Strengthening Access to Capital through Equity Financing (August, 2022)

Jamaica Manufacturers and Exporters Association (JMEA)

For many businesses, 2022 is a year for refocus, realignment and reform, as the country recovers from the significant economic downturn brought about by the COVID-19 Pandemic. Access to finance, a longstanding development challenge, is a key area of focus for the strategic repositioning of businesses. Many local businesses continue to cite access to finance as a major constraint to business expansion. As the leading business development organisation, with a mandate to advocate and technically support its members, the Jamaica Manufacturers and Exporters Association (JMEA) signed a Memorandum of Understanding (MOU) with the Jamaica Stock Exchange (JSE) in April 2022, to address access to finance.

With the goal to list 50 manufacturing and exporting companies on the Junior Market within two years, this MOU signals a new era of facilitating industry growth and development through access to equity financing. Undoubtedly, the collaboration between the JSE and JMEA presents a viable solution for Micro, Small and Medium Enterprises (MSMEs) to transform their business, in an environment where financing expansion, raw materials and operation can be costly. MSMEs are considered ‘the backbone of the economy’ and ‘the engine of growth’. Increasingly, stakeholders are recognizing the important role MSMEs play in accelerating inclusive and robust economic growth and development. MSMEs account for more than 90 per cent of Gross Domestic Product (GDP) and 80 per cent of jobs in Jamaica. Both the Government of Jamaica (GOJ) and the private sector share the view that any strategy geared towards accelerating economic growth must include improving access to credit, especially to MSMEs.

Commercial banks are the dominant providers of credit within the Jamaican financial system. However, the take-up on commercial bank-mediated credit remains constrained due to:

• relatively tight lending standards enforced by high collateral requirements
• poor credit information which makes it difficult to conduct credit risk assessment
• uncompetitive or high interest rates
• legal systems that favour large businesses and those with property.

Given these challenges, alternative financing solutions are required to drive business expansion and economic growth in Jamaica., The JSE is a viable option to financing.

The JSE, which opened in 1969, is now one of the largest stock exchanges in the Caribbean by size and market capitalization. At the end of 2021, 41 companies were listed on the Junior Market, of the total 95 companies listed across all markets. The market capitalization or the total value of all shares on the JSE Main and Junior Markets was US$12.07 billion / JA$1.87 trillion.[1] The benefits of being listed on the Junior Market are transformative to companies. Companies can take advantage of attractive incentives and other benefits which include:

• exemption from paying corporate income tax in the first five years after admission
• improved branding and visibility as companies that list on the Junior Market automatically raise their profile. Listing creates a perception of transparency and stability while increasing public awareness of your product or services.
• ease of getting further financing.

The immersion into a bullish JSE Junior Market provide great impetus for the company’s accelerated growth. Jamaican Teas, which was listed on the Junior Market in 2012, is a prime example of a company that has benefited from being listed on the Junior market. A decade after listing, Jamaican Tea has experienced an increase in value to US$60 million up from US$4 million in 2012.

The COVID-19 Pandemic and the Ukraine-Russia war have imposed several issues and challenges for MSMEs. These include: disruptions in the global supply chain, logistics/shipping crisis, inflation, rising interest rates among other things. The JMEA-JSE MOU provides hope to many businesses as Jamaica continues to pursue economic recovery of which manufacturing and exports are integral. In celebrating our 75^th Anniversary, the JMEA is committed to strengthening our member companies through representation, services and support to ensure that manufacturing and export create sustainable growth for Jamaica. The JMEA recognizes that our vision of being the driving force for the productive sectors to advance a thriving manufacture and export-led economy is aligned with Vision 2030 Jamaica’s National Outcome 12, “Internationally Competitive Industry Structures: Manufacturing”, and our strategic efforts are geared towards Vision 2030 Jamaica’s National Goal 3, “Jamaica’s Economy is prosperous”. The JMEA continues to serve as the voice of manufacturers and exporters and seeks to create viable partnerships towards achieving Vision 2030 Jamaica to make “Jamaica, the place of choice to live, work, raise families and do business.”

[1] The Jamaica Stock Exchange https://www.jamstockex.com/

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