Caribbean MicroFinance Alliance works on promoting responsible lending

AS the Caribbiance (CMFA) prepares to make its presence felt on a regional basis, it is working to promote "responsible lending" according to chairman of the CMFA, Ramesh Persaud.

The CMFA is an advocate for effective microfinance services in the Caribbean, and wants to make "the entire lending process more transparent, so that clients can be fully informed", Persaud told the Jamaica Observer. The body has now started a process of assessing some of its members with a view to giving them certification.

The CMFA currently has 25 members from nine countries, including: Jamaica, Guyana, Belize, Trinidad & obago, Suriname, Barbados, Grenada, St Lucia and Dominica. Jamaica is the largest of those markets, but the Alliance has also had interest from Haiti, which would be the largest market of all, Persaud said.

Meanwhile, microfinance businesses in Guyana have an advantage over their Jamaican peers, as the rate of microfinance loans is signficantly lower. People in micro business sector make money in areas such as selling phone cards or peanuts at bus stations. But, while in Jamaica these small entrepreneurs may pay an interest rate of one per cent per week, Persaud's organisation currently has microfinance loans for 36 per cent.

In addition, the payback policy is significantly more lenient. In Guyana a client who borrows US$500 for a 20 week period would be expected to pay interest of US$75 at the end of that period, Persaud said. "But if they can't pay, they have two years to pay back their US$75," he said.

While most governments focus on poverty reduction, "microfinance is more about wealth creation", Persuad said. "Access to finance is a challenge across the region," he added.

To promote responsible lending, the organisation has started to assess some of its members. The idea is to define their level of responsible practices, and to see if they have any "predatory" practices, Persaud said. The companies will then be required to make any appropriate changes before receiving certification.

Four member organisations are currently undergoing assesment, including the Institute of Private Enterprise Development in Guyana -- which is headed by Persaud, Inmaculade Credit Union in Belize, the National Development Foundation of Dominica, and Access Financial Services in Jamaica. Other Jamaican institutions in the Alliance include: Microcredit Ltd, COK Sodality Co-Operative Credit Union, First Heritage Credit Union, Sure Financial Services and the St Catherine Co-operate Credit Union.

The CMFA is headquartered in Kingston and is headed by Executive Director Michell Scott. Its members have invested more than US$34 million to serve more than 22,000 micro entrepreneurs within those markets. It is estimated that those entrepreneurs create full-time employment for at least 50,000 people across the region.

But those numbers are from CMFA membership only and "our membership serve less than 50 per cent of the small and micro business sector in their market spaces", Persaud told Sunday Finance.

Persaud was on the island to launch the Caribbean Microfinance Forum 6, which is to be held in Miami, Florida from June 6 - 9, 2015 under the theme 'Microfinance Solutions for Inclusive Growth'. It is the sixth time that the Forum will be held, but it is the first time that it will be fully organised by the CMFA as the previous five were held under the auspices of the Caribbean Capacity Building Project, funded by the IDB, CDB, EU and Citi Foundation.

Originally published: http://www.jamaicaobserver.com/