Jamaica's moneylenders do $3 billion of business annually, on their own count, and now some of them are banding together to shake off the image of members as loan sharks and reposition as serious microfinanciers offering a needed service.

The newly created Jamaica Microfinancing Association Limited (JaMFA) also sees itself in the role as self-regulator in a market where not all service providers are authorised to conduct business.

JaMFA on Wednesday staged its official launch with 10 members on board of a potential 25 private registered companies as well as "many more small individuals doing their own thing," according to JaMFA Executive Director Raymond Gabiddon.

Asserting that micro-financing entities were more accurately described as part of the secondary market for credit, the executive director said his sector did over $3 billion in business in the last financial year, with an average 1,500 loans made to individuals monthly, or 18,000 transactions for the year.

But Gabbidon acknowledged that moneylenders, as they are designated under law, have developed a reputation for gouging clients and employing unsavoury recovery tactics, including long-time reports of people being forcefully detained until their relatives pay what is owed.

"The industry is seen as loan sharks, which we are really not; we are really operators in the secondary financial market," said Gabbidon.

"The consuming public has not been served well especially in terms of draconian recovery tactics."

The practice often leads, he adds, to loss of assets by the poor or near poor.

JaMFA Chairman Hurshell Cyrus of WorldNet Investment Company, at the Kingston launch, unveiled a raft of initiatives being pursued by the new association including regulatory initiatives, best practices for the sector and the creation of a database of borrowers for use by its members.

The database, he said, would track more efficiently serial borrowers who turn up at different agencies seeking loans on the same collateral.

There was also, the chairman said, a lobby being strengthened for the pursuit of low-cost funding for loans.

According to Gabbidon, the association will vigorously pursue an agenda for best practices.

"You cannot have hidden fees," he said.

"Everything must be upfront and the client must know what they are getting into."

A code of conduct has been drafted, two meetings have been held with the finance ministry at the ministerial level and recommendations presented on new criteria for general registration of micro financiers (see insert).

Moneylenders are monitored, somewhat loosely, by the Ministry of Finance.

But legislative changes are under consideration to bring the group into a stricter regime.

"The Ministry is also looking at its own proposed regulations," said the JaMFA director.

"The recommendation was made to integrate both into one financial draft, engaging the FSC (Financial Services Commission) the BOJ (Bank of Jamaica) and others in the process."

The Finance Ministry continues to lead on the technical efforts to redefine the governance and legal structure for microfinanciers but the responsibility to oversee the sector will fall to the Ministry of Industry, Investment and Commerce.

Moneylenders, who accept personal assets, including household appliances, vehicles and insurance policies with cash value as collateral, approve loans to walk-in clients who are often unschooled in financial language.

JaMFA now requires that all contracts issued by members include interest rate charges for the loan duration, loan-processing fees, the rate for late payments and any other charges including stamp duty to register a bill of sale.

Members will be barred from inducing hidden charges, fees or penalties not detailed in loan agreements signed by the client.

According to Gabiddon, the application process for joining JaMFA "is very rigorous including, an 18-part questionnaire based off requirements of the Financial Services Commission. Neither the FSC nor Bank of Jamaica is expected, at this stage, to play a role in regulating the moneylenders.

avia.collinder@gleanerjm.com

JaMFA membership:

WorldNet Investment Company Limited

Kris An Charles Investment Limited

First Union Financial Company Limited

Niche Financing Limited

McKayla Financial Services Limited

Tech Loans Limited

IFP Financing Limited

Elegero Limited

Integrity Financing

Cool Loans Limited

Recommendations:

1. Customers must have proper contracts which should have no fine print and stipulate fees, charges and liens.

2. Members should accept no deposits from the public to fund their operations.

3. Members must maintain accurate records of all transactions and must equip their business with tools such as loan management software.

4. Members must adhere to all statutory and regulatory requirements, and pay their taxes.

5. Members should also be exempt under the Money Lending Act so they can protect accounts receivables.

6. Companies and staff must be forthright, transparent, and honest in dealings with the public.