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About Us - Community Revolving Fund (CRF)

T he Community Revolving Fund (CRF) based on the Jamaican 'Partner' had its genesis in thesis work done by Paul Buchanan, Technical Director of MIDA and later inputs by a group of committed Jamaicans. This group consisted of people like Prof. Carl Stone, Edwin Tulloch-Ried (Commissioner of Revenue, Clive Nicholas (G.C.T. Commissioner) Christian Wolfe (Head, Physical Planning Unit, CAST) and Derrick Peart (Manager - JCB). Their work has been continued by the MIDA Management team.

The CRF and its loan and investment arm - the Community Development Fund (CDF -registered as a Provident Society) - was conceived as a critical component of the Enterprise Zone concept with the particular objective of fostering an economic model to enhance integrated development of depressed urban and rural communities.

More importantly the mechanism allows for the formation of a critically necessary financial equity base for public and private investment at the community level. This leads to the type of capital formation and collateral within poor communities that will ensure the productive use of loans and their repayment as well as creating a savings ethos - a precondition for real economic growth and development.

Economic rationale at its core, the CRF/CDF is geared to counter two major and unique economic phenomena associated with the Jamaican ghetto.

a)	The paradox of Thrift
b)	The Consumption/Unemployment Paradox

The Paradox of Thrift
The term relates to the movement of capital from depressed areas into the formal banking system in the form of savings deposits flowing from higglering, hustling, wages, robberies, drugs, 'partners', public works contracts, foreign (money) transfers etc. This savings outflow is not matched by a concurrent inflow from the bank loans and investments due to "high risks" classification of applicants from such areas. Consequently, there is a net disinvestments effect, which exacerbates the poverty index. It is therefore paradoxical that savings which should be a positive feature turns out to be a negative element in relation to the economics of the ghetto. The CRF/CDF as a community-based banking endeavour seeks to channel community savings into an entity, which will be responsive and sensitive not only to the loan capital demand of residents but also, the investment base required for meaningful development.

The Consumption/Unemployment Paradox
This phenomenon speaks to the prevailing high propensity to consume despite high unemployment. Unnecessary and wasteful spending on drugs, guns, jewellery, hairpieces, etc. is a common feature of ghetto life. The CRF/CDF strategy seeks to promote and encourage the savings ethos over vulgar consumerism. The objective therefore is to allow for optimal use of scarce capital directed to equity mobilization.

Many institutions have benefited from generous inflows of soft loans and grant funds through international and local institutions, ostensibly to foster economic development of the micro sector. The poverty cycle however not only persists but has become enlarged.

One of the primary, if not the major problems contributing to this situation, is the lack of collateral to access loans on the part of the poor. The failure of these institutions to fashion a meaningful solution to the collateral problem only prolongs the misery and increase the poverty index.

After experiencing little encouragement from the use of a number of initiatives such as risk-sharing and private sector guarantees to counter the collateral question, MIDA has undertaken a serious and sustained approach to the problem by facilitating the development of the Community Revolving Fund (CRF) mechanism.