The following is the text of the presentation by the Minister of Finance and the Public Service, Audley Shaw at the launch of Sygnus Capital Limited on Wednesday, July 12, 2017 at the Porsche Centre in New Kingston.
Good evening. It is truly a pleasure to address you at the launch of your new financial firm. This is indeed a bold step and I congratulate your team on their vision to provide the local financial landscape with additional products that will no doubt lead to an even more vibrant space. I think you will all agree that entrepreneurship is alive and well in Jamaica.
Looking around, I must also add that the atmosphere of this new Porsche showroom, the first of its kind in Jamaica, also adds to the richness of the evening.
Ladies and gentlemen, I want to use the opportunity this evening, to speak briefly on financial inclusion- its impact on economic growth and how firms such as Sygnus add to the goal that we envisage for our financial sector.
A competitive financial service sector augurs well for growth. It means that companies have to be innovative in their offerings. This in turn improves access to credit and drives economic growth.
The importance of the financial and insurance sector cannot be over emphasized in this regard since, at 12 percent, it is the third largest sector contributor to real GDP.
A cursory look at the landscape shows that Sygnus Capital is the second firm to be issued a securities dealer’s license by the Financial Services Commission in the past five years.
Two commercial banking licences were also issued by the Bank of Jamaica last year to Jamaica National and Jamaica Money Market Brokers Limited.
Already, we see the benefits of the license issued to Jamaica National and its conversion to a commercial bank through its introductory offers to customers. This is the kind of vibrancy that competition brings.
I expect the addition of Sygnus Capital to the securities market to also bring competition and growth to the sector.
The fact that Sygnus was started by and is led by Jamaicans also augurs well for the local landscape. It means the Jamaican economy will be the full beneficiary of its success.
I am pleased with the company’s vision which you have stated is ‘to drive the velocity of economic growth across the Caribbean using innovative financing solutions.’ This aligns with the National Financial Inclusion Strategy that was launched in March this year.
The goal of financial inclusion is to increase the access for all eligible Jamaicans to our regulated financial institutions so that they can safely and cost-effectively access the services of the market.
The four pillars:
(i) Financial Access and Usage
(ii) Financial Resilience
(iii) Financing for Growth and
(iv) Responsible Finance
Are built on a foundation of developing the supporting infrastructure for the financial system, which requires the creation of an enabling regulatory and supervisory framework for advancing credit to the private sector, improved credit reporting and measures to reduce informality.
Through the launch of your Sygnus Credit Investments Ltd, which aims to provide financing for medium sized firms, you will help to advance the goals of improved financial access and usage to drive economic growth.
Your focus on medium sized firms is not only strategic. It is key to improving economic growth and financial inclusion.
Ladies and gentlemen, let me take this opportunity to reiterate that Jamaica is on the move.
The economy has steadily improving. Based on latest data released by the Statistical Institute of Jamaica, real GDP growth peaked at 1.5% in 2016, but owing to weather related setbacks, it slowed to 1.3% for the Fiscal Year 2016/17.
We however expect that growth in the economy to continue to steadily improve to between 2- 3% in FY 2017/18 based on strong tourism, agriculture, and manufacturing expansion, and recovery of the mining sector. I am also encouraged by the sharp recovery in exports that we have been seeing from our manufacturing and agriculture sectors, as well as stronger consumption owing to more disposable incomes from lower income taxes.
It would be remiss of me to not highlight the developments in the financial sector that demonstrate greater diversification of services, lower financing costs and greater access to credit by the wider population.
In this regard, based on the Bank of Jamaica’s March 2017 Survey of Credit Conditions, I am pleased to see that interest rates continue to fall, with rates on new local currency loans averaging 13.8% in the March 2017 quarter, down from 15.63% in the December quarter. In particular, interest rates for businesses fell to 12.8% from 15.13% in the December quarter. The share of loans to businesses also increased to 48% of private sector credit in the March quarter, up from 45% in the December quarter. This is a good indicator of the competitiveness now at play within the financial sector.
To put this in context, we can look back at the December 2013 quarter when business loans accounted for 37% of total private sector credit.
But ladies and gentlemen, not only is the pace of lending to the private sector increasing, we also see a trend of greater financial inclusiveness amid the decline in financing costs.
For the December quarter, the share of bank lending to small businesses rose to 10.8% of total private sector credit up from 9.5%.
This occurred while the average rate of interest on such loans fell to 11.7% down from 13.6%. The average interest on loans to medium sized businesses also fell to 9.9% down from 11.16% in December. Additionally, the average interest on loans to large corporations and commercial businesses declined to 8.8% down from 10.23% in the December quarter.
As you all know, these positive developments reflect continued improvement in the investment environment in Jamaica. My goal is to maintain macroeconomic stability through continued tight fiscal management, a low inflation target and ample international reserves, all of which help to support the maintenance of a competitive and stable Jamaican dollar.
Ladies and gentlemen, let me close on a note of exhortation.
Although we have made significant economic gains in recent years, the social challenges and crime rate issues pose high risks for Jamaica. These challenges reflect a steady breakdown in societal discipline, and a historical absence of opportunity due to weak economic performance and inequality in the Jamaica.
The Government therefore needs your help to accelerate the pace of economic growth. The continued increase in access to financial services to the broader population supports micro and small businesses and goes a long way toward easing the inequality and high rates of youth unemployment.
We must therefore continue to support the development of companies such as Sygnus Capital and other entrepreneurs who are poised to help in this regard.
Ladies and gentlemen, thank you.
Source: Jamaica Observer