Dionne Rose, Business Reporter

Bernadette Barrow ... faced a storm of complaints about lending policy when NCB invited owners of small and medium-size busineses to a seminar last week. - Contributed

Facing complaints from entrepreneurs operating small and medium-size enterprises that high interest rates undermined the viability of these businesses, National Commercial Bank (NCB) last week promised that it would do something about the problem.

But bank officials, having been told to their faces about the perceived errant ways of the big financial institutions, conceded that whatever they do in the short-term will be limited in scope.

"You are all familiar with the NIF (National Insurance Fund) facility that was announced sometime last year," Bernadette Barrow, NCB's assistant general manager with responsibility for the bank's small and medium enterprise (SME) division, told business operators at a seminar last week. "NCB will be participating in that programme and we will be able to offer this to our existing customers."

The facility to which Barrow referred is the $1-billion revolving fund, using money borrowed from the NIF, which was announced by the former government more than a year ago, to provide soft loans to small and micro enterprises. Loans under that scheme are capped at $5 million, with interest at 10 per cent over four years. Generally, though, commercial banks charge their best customers 16 per cent there is a handful of facilities for SME borrowers at lower rates.

Meeting with SMEs

It was with this in mind, as well as a new drive to attract a new type of business borrower through its doors, that NCB last week invited SME operators to its Half-Way Tree branch to get to know its key personnel and to outline the kind of services it has on offer.

But Barrow and others could hardly have been prepared for the earful they received. People complained about the low returns they receive on their savings and other instruments in comparison to what banks charge their borrowers.

"I want to charge NCB to find a way to support good businesses in this sector with single-digit loans," said one man, who was cheered along by the audience.

He added: "I want you to think about that: this thing of high interest loans is killing us!"

He urged NCB to move away from the pack, so as to be "different from the rest of the other banks".

Ridiculous interest

Another point of irruption for Jamaican banking customers: the difference between what they are paid on their deposits by banks and what they are charged on loans.

"What are you doing for us?" a lady asked.

"The savings … the interest is ridiculous. I have a US (dollar) account for about 10 years now, and I laugh every time I see it. It has not moved and that is the reality.

"This is what I want NCB to tell me about, what are you doing for me?"

This matter of high interest rates that spread between what banks charge their customers and what they pay on savings and other instruments has long been a contentious issue in Jamaica.

Two years ago it triggered a formal complaint by the Jamaica Manufacturers' Association to the Fair Trading Commission (FTC), alleging collusion among banks. The FTC found no collusion.

Coincidentally, the day after the NCB seminar, Omar Azan, the JMA's current president, was lamenting the lack of affordable capital. Businesses could not re-tool or be seriously competitive having to pay interest at between 16 per cent and 23 per cent.

Limited facility

Responding specifically to the concerns of the small enterprise operators, NCB's Barrow acknowledged that the NIF facility that the bank was about to launch "is quite limited".

"But it is a start in the right direction," she said. "We will be looking at introducing a pool of funds at single-digit Jamaican dollars interest rate."

Christopher Denny, regional manager of retail banking, sought to assuage the complainers of low savings rates, saying NCB regularly reviewed the rates that are offered to its customers. He also suggested that the customer should explore other investment vehicles that offer higher returns.

Earlier, guest presenter Dennis Richards, an economist, gave SME customers tips on how to manage their cash flow. Some of the tips included marrying outflow with inflow.

"So, if you find for instance that most of your cash comes in at the end of the month, that is when you want to make your payments," he explained. "It would make sense to move your staff you pay on a weekly basis over to fortnightly until you can get them monthly."

Richards also recommended that customers should pay attention to utility bills and don't pay more than is required.

He also advised small businesses of not over-investing in supplies, which could tie up cash flow.

dionne.rose@gleanerjm.com