Some problems in operating a loan program for craft and emerging small-scale non-farm enterprises in Jamaica

(SEDC0) provides technical assistance and credit to the country"s increasingly important craft and small-scale (non-farm) sectors. This paper examines criteria established by the World Bank for loans issued by SEDCO with its funds and some problems resulting from these criteria. After sketching SEDCO"s origins and the history of its dealings with the Bank, the author discusses SEDCO lending criteria, both definitional criteria - restricting the loans to manufacturers, prohibiting equity investments, and limiting the loans to $22,471 - and evaluative criteria - requiring borrowers to provide 100% collateral and meet stringent information requirements and SEDCO to raise its interest rate from 7.5% to 11%. Problems created by these criteria are noted, as are the costs in time and money involved in evaluating loans for small projects, and the criteria"s paradoxical effect of excluding political interference in individual loan issuance while generating charges that SEDCO was being controlled from outside. It is concluded that overly narrow definitional criteria, particularly the exclusion of the service sector, may have unnecessarily limited the number of borrowers and that it may be difficult, if not impossible, at existing interest rates to cover the costs of evaluating the loan applications of very small enterprises.