Seaga pleased with launch of National Development Bank
Fulfilling an important item in his manifesto, Seaga was pleased to open the National Development Bank of Jamaica Limited. This replaces the Jamaica Development Bank, which was a failure in the eyes of the prime minister.
Published Thursday, November 25, 1982
NDB begins business with $62m
PRIME MINISTER, the Rt. Hon. Edward Seaga yesterday officially launched the National Development Bank of Jamaica Limited with assets totalling $62.4 million for the year 1982/83, and with the expectation that in the next three years, the assets will total $150 million.
The assets, the prime minister said, were "considerably more than adequate” to meet the $50-million worth of lending that is now in the pipeline for the bank.
The launching of the bank took place at the Jamaica Pegasus hotel, New Kingston and the prime minister expressed his gratitude to see what he described as an idea moving from the stage of concept to one of reality. “This project has moved over that stage in a period of 2½ years,” he declared.
Seaga recalled that the NDB was founded as a replacement, in part, for the Jamaica Development Bank. While the JDB had a wide portfolio for lending, its function was now split, with the NDB responsible for loans to industry, tourism and mining, while the Agricultural Credit Bank will be responsible for loans to the agricultural sector.
It was easy to recognise, even before the last general elections, that the JDB could not continue the business of development banking since it had lost its credibility, Mr Seaga said, adding that during the 1970s the performance of the bank was disappointing; it having built “massive debts”.
“It was decided, therefore, in our manifesto that we would be seeking to terminate the JDB and replace it with a new institution, and one of the things undertaken by the Government when it took office was to do just that,” the prime minister said.
The Government, Mr Seaga said, also had to take into consideration something else. Here he referred to the Small Industries Finance Company (SIFO), adding that from the very beginning it was “an endangered species”, saddled with the obligations from the institution from which it was born.
In 1977, he said, another institution was launched as a subsidiary of the Bank of Jamaica – Premier Investment Corporation – but in this case, it began to assume a different role.
Having regard to the fact that there must be a “lending window” for small enterprises, it was decided to incorporate both Premier Investment Corporation and Small Industries Finance Company in the NDB, since it was well-funded and well-structured to deal with loans, large and small.
The NDB, the prime minister explained, would not lend directly to individuals but, instead, would lend through intermediaries, such as commercial financial institutions and credit unions, both of which have the expertise to institute the checks and balances necessary.
Starting that the NDB has been able to put up $62.4 million for the year1982/83, Seaga said loans are made available on medium term and long term. On the medium-term loan, there is a maximum of five years repayment, with one to two years grace period; on long-term loans the period is 10 years, with a grace period of three years.
The interest rate in respect of funds for local purposes will be 15 per cent, funds from overseas sources will carry a rate of interest of 16 per cent, and in the case of the credit unions, the rate of interest will be 12 per cent.
The borrower, Mr Seaga said, can approach any merchant bank, commercial bank or credit union. These institutions will, in turn, make an approach to the NDB if the particular project has the appropriate criteria. The NDB will then lend to the commercial institution, in this way it will have a small group of clients to deal with.
Seaga said that there are 96 credit union branches throughout the island, 70 of which are in the Corporate Area and there was no parish without a credit union in operation. “This means that the accessibility to borrow will multiply considerably through the credit unions, which themselves have been credited with sound financial management," he said.
In order to borrow through a credit union, it is necessary for the borrower to become a member, and the Credit Union Act will have to be amended to allow for this, Mr Seaga said.
To date, he said $7 million is being made available for lending through the credit unions for 1982/83, with the stipulation that if more is required, more will be made available.
The amount to be made available through the NDB over the next three years, together with the $62.4 million, total $150 million, “which is in the pipeline and will be available for 1983 84, 1984/85,” Mr Seaga said.
Seaga warned that the new system did not mean that those persons who had borrowed under the JDB and other lending institutions should feel that their loans had been written off.
This is not so, he said, adding that it was wise for those persons who have obligations in other institutions to work out some repayment plan.
He said that the NDB will be empanelling a number of consultants to offer assistance on projects.
A document put out by the Bank said that the NDB will approve loans through approved Financial Institutions (AFIs) for the following types of projects: construction, expansion or modification of structures, purchase of machinery of equipment new or used, purchase of fixed assets, permanent working capital and, hopefully, rehabilitation of existing enterprises.
The following criteria must be met for projects being considered for loans: they must be competently managed and adequately staffed with trained personnel; must be profitable or capable of becoming so; must be engaged in activities classified as manufacturing, industrial, mining, tourism or agro-industrial; must be capable of making a positive contribution to the economy by saving or creating foreign exchange and/or by creating employment opportunities.
Noel Lyon, managing director of the NDB, said the bank was incorporated under the Companies Act on June 18, 1982. Its main objects are to foster economic development of Jamaica, to increase employment by assisting in the establishment, expansion, diversification and modernisation of business enterprises, and to facilitate the widening of Jamaica’s entrepreneurial base.
Marshall Hall, chairman of the NDB, welcomed guests who included representatives from the financial and business sector, and members of the diplomatic corps. He said that the bank was founded on the premise that it must demonstrate its own commercial viability, and at the same time, meet the banking needs of Jamaica consistent with sound financial management.
Prayer was said by the Rev. C. Evans-Bailey, chairman of the Jamaica Council of Churches.
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