6 months ago
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Two associations representing small businesses in Jamaica have welcomed the move to amend the laws governing the use of personal property to acquire loans and hope the change will make it easier for their members to do business.
Minister of Industry, Investments and Commerce Senator Aubyn Hill says the amendments to the Security Interests in Personal Property Act, better known as SIPPA, will expand access to credit for businesses and entrepreneurs, and further simplify and broaden financing options for small businesses.
A Joint Select Committee of Parliament conducting a statutory review of the SIPPA, approved its draft report at its last meeting on January 23, outlining significant recommendations aimed at strengthening the SIPPA framework and enhancing access to credit, a news release from the ministry said.
Introduced in 2014, SIPPA changed the way Jamaicans secured loans, allowing personal assets like equipment and inventory to be used as collateral.
“The upcoming changes, now in their final stages of legal review, will improve the act’s effectiveness and inclusivity. These changes will allow more individuals and businesses to utilise the potential of movable assets as security for financing arrangements,” the ministry said.
The committee, which held its first meeting on July 13, 2023, heard public submissions, including from the Bank of Jamaica, Development Bank of Jamaica, Jamaica Agricultural Society, Jamaica Association for Micro-Financing, Jamaica Bankers Association, Jamaica Co-operative Credit Union League, Jamaica Intellectual Property Office, the Jamaican Bar Association, Kingston Creative, Lasco Microfinance Limited, Rural Agricultural Development Authority, and the Faculty of Social Sciences at the University of the West Indies.
Recommendations for the amendment to the SIPPA regime include making it easier for people to buy and sell items used as loan security; allowing auctions to take place both online and in person, thus making the process more open and accessible to everyone; enhancement of provisions to make it an offence for debtors to knowingly dispose of secured property in violation of security agreements; and the express inclusion of commercial consignments, long-term leases (more than six months), and sales of accounts receivable as recognised security under the Act.
Other recommendations for the amendment include the use as collateral of any item of personal property that can be identified via the use of a serial number; and new provisions making it clear that if a lender hasn’t properly registered their claim on a borrower’s property, they cannot take it from someone else who bought it.
Also, a public education campaign will be implemented to help people understand the law and improve financial knowledge across the country.
Commenting on the proposed amendments, President of the MSME Alliance Antoinette Hamilton expressed hope that meaningful changes would arise for the members of her association, 60 per cent of which are businesses with revenue of less than $15 million per year.
“The act before, I think, was really just a start, which focused mainly on the traditional types of security that could be easily registered and transferred. The fact that it has now extended to include some of the non-traditional types of security is most welcome. Any change in policy that would allow all members to have easier access to financing is a step in the right direction,” said Hamilton.
“The challenge is that it is not the first time these changes would have been mentioned, so our hope is that this time it is executed,” she said.
Hamilton suggested that an auction for items used as security to be bought and sold was not sufficient, but it should be an active online portal similar to eBay.
She also expressed concern that the cost of registration fees under the SIPPA as well as credit reports were borne by the businesses alone, and suggested that these fees should be shared with the credit bureaus.
Meanwhile, Garnett Reid, president of the Small Business Association of Jamaica, said hundreds of small businesses were being denied loans not only because of the absence of acceptable collateral, but a host of other reasons.
“Some (financial institutions) want memorandum and articles of association, business plans, cash projections, audited financials, and TCC (tax compliance certificates). These denials are not helping the banks, nor are they helping the economy,” Reid said.
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