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Introduction
The finance and insurance sectors grew by 1.5% during 2009 and contributed to
11.4% of the total Gross Domestic Product (GDP). The increases included stock
of loans and advances at commercial banks which increased by 26.2% and
building societies loan stock which increased by 29.0%. Although the sector’s
performance improved during 2008, during the latter part of the year growth
slowed as a result of the global financial and economic crisis. The downturn
led to a decline in economic activities as well as in business and consumer
confidence. The existing problems caused the Bank of Jamaica (BOJ) and the
Financial Services Commission (FSC) to continue strengthening their respective
regulatory framework in order to maintain stability in the industry. BOJ also
offered a temporary lending facility to maintain stability in the financial
sector amidst the global economic crisis. It also increased the cash reserve
requirement for commercial banks, merchant banks and building societies by
11.0%.
Deposit Taking Institutions
The Bank of Jamaica supervised a total number of 14 deposit–taking
institutions during 2008. Deposit taking institutions include commercial banks
and building societies. Assets in this sub-sector grew by 8.9% compared to
2007 and total assets stood at $715.8 billion at the end of 2008. Total loans
which accounted for 46.5% of total assets increased in 2008 by 24.2%. Total
deposits held at the commercial banks and building societies grew by 4.5%
during 2008.
The total assets of commercial banks in 2008 grew by 11.7% to $548.3 billion
due to increases in loans and advances, and balances with the Bank of Jamaica.
The increase in assets was due to the growth in loans and advances as well as
balances with BOJ. Loans and advances increased by 5.2 percentage points.
The total assets of building societies increased by 12.7% to $139.2 in 2008
despite a reduction in foreign assets and government securities. The share of
cash and deposits increased by 4.7 percentage points to 6.7% due to higher
reserve requirements. Increased loan activity led to a seven percentage points
increase in the loan stock. Prudential indicators from BOJ revealed however
that there was deterioration in the quality of loans held by the building
societies. This is shown by the 0.6 percentage point increase in loan arrears
to total loans in 2008 which was 3.6%.
An examination of the performance indicators of Credit Unions in 2008 showed
that there was an improvement over 2007. The asset base of the credit unions
grew by 13.9% to $50.4 billion. The improved performance was due primarily to
an expansion in the loan stock. Savings grew by 14.8% to $39.5 billion and the
total membership increased by $42,005 to $952,950.
The overall weighted average monthly loan rate of Jamaican commercial banks as
at December 2008 was 16.78% or 0.33 percentage points lower compared to 2007.
The loan rates were divided into six categories:
· Instalment
credit
·
Mortgage credit
· Personal
credit
·
Commercial credit
·
Public entities
·
Central government
At the end of December 2008 the weighted monthly loan rate for three
categories -instalment, personal and commercial credit – had declined. The
remaining categories showed increases as follows:
·
Central government by 7.1 percentage points to 22.33%;
·
Public entities by 2.81 percentage points to 13.33%; and
·
Mortgage credit by 0.17 percentage points to 7.57%.
The overall weighted average deposit rate for commercial banks in December
2008 was 5.16%. This reflects an increase of 0.24 percentage points compared
to December 2007. The three deposit rates were demand, savings and time. Of
these three, only demand deposit rate showed a decline as it moved from 2.79%
in 2007 to 2.45% in 2008.
Non Deposit Taking Institutions
The non-deposit taking institutions remained at 14 at the end of 2008.
Non-deposit taking institutions include development and financial
corporations. Total local currency disbursements from the Development Bank of
Jamaica and the National Export–Import (EX-IM) Bank of Jamaica increased by
18.9% to $5.4 billion compared to 2007. This was attributed to businesses in
the agriculture, and mining and quarrying sectors. There was a decline however
in disbursements to the manufacturing sector. Total foreign currency
disbursement for development financing also increased. The funds disbursed in
2008 were US$35.7 million or US$13 million more than 2007. This increase was
due to larger foreign currency disbursements to manufacturing and distribution
entities. In an attempt to ease liquidity problems associated with the global
financial crisis, EX-IM Bank also initiated a US$10 million credit facility.
Insurance Companies
The life insurance sub-sector showed an increase in the number of policies
issued moving from 120, 261 in 2007 to 121,951 in 2008. There was an increase
in net premium income of $25 billion, a 44.3% increase over 2007. A look at
the general insurance sub-sector showed that net profit increased by 48.4% in
2008 to $2.6 billion. The general insurance companies also recorded an
increase in net premium income of 17.8%.
Jamaica Stock Exchange (JSE)
Average returns on the Jamaica Stock Exchange Index in 2008 declined by
25.8%. This decline was mainly as a result of a fall in stock prices,
deterioration in companies performances due to the economic crisis and the
reluctance to take risks during in the economic downturn.
Source: The Economic and Social Survey
Jamaica 2008
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