Jamaican Minister Pushes for Banks to Lower Loan Rates

• Jamaica’s Minister of Industry, Investment, and Commerce, Aubyn Hill, is once again calling on banks to lower their interest rates on loans, arguing that high borrowing costs are stifling economic growth.
• Despite the Bank of Jamaica (BOJ) reducing its policy rate four times between August and December 2024, commercial banks have yet to follow suit. Hill pointed out that banks benefit the most in a growing economy because of the increased number of transactions. However, for the economy to grow, it is crucial to have reasonable and relatively low interest rates.
• The concern over high lending rates is particularly significant for micro, small, and medium-sized enterprises (MSMEs), which form the backbone of Jamaica’s economy. MSMEs account for 97% of Jamaican businesses, employ 80% of the workforce, and contribute 44% of the country’s GDP. Yet, access to affordable financing remains a persistent challenge.
• Jamaica’s lending rates remain significantly higher than those in the United States, where mortgage and auto loan interest rates are considerably lower. For example, while mortgage rates in the U.S. currently range between 6-7%, Jamaican borrowers often face rates exceeding 8-10%—sometimes higher depending on the financial institution. Car loans in Jamaica can carry double-digit interest rates, compared to U.S. rates that are typically in the 5-8%. This discrepancy creates a barrier for Jamaicans abroad who may be considering investing in property or business ventures back home.
• High interest rates can slow down the growth of local businesses, making it harder for entrepreneurs, especially in tech and manufacturing, to obtain the necessary capital to expand. This is one of the key reasons why initiatives like the DBJ’s Boosting Innovation, Growth, and Entrepreneurship Ecosystems (BIGEE) program, funded by the Inter-American Development Bank (IDB), are so important. The newly announced partnership between CEDA and DBJ will introduce a grant-funding program to support local tech entrepreneurs who secure corporate partnerships, with funding of up to US$75,000 per innovator.
• As global investors and members of the diaspora evaluate their options, Jamaica’s high interest rates continue to be a major factor in investment decisions. Until lending institutions lower rates in line with BOJ’s policy shifts, the country may struggle to attract the level of business expansion and foreign capital needed to sustain long-term economic growth.

(Source: Caribbean National Weekly)