Few local businesses in urban centres have ever accessed a business loan or even have internet connectivity, according to new findings from the Jamaica Survey of Establishments conducted by the Statistical Institute of Jamaica (Statin) and published by the Planning Institute of Jamaica, PIOJ.

The survey found that one of 10 establishments have ever accessed a business loan and seven out of 10 establishments do not have internet access.

“How can it be that over 90 per cent of the micro and small businesses are not borrowing money,” said Commerce Minister Audley Shaw at the release of the report on Wednesday, while alluding to another more than decade-old study, which estimated that the informal sector accounted for 40 per cent of total economic output.

“We need to build a more formal economy, because the high level of informality correlates with the levels of access to credit,” Shaw said.

The current study defines an establishment as an enterprise that is situated in a single location that conducts productive activity, either for-profit or not-for-profit. The survey covered establishments that employed a minimum of three persons on a continuous basis.

In the past, high lending rates were blamed for the low take-up of loans, but with interest rates at single-digit levels, other barriers are emerging, such as the requirements to open bank accounts, said PIOJ technocrat James Stewart.

“The relatively low take-up of loans reduces the impact of interest rate policy on economic activity, especially within the context of low interest rates. It is very important from a policy perspective to understand why these businesses are not utilising loans so that measures can be put in place to increase access to financing,” said Stewart, the senior director for the Economic Planning, Research and Policy Logistics Division at the PIOJ.

Stewart said that what seems like a regular requirements to open a business bank account can be seen as barriers to the micro sector, including providing a business registration, articles of incorporation, business tax registration number, identification and TRN for all directors, and letters of good standing. He added that other factors may include improper bookkeeping by establishments and low levels of collateral.

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