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DBJ steps up promotion of SMEs energy loan facility

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Yvonne Lewars (left), and Howard Martin

The Development Bank of Jamaica (DBJ) has embarked on a three-pronged initiative to promote its small and medium-sized enterprises (SME) energy loan facility, which is financed by the PetroCaribe Fund.

The initiative, to be undertaken over a 24-month period, will include a market study to determine demand for renewable energy projects; strengthening of the technical expertise to support project development and implementation by targeted sector interests; and a public education campaign, to showcase energy efficient, energy conservation and renewable energy projects already implemented.

According to General Manager of DBJ’s Approved Financial Institutions Relationships (AFI) Division, Yvonne Lewars, the initiative will be jointly financed by the Inter-American Development Bank (IDB) and the DBJ. She says the entire project cost is US$807,000, of which US$593,000 will be a grant from the IDB, while the DBJ will provide the remaining US$214,000.

Mrs. Lewars notes that the component to strengthen technical expertise will be based on a Memorandum of Understanding (MoU) between the DBJ and University of Technology (UTech), for continuous training of certified energy auditors and managers.

Certified energy auditors are engineers who assess the amount of energy an entity consumes, and recommends cost-saving measures. The energy manager calculates and provides costing for implementation of the measures.

Mrs. Lewars says the decision to pursue the initiative, primarily, arose from the “sluggish” response to the energy fund by targeted stakeholders since 2008. These include commercial and industrial entities, energy service companies (ESCOs) and manufacturers of energy efficiency equipment and devices.

Over $500 million, provided by the PetroCaribe Fund, has been committed by the DBJ to finance the development and implementation of energy efficiency, energy conservation and renewable energy projects. The funds are on-lent to sub-borrowers, primarily business entities interested in pursuing such projects, through approved financial institutions (AFIs) affiliated with the DBJ, at an interest rate of 9.5 per cent per annum.

AFIs include commercial banks, merchant banks, the National People’s Co-operative Bank, the EXIM Bank and microfinance institutions.

Mrs. Lewars says $68 million was set aside for project development in the manufacturing, agro-processing and services sector, and the balance of approximately $432 million earmarked for SMEs and tourism interests. A maximum of $15 million per entity is provided for SME projects which, on average, equates to some 90 per cent of the DBJ’s funding input to borrowers.

Where the loan request exceeds this amount, she says the DBJ provides other lines of credit to cover the difference. She points out that in the case of larger clients, undertaking similar projects not falling under the dedicated energy fund, the DBJ provides up to 75 per cent financing with funds drawn from credit lines within the institution, or as the need arises.

She explains that the 9.5 per cent rate represents a “cut in the spread” for both the DBJ and the AFIs.

“We (DBJ) would borrow these funds from PetroCaribe at six per cent, and we would only add 0.5 per cent. Then we would ask the approved financial institutions to add only three per cent, wherein they would normally add 5½ per cent. So, it is, really, in an effort to push the savings of the country, because we are spending too much on energy,” she states.

Explaining the loan process, Mrs. Lewars says applicants are required to secure an energy audit from a certified energy auditor, selected from a listing on the DBJ’s website. Thereafter, the certified energy audit, along with a loan application letter and a detailed costing of the project prepared by an energy manager, are taken to one of the AFIs for processing.

“This is assessed by the AFIs under their own lending terms…and then they apply to us for funding under the PetroCaribe Fund. Once it gets here we can, depending on the size of the loan, process it within a week,” she explains.

She said, however, that if the loan is above the limit, it may have to go to the (DBJ) Board and that may take up to a month. The loan carries a maximum seven-year repayment period, with a 12-month moratorium on payment of the principal sum borrowed.

She points out that following a period of preparatory work, subsequent to the energy fund’s launch in 2008, loans totalling upwards of $120 million were approved for energy projects for over eight client applications. The projects included solar systems, bio-digesters and some which are ethanol related. The funds have already been disbursed.

The DBJ is currently working on developing projects for over 100 “potential borrowers”, with an estimated value of close to $300 million.

However, based on the slow response to the loan, the bank opted for a public awareness initiative, which began at the 2010 Denbigh Agricultural and Industrial Show in Clarendon last August. At the show, the DBJ partnered with five entities, including the National Export-Import (EXIM) Bank and the National People’s Co-operative Bank (NPCB), both of which are DBJ approved financial institutions, to mount energy project displays.

The DBJ will also be collaborating with private sector umbrella bodies, such as the Jamaica Manufacturers’ Association (JMA) and Jamaica Exporters’ Association (JEA), to promote the fund among a wider cross-section of sectoral stakeholders.

Regarding the demand study, Manager of the Energy Fund, Howard Martin, tells JIS News that financial institutions and some of the MSMEs are being targeted to get their feedback on the facility.

“We realize that up to 70 per cent of the cost of the overheads of most businesses is energy. That alone tells you, if you are able to save on that your business will be a bit more profitable. Therefore, we see this as a way for us to help the country,” he argues.

Regarding the training of energy auditors, Mrs. Lewars says the DBJ and UTech have already signed the MoU formalizing the arrangement, which has already started.

According to Mr. Martin, 11 auditors have been trained and added to the DBJ’s list, to bring the overall complement up to nine.

Regarding the actual public education component, Mr. Martin explains that DBJ will be partnering with several entities which have undertaken energy projects, to have them displayed. He says a project coordinator has been recruited to guide the initiative over the 24-month period, and he is optimistic that the undertaking will be executed within the earmarked period.

Mrs. Lewars says DBJ officers will be available to anyone, or entity, desirous of pursuing an energy project.

“We (DBJ) would be more than willing to come into the businesses with the bankers and actually promote the products. This is to show the various ways savings (can be derived), whether it be (from) energy efficient methods…energy conservation, or whether it be renewable energy,” she says.

The DBJ is an agency of the Office of the Prime Minister (OPM), created in 2000 from a merger of the Agricultural Credit Bank (ACB) of Jamaica Limited and the National Development Bank of Jamaica (NDBJ). The operations were further merged with the National Investment Bank of Jamaica (NIBJ) in September, 2006.

The DBJ’s mission is to facilitate the growth and development of all viable enterprises in the productive sectors. These include agriculture and agro-processing, manufacturing, information technology, mining and quarrying, energy, services and tourism.

PetroCaribe is a regional integration initiative, conceptualized in 2005 by South American oil producer Venezuela. Under the initiative, Venezuela supplies up to 100 per cent of the fuel needs of 18 Caribbean, Central and South American countries, including Jamaica. The PetroCaribe Fund was established to finance social and economic programmes in these countries, through contributions from financial and non-financial instruments.



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