IDB support for STR in Jamaica (2008 – 12)

Context: STR initiative is part of “Jamaica Competitiveness Enhancement Program” to improve business climate

Initiatives include:Tax policy and tax administration reformDivestment of State Owned EnterprisesSME access to finance

Secured Transactions ReformsCredit bureausMobile banking

Reduction in business costs through expedited land titling Modality: Sequence of four Policy Based Loan operations

Program targets (conditionality) for STR (and all other initiatives) based on diagnostic of country specific problems, best international practice tempered by feasibility of reforms in Jamaica.

Prior Diagnostic Study (2005/06)

Multi-sector “Private Sector Assessment” In financial sector found that:

Domestic Credit low - around 20% of GDPLaws governing collateral are outdated:

They require lawyers to draw up individual instruments and examine the law to ascertain what is permissibleBanks rarely lend to sole proprietors (vast majority of Jamaica Businesses)

4 PBLs: Sequence of STR Targets1st loan (2008): Time-bound action plan to build consensus2nd loan (2010): ST position paper submitted to Cabinet & Cabinet approval of “concept of reforming laws… and commencement on reform process”3rd loan (2011): Consultations w/ stakeholders & STR law drafting instructions approved by Cabinet4th loan (2012): STR law and implementing regs. in effect -- Central Registry fully operational.

Parallel Technical Cooperation:Consultation & Tailored briefing

papers“Private Sector Assessment”: dissemination & public dialogue (2006/07)“Legal diagnostic & action plan” (2007) “Implementing STR in Jamaica: Issues and Policy Options” (2008)STR stakeholder workshop (early 2009)Cabinet briefing papers & further stakeholder consultation (2009/10)Preparation of Discussion Bill (2010)Close collaboration during legislative process & Registry design & startup (2011 – 12)Continuous support from PIOJ & Bank country office

Political Support & Resistance

Main Champion: Minister and PS - Ministry of Industry Investment and Commerce

Also support from Minister of Finance and PIOJResistance from CPC, Registrar General, & MoF Fin. Institutions Unit

CPC resents outsourcing of legal draftingRegistrar General worried about losing current Bill of Sale and Company Charge registration fees. MoF worried about consequential amendments

Different Approaches to TAIFC (incomplete listing)

Well developed Toolkit adaptable to countries worldwide Strong in-house STR practice group w/ dedicated fundingTeams ready to work with countries on implementation

IDB Permanent in-country presence & dialogue at all levels w/ counterpartsTailored advice & program design, based on in-depth, country-specific diagnosticsPBL (and parallel TA) is very useful tool in raising profile & providing incentivesSynergies of packaging STR w/ other reforms

Peru Case: A Brief ReviewBasic Approach: Three Policy Based Loan Operations supported by Technical Assistance

1999: 1st Operation: Consensus building workshops 2000/03: Internalization process: Book published, MEF white paper, SBS trans cost study 2003/07: 2nd Operation: ST law in effect & Moveable Property registry nominally

functioning Quasi legal registry instead of notice registry – applications frequently denied on

legalistic formality Unnecessary but mandated use of notary public services Law permits, but regulations deny, pledging of future assets (goods not yet in

possession of borrower) Law does not allow preference for creditors financing new equipment vs. those

financing inventory or the fixed assets to which the equipment is attached Lack of norms for repossessing collateral in the event of default.

2008/09: Further diagnostic work and consensus building on shortcomings of first STR law 2010/12: 3rd Operation:

- Reform of the legal framework to correct errors and shortcomings of the first law and regulations

- Improvement of the Registry to convert it to a true notice registry.

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