CAPRI calls for legislation to make access to banking services easier for Jamaicans

 

The Caribbean Policy Research Institute (CAPRI) is recommending the government enact legislation that will allow financial institutions to share information to make it easier for Jamaicans to access banking services.

 

CAPRI's latest research found that 17 per cent of Jamaicans remain unbanked and 75 per cent of the respondents to its survey had a preference for using cash.

 

Executive Director of CAPRI Dr. Damien King said a significant number of Jamaicans are also saving money outside of the banking system. 

 

"Our survey revealed that half of the low income population actually have savings, but little of it is in a bank account. It turns out that two out of five persons in our survey said that they lacked proof of address that they would need to be able to access a bank account," he revealed.  

 

Dr. King noted that a large segment of the population remains untapped for financial services because institutions do not think it is worth the effort to serve them.

 

He explained that this is because it can be expensive to acquire and maintain customers and the risk might not be worth the return.

 

According to Dr. King, regulations which allow for open banking and the sharing of information could resolve some of these issues. 

 

"If we can complete the establishment, the drafting and implementation of these regulations, then we are going to have open platforms and facilitating regulations, out of which will come competition and innovation," he suggested. "And it is that competitive innovation that is going to bring new players and new services that are going to seep into every financial service niche."

 

He argued that "it is for the financial sector to be able to reach the unbanked where they are" and necessarily existing institutions. 

 

 

Additionally, Dr. King disclosed that three quarters of Jamaica's small and micro businesses are not utilising credit.

 

He said CAPRI's survey found that only 13 per cent of the adult population had access to credit or a credit card in the last six month.  

 

This, he said, was a particular problem for micro, small and medium sized businesses since "every business needs to have credit in order to use working capital in order to manage its cash flows". 

 

"For micro, small and medium sized businesses, only 25% of those businesses were carrying any kind of debt, so that is one of the factors that is holding back micro businesses from becoming small ones and small ones from becoming medium sized ones," he asserted.

 

Respondents have said borrowing is too tedious, according to Dr. King, who cited inadequate collateral as one reason. 

 

"Micro, small and medium sized enterprises don't have the kind of fixed capital that can be used as collateral, the kind of collateral that established commercial banks need...and so that mismatch means that they're not able to access credit," he explained. 

 

Another hurdle these enterprises have is their informality. Dr. King noted that of the 425,000 small businesses in Jamaica, "half of them are informal and therefore lack the capacity to produce the kind of documents that would be required to be able to access credit". 

 

He was presenting the findings of CAPRI's latest report Cheque In: Increasing Access to the Formal Financial System, on Thursday evening.