SBAJ tackles bankers on failure to cut interest rates

Decrying the high lending rates commercial banks offer to players in the small business sector, despite consecutive reductions in policy interest rates last year by the Bank of Jamaica (BOJ), president of the Small Businesses Association of Jamaica (SBAJ) Garnett Reid is calling for immediate action to ease the burden on those deemed to be the engine of economic growth in the country.

Reid said if interest rates on loans from commercial banks to the small business sector remain at the current levels, they could threaten the survival of many businesses.

The SBAJ president has requested an urgent meeting with Minister of Finance and the Public Service Fayval Williams and the leadership of the Jamaica Bankers Association (JBA) to discuss the issue.

In a letter to the JBA, a copy of which The Gleaner has seen, Reid said small businesses are currently paying as high as 15 per cent to 18 per cent on existing loans.

He argued that the BOJ had implemented four consecutive rate cuts in 2024, bringing the policy interest rate down to 6.00 per cent per annum as of December 23, 2024.

Reid noted that this misalignment has created significant financial strain for small business owners and other borrowers, adding that it was imperative for the SBAJ and the JBA to engage in dialogue to address this matter.

According to Reid, these measures were intended to stimulate economic activity and ease borrowing costs.

“However, we note with dismay that commercial banks have not adjusted their lending rates to reflect these reductions. Our members, who form the backbone of Jamaica’s economy, continue to face prohibitively high interest rates on loans, mortgages, and credit facilities – rates that are undermining their ability to grow, sustain operations, and contribute to national development,” Reid said in his letter to the JBA.

In requesting the meeting, the SBAJ head said his organisation was seeking to understand the factors influencing commercial banks’ lending rate policies and to explore possible collaborative solutions that can alleviate the financial burden on borrowers while maintaining the health of the banking sector.

At the same time, the SBAJ has also written to Williams regarding the seeming reluctance by commercial banks to trim their lending rates.

Untenable situation

In his letter dated December 31, 2024 to Williams, the SBAJ president echoed sentiments that the lack of alignment between the BOJ’s monetary policy and the practices of commercial banks undermines the very objectives of the central bank’s rate cuts, including the stimulation of economic growth and the reduction of borrowing costs for Jamaican citizens.

“This untenable situation has left small business owners, the backbone of Jamaica’s economy, particularly vulnerable. With members of our association paying interest rates as high as 18 per cent, they face insurmountable challenges in maintaining operations, retaining employees, and contributing to national growth,” he told Williams.

In his proposed meeting with the finance minister, Reid said the association will explore potential solutions, including policy directives or interventions that can ensure the benefits of the BOJ’s rate reductions are passed on to borrowers.

The SBAJ president also commented on the deplorable state of farm roads that are posing a serious challenge for farmers who want to move their produce.

“We are calling on the prime minister and the persons in authority to deal with the farm roads. Farmers have to travel on the farm roads before they can reach the main roads and the highway so we need to place emphasis on the farm roads,” he stressed.

He also urged the government to move more decisively against crime which has been a sore problem for small business operators.

The SBAJ president said he continues to get calls from farmers who complain bitterly about losing their livestock and farm produce to praedial larcenists.

edmond.campbell@gleanerjm.com