Informal finance in Kingston, Jamaica

Antonio Salas | Robert Wieland | Katherine Stearns

In many developing countries new approaches are being sought by which to provide assistance for the small business and microenterprise sectors. Improved access to financial services and particularly credit is often an important part of this assistance. In the hope of avoiding the myriad
problems that have faced small-farmer credit and other targeted lending programmes in the past, these newly developing programmes try to take into consideration the needs of borrowers and lenders in a microenterprise financial system. Except for a few well-discussed examples such as the several
ACCION lending programmes in Latin America, the BKK in Indonesia and the Grameen Bank in Bangladesh, formal financial institutions do not typically provide services for microenterprises. Thus, in order to improve our understanding of the needs of borrowers and lenders in these markets, it
is necessary to look at informal sources of finance.This article is the result of a study which sought to assess informal financial arrangements in Jamaica. It summarizes interviews with both providers and users of informal finance in Kingston undertaken in February, 1990. The objective
of these interviews was to collect information regarding the terms and conditions of financial arrangements. The questions focused on client selection, sources of financing, costs of finance, appraisal methods, guarantees, duration of repayment, and loan amounts.