Is There A Viable Market

RESEARCH PROPOSAL:

Is there a viable market

for high-yield, high-risk Alternative Investment Schemes in Jamaica?

PRESENTED TO:

Mr. Karl Simpson, General Manager

Finance & Investments Ltd.

26 Trinidad Terrace,

Kingston 5

TABLE OF CONTENTS

1.0 INTRODUCTION 3

2.0 BACKGROUND 3

3.0 RESEARCH OBJECTIVES 4

4.0 SIGNIFICANCE OF THE STUDY 5

5.0 TERMS OF REFERENCE 5

6.0 SCOPE OF THE RESEARCH 5

7.0 RESEARCH STRATEGY AND METHODOLOGY 5

8.0 NATURE OF FINAL REPORT 14

9.0 BUDGET AND SCHEDULE 17

10.0 DELIVERABLES AND PROGRAMME SCHEDULE 18

11.0 BACKGROUND OF CONSULTANTS 18

12.0 APPENDICES 19

13.0 REFERENCES 28

1.0 INTRODUCTION

Associated Research Consultants Limited (ARC Ltd.) is pleased to be given the opportunity to respond to your request for a proposal geared towards helping you to provide the Jamaican investment market with a high-yield and high-risk alternative investment product.

Our enclosed proposal provides a background to investments and more specifically Alternative Investment Schemes. It outlines the objectives of our research, and its significance in today’s investment market. We have carefully defined our scope of the research and the strategy and methodologies that will be adapted. It is important that you understand exactly how our finding will be presented and the budget required to carry out this study. Included is a high-yield list of our deliverables and their schedules.

ARC Limited has been in operations since 1993. We are known internationally as the premiere choice for Business and Market related Research. A strong team of highly qualified professionals who bring a vast amount of expertise and knowledge to conducting and analysing research manages the company.

2.0 BACKGROUND

There has been some amount of consolidation in the financial sector since the meltdown of the mid to late 1990s. Currently, the three largest banks in Jamaica dominate the banking sector. With interest rate trending down over the last couple of years, commercial banks will have to find alternate sources of revenues to remain profitable and also as a means of diversifying their revenue streams. It has become increasingly difficult though to carve out a distinctive competitive niche in what has become a more complex and crowded investments market. Although commercial banks have continued to evolve into formidable, capable providers, more players and more products are entering the market. Banks not only find themselves beleaguered with competition from other banks, securities firms, insurance companies but more recently Alternative or Informal Investment Schemes.

There are reportedly 25 such schemes operating in Jamaica with an estimated combined deposit of approximately JA$200 billion, according to a study done by the Caribbean Policy Research Institute (CaPRI) 2008. These Alternative/Informal Investment Schemes are for the most part operating outside the regulatory environment prescribed by the Bank of Jamaica (BOJ) and the Financial Services Commission of Jamaica (FSC). Sufficient information is not available about the nature and principals of these schemes that are offering astoundingly high interest rates (of up to 15% per month) to investors in Jamaica.

The popularity of these schemes has not only caught the eye of the regulatory bodies namely the Bank of Jamaica and The Financial services Commission but also mainstream financial institutions as well. There seems to exist an appetite for riskier financial instruments and research is being proposed to provide answers with empirical evidence to such questions as; what has fuelled the growth and popularity of these firms? If the estimated funds under management is accurate, is there a market being underserved by the traditional investment institutions?

A comprehensive research is being proposed to adequately evaluate these schemes and the prevailing market conditions that have lead to their popularity, the sources and uses of these huge deposits, and also their ability to provide enormous returns on depositors’ money. If an opportunity exists in the formal sector, how these instruments should be structured and what interest rates will be attractive enough. Is this an opportunity for traditional institutions and the country as a whole or do they pose a threat?

3.0 RESEARCH OBJECTIVES

1. To determine whether an institution is currently operating a formal high yield, high-risk alternative investment scheme in Jamaica

2. To determine and assess available high yield, high risk investment schemes/investments currently available

3. To develop a profile of the investors/participants of these investment schemes

4. To establish whether traditional investment institutions can meet the apparent needs of the underserved market

5. To ascertain whether the Financial Services Act makes allowances for these schemes

6. To make recommendations as to the decision to be made for offering high yield, high-risk investments to Jamaica public in the near future.

4.0 SIGNIFICANCE OF THE STUDY

It is felt that there is a market for high-yield, high-risk investment instruments that is currently underserved, and hence it has become necessary to conduct a research of this nature at this time. The research will assist the management team to become aware of what is presently available in the investment market.

5.0 TERMS OF REFERENCE

This proposal is