Finance the Growth

Emile SpenceBusiness Development & Research Executive Jamaica National Building SocietyJamaica Trade & InvestAugust 20, 2009

… How toof yourBusiness

the

Financi

al crisis

Economi

c downtur

n

Recession

Downsizing of businesses

Job cuts

Redundancies

Re-financin

g

Re-tooling

Early

retireme

nt

Right-sizing

New strategi

es

Areas of Focus• What is this financial crisis?

• How will the financial crisis affect individual

businesses?

• Why is it important for business persons to

be

vigilant in making monetary decisions?

Global Financial Climate

• Global cash crunch• Major economies record steep declines in

output• Global economy expected to decline by

1.3% for 2009• Estimated world credit loss of US $2.3

trillion• Approximately US $14.5 trillion or

$33% of the value of the world’s companies affected

Global Financial

Climate

Reduced Reduced access to access to

creditcredit

Reduction Reduction in demand in demand

for for aluminumaluminum

Contraction of global

demand for goods and services

Fall in Fall in global oil global oil demanddemand

RemovaRemoval of l of

tariffstariffs

Global Financial Climate

Impact on Jamaica

Declined by 17%

since

January 2009

M

Contract by 3%

Contract by 3%

1.3% Jan-M

arch

1.3% Jan-M

arch

20092009

Decline in value

Decline in value

Economy Inflation FDI Remittance Remittance inflowinflow

Low levels of output

Low levels of output

ExportsExports

$159B of the $548B budget $159B of the $548B budget earmarked for debt repaymentearmarked for debt repayment

$159B of the $548B budget $159B of the $548B budget earmarked for debt repaymentearmarked for debt repayment

• Decline in price and volume of exports

• Restrictions in access to trade financing

• Reduced remittance inflows

• Depressed commodity prices

• Weakened labour markets

• Low business and consumer confidence

• Falling asset values

• Downgrade of Jamaica’s credit rating

Impact on Jamaica

International Response

IMFIMFIMFIMF World BankWorld BankWorld BankWorld Bank IBDIBD IBDIBD

Offer Offer policy policy advice advice

and and technical technical

assistance assistance

Umbrella Umbrella Vulnerability Fund Vulnerability Fund to which developed to which developed

countries would countries would dedicate 0.7 per dedicate 0.7 per

cent of their cent of their planned economic planned economic

stimulus for stimulus for assistance to assistance to

developing developing countriescountries

At end of December At end of December 2008 disbursed 2008 disbursed approximately approximately

US$150 M, including US$150 M, including some US$120 M for some US$120 M for budgetary support.budgetary support.

Additional US$200M Additional US$200M to US$300M available to US$300M available

for lending during for lending during 20092009

G-20 NationsG-20 NationsG-20 NationsG-20 Nations

$1.1 Trillion for $1.1 Trillion for developing developing

countries to countries to boost micro boost micro enterprises enterprises

sectorsector

55thth Summit of the Americas Summit of the Americas… … recognition of importance of MSME sector and recognition of importance of MSME sector and

commitment to finance sector in LAC countriescommitment to finance sector in LAC countries

55thth Summit of the Americas Summit of the Americas… … recognition of importance of MSME sector and recognition of importance of MSME sector and

commitment to finance sector in LAC countriescommitment to finance sector in LAC countries

Regional ResponseCARICOM to

establish College of Regulators to facilitate closer collaboration among supervisory authorities in Caribbean jurisdictions which is critical to ensuring safety, soundness and stability in the financial services sector.

CARICOM to establish College of Regulators to facilitate closer collaboration among supervisory authorities in Caribbean jurisdictions which is critical to ensuring safety, soundness and stability in the financial services sector.

13th Heads of Government of the Caribbean Community Meeting in Guyana, July 2009

Government's Response

GovernmentGovernmentInitiativesInitiatives

Funding for MSME sector

International funding

Funding for tourism sector

Renegotiation of international loans

Concessions to Manufacturing sector

YouthEntrepreneurshipProgramme (YEP)

• Look for creative micro and small business opportunities in sectors such as agriculture and tourism

• Become financially literate

• Refine financial management for small businesses: Funding Cash Management The Importance of Saving

Response of Businesses

Funds from Development Bank of Jamaica available for on-lending by microfinance institutions such as:• JN Small Business Loans Ltd• Jamaica Business Development

Corporation • Credit Unions

J$350 million fund for small and medium size businesses

J$2.25 billion venture capital loan programme established

Funding for Small Businesses

Importance of Saving

• Save profits to replenish raw materials or stock

• Save profits toward purchase of new equipment

• Save profits to reward one’s self

• Save profits to replenish raw materials or stock

• Save profits toward purchase of new equipment

• Save profits to reward one’s self

JN’s Response

Tips for Survival

CONSERVECONSERVE

GRASP OPPORTUNITIES

BE FINANCIALLY LITERATE

SAVE

ELIMINATEELIMINATE UNECESSARY DEBTUNECESSARY DEBT

Payday loans - Payday loans - rates as high rates as high at 32.5% on the reducing at 32.5% on the reducing balancebalance

Credit Cards Credit Cards - Interest rates as high - Interest rates as high as 49% per annum on Jamaican as 49% per annum on Jamaican currency cards and up to 20% on currency cards and up to 20% on International cardsInternational cards

Credit Cards Credit Cards - Interest rates as high - Interest rates as high as 49% per annum on Jamaican as 49% per annum on Jamaican currency cards and up to 20% on currency cards and up to 20% on International cardsInternational cards

Hire purchase Hire purchase - interest rates range from 2 – 3% per month, add on … on outstanding balance

Hire purchase Hire purchase - interest rates range from 2 – 3% per month, add on … on outstanding balance

Economic Opportunities

Information Technology

… use of the internet

MusicTourism

Capacity building in the area of music … Jamaican Motown record company

Theme Parks, Cultural sites, adventure &

sports tourism

““Seeds of faith are always within us; Seeds of faith are always within us; sometimes it takes a crisis to nourish sometimes it takes a crisis to nourish

and encourage their growth.”and encourage their growth.” Susan TaylorSusan Taylor

Hope…