Hard times are forcing local micro-entrepreneurs into the habit of saving, according to a new study which found that 90 per cent of the 202 respondents put away cash on a consistent basis to mostly pump back into their businesses. These hard times are characterised by, among other factors, a depreciating Jamaican dollar that is pushing up costs while lessening demand for the products and services offered by microentrepreneurs.

But, the finding is not a bad one, according to Barbara Magnoni, president of New York-based EA Consultants that conducted the study on Jamaica’s microcredit market. The study, which was commissioned and funded by the Multilateral Investment Fund through the Caribbean Microfinance Capacity-Building Programme, also assessed the situations in Belize, Guyana and Suriname.

“We found that they save, and it is wonderful and it is a good way to cushion themselves against bad times; when they need to finance their businesses they can use their own money to do it. They don’t need credit all the time,” Magnoni told the Jamaica Observer yesterday, hours after making a presentation on the findings of the report on day two of the Fifth Caribbean Microfinance Forum at Iberostar Rose Hall Suites in St James.

The May 2014 study, titled ‘Building up business: microenterprise demand for credit in the Caribbean’, found that 71 per cent of the respondents save formally with institutions such as banks, credit unions and rotating savings and credit associations (ROSCAs), more commonly known as partner plans, while 57 per cent save informally with ROSCAS, as well as through relatives and friends, and at their homes.

At the same time, the study found that men were more likely to save than women, particularly through informal means, while it was observed that there were hardly any differences between the saving patterns of the respondents in rural and urban areas, with formal savings being used for longer-term investments and informal savings kept close for easy access.

Another key finding of the study was that, though Jamaica’s micro-entrepreneurs had the highest uptake of credit among the four countries surveyed, they had the “lowest rates of credit eligibility and interest in microloans”.

“There are some of these people here who can benefit from a loan, but are afraid,” Magnoni told the Observer. “So, if you are a credit provider you have to move aggressively to get the people who are not borrowing.”

The report, meanwhile, pointed out that low aggregate demand is squeezing microenterprise margins, making borrowing at prevailing rates less attractive. “Those who do borrow, however, can run into payment problems. Some appear to be caught in an annual cycle of debt that is only cleared with the Christmas of rushed sales. This has created concerns of over-indebtedness, multiple borrowing, and competition from moneylenders who give fast and easy consumer loans at high rates,” the report stated.