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More hospitality entrepreneurs chasing EXIM loans

More entrepreneurs operating businesses within the tourism sector are taking up loans on offer from the National Export-Import Bank of Jamaica, new data from the state-run financial institution has revealed.

The EXIM Bank markets five loan products: a pre-shipment financing facility, a short-term revolving loan, a medium-term revolving loan, the foreign currency financing line, and the SMTE, or small and medium tourism enterprises revolving loan.

But the SMTE was the sole product to see a rise in demand last fiscal year ending March 2023, after slipping 25 per cent a year earlier. The bank disbursed a total of $304.14 million in revolving SMTE loans, up 36 per cent from $223.31 million in FY2022.

Within the current fiscal period, EXIM said it disbursed $54.79 million for the first quarter, that is, within the period April to June 2023.

“We are projecting $486.36 million to be disbursed under that loan facility for the full year,” said Interim Manager Director of EXIM Bank, Errol Barnaby.

Interest in EXIM’s products, he said, is partly due to the bank’s stance of the price of credit. The bank has kept its lending rates steady, despite the fourteenfold increase in the central bank’s policy rates.

But demand is also driven by recovery within the hospitality market, whose players, Barnaby said, are engaged in fresh capex projects to handle the regrowth of the tourism sector and rebound in tourist visits.

The Ministry of Tourism reported that Jamaica recorded over a million visitor arrivals up to May, putting the destination on par with 2019 records. The ministry is projecting more than 3.8 million visitors in 2023, and for that number to grow to more than five million by 2025.

“The EXIM bank has become more competitive in the rates offered in recent times,” said Barnaby.

“Most of the commercial banks have revised interest rates in line with the policy rate set by the BOJ, and this has led to entrepreneurs paying more on the loans they had with the banks. But once we have issued you a loan, you have locked in that rate, and so there’s no worry about us increasing the rate because of market conditions,” he told the Financial Gleaner.

In operation for over 30 years, EXIM Bank Jamaica is an agency of the Ministry of Industry, Investment & Commerce that offers credit to enterprises within the micro, small and medium groupings.

The bank lends directly to the SME sector, but facilitates lending to micro entities through the JN Bank.

Its loans are priced within a range of seven per cent to 13 per cent on Jamaican currency facilities, and six per cent to nine per cent on foreign currency lending.

But the SMTE loan, which is a special facility created by the bank in collaboration with the Tourism Enhancement Fund, the source of the seed funding to facilitate the growth of tourism entities, is offered at a concessionary 4.5 per cent interest rate, with a loan tenure of 84 months or seven years.

The loan product is open to businesses operating within the tourism sector, the tourism linkages networks, and to manufacturers and suppliers to hotels. The qualified entities must have 25 per cent of their revenue generated from services to the local tourism sector and must be in operation over two years.

The loans are capped at $25 million.

“Tourism Minister Edmund Bartlett has done well in terms of marketing this loan for us, but whenever the opportunity arises, we attempt what we call ‘upselling’ to existing clients. It simply means that the client is eligible for the maximum amount but has only draw down $12 million,” said Barnaby.

“In those instances, we try to encourage them to take up the remainder,” he said.

As to the performance of the other credit facilities, last year disbursements for the foreign currency line marginally dipped from $697 million to $632.01 million; pre-shipment financing loans fell from $1.09 billion to $700 million; the medium-term disbursements declined from $1.23 billion to $827.96 million; while the starkest fall-off related to the short-term revolving facility, which plummeted from $933.83 million at year ending March 2022 to $266.65 million at March 2023.

“During the financial year, there was more focus on the medium-term loan for which tenure is 84 months,” said Barnaby.

“Coming out of COVID, companies have been more cautious about getting into any short-term borrowing, and before now there was also a low take-up because, as I mentioned before, the EXIM loans were not so competitive in term of rates,” he said.

But: “Since the start of this calendar year, we have seen greater demand for loans overall because of the stance taken by the BOJ,” Barnaby added.

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