan take-up when, in May, NCB extended its NCB Nation Builder Credit Line, which offers companies as much as $15 million in financing at a single digit rate of nine per cent for up to seven years. The programme was due to have closed on April 30, 2010 but was extended until June 30. NCB said the move was to signify its commitment to the productive sector.
Last year, Scotiabank also made a 9.95 per cent loan facility called the Scotia Productive Sector Growth Fund available specifically for Jamaica's productive sector.
Former senior banking executive, Aubyn Hill, said among other benefits the JDX has brought to Jamaica is a change in the outlook of bankers to the viability of investing in productive enterprises instead of government paper.
"The JDX has brought many benefits to the country in terms of low interest rates and one of the greatest benefits is that it's forcing bankers to look at operating businesses," he said recently.
However, a $13 billion combined loan offer in May to agriculture and production is still dwarfed by loans to other types of investments including construction and land, $20.2 billion, and government services, $33.65 billion.
And while loans to the agriculture and production sectors have increased, loans to other productive enterprises including manufacturing, down 5.6 per cent, sugar, rum and molasses, down 89 per cent and food, drink and tobacco, down 35 per cent, have signalled the effect of a global economic recession on the demand for some consumer goods and the fall off in loans to the sectors.
http://www.jamaicaobserver.com/busin...--p---_7860417
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