Senator Don Wehby is calling for greater protection of Jamaicans taking loans from micro-lending operators and is suggesting that it be made clear what the annual interest rate is on any loan.

Taking the opportunity to point out the need for a robust regulatory framework for the micro-credit sector, Senator Wehby was speaking during his contribution to the debate in the Senate on the Micro Credit Act 2021.

“There is a feeling that the regulation of the industry may dampen the entrepreneurial spirit of some operators but it is extremely important to protect consumers and even for the operators own benefit, to achieve sustainable growth of the microcredit industry,” he said

“One of the main concerns that was addressed as an issue that could affect the industry negatively was the cap on loan interest rates and mandatory linking to GOJ Treasury Bill rates. I am pleased that the Ministry of Finance listened, for this provision was removed,” Wehby added during the senatorial debate.

Wehby who is also Group CEO of the conglomerate GraceKennedy, is stressing that Jamaicans should not find themselves yoked to exorbitant rates that negatively impact their lives.

His suggested that rates should be openly published and that transparency should be the watchword. This should lead to greater fairness and people not bullied into accepting onerous rates.

Wehby brings vast financial sector experience to this issue and his advice here should be heeded.

“Interest rates will be determined by market forces and the assessment of the risk involved in providing the loan. It is my opinion that the Consumer Affairs Commission should publish the interest rates of all microcredit institutions in the same way it does for grocery sold by supermarkets. This will allow consumers to shop around and encourage competition in the industry,” said the senator.

All too often the lack of regulation has resulted in some vulnerable consumers being exploited and the use of strong-arm tactics which Wehby declared is never justifiable under any circumstances.

He drew attention to instances where consumers take out loans with no means to repay them while the microfinance institution may ask little questions about the ability to repay.

Wehby focused on the importance of Section 45 of the Micro Credit Act 2021, which mandates that the person must provide evidence of their ability to repay the loan and places an obligation on the consumer to act responsibly.

A trained accountant, Wehby made it clear that Section 43 of the Act cannot be understated. This speaks to the terms of the loan agreement which include specifying how the interest rate is to be stated, i.e. the percentage rate of interest and dollar values, the amount of interest and the penalty on default of payment.

He used a scenario to paint a picture of just how deleterious the impact is on Jamaicans who take out these loans, unaware of the terms and the high rates they have to pay to service them.

“I had an experience where a gentleman I know told me he took out a microloan to do some “buying and selling”. The institution told him he would need to repay X amount per week. When I did a quick calculation based on what he told me, he was repaying the loan at an interest rate of over 100 per cent. So, the loan repayment would basically wipe out his profits and his hustling would dry up.”

Wehby is calling for the annual interest rate on loans to be made unequivocally clear. He also supports the use of clear and simple language in loan agreements required under Section 43 so all consumers will be able to understand the terms regardless of their level of financial literacy.