–to advance critical projects, support small-business growth
IN a significant announcement aimed at bolstering Guyana’s economic development, Vice President,Dr Bharrat Jagdeo, says the government is exploring the re-establishment of a development bank. This, he noted, will help in the areas of key financial gaps and provide long-term capital to support those transformational projects in tandem with the country’s strategic objectives.
Speaking at the Guyana Manufacturing and Services Association (GMSA) 29th Annual Awards and Dinner last week, he explained that the proposed institution would focus on providing financial support to small and medium-sized businesses.
The Vice President emphasised the government’s commitment to strengthening and modernising Guyana’s financial sector to meet the demands of a rapidly expanding economy.
He noted that discussions are underway to introduce new institutions and innovative financial instruments to complement the offerings of existing financial entities. These advanced tools, he explained, are essential to addressing the evolving needs of businesses and industries.
Additionally, Jagdeo highlighted a significant trend among major international banks, which are increasingly reluctant to engage in retail banking, further underscoring the necessity of these measures to ensure robust financial support for the economy.
“The discussions we have been having with companies from [a]broad. Most of the big banks now they don’t want to get into retail banking,” he revealed. He explained that many major international banks are interested in setting up representative offices in Guyana, which would require amendments to existing laws to facilitate their establishment.
He cited Citibank as an example, noting that the bank has informed the Guyana government of its decision to exit operations in the Caribbean and Latin America, with plans to do the same in Mexico.
“This is part of the big institutions’ move to de-risk by getting out of small jurisdictions,” Jagdeo emphasised. Citibank, the primary banking subsidiary of the multinational financial services corporation Citigroup, ranks as the fourth-largest bank in the United States by assets as of 2023. The bank operates branches across 19 countries, reflecting its global reach.
In this context, Jagdeo proposed that the government might consider revisiting the idea of establishing a development bank or similar mechanisms to provide financing for small and medium-sized businesses at competitive rates in the future.
He indicated that such an initiative could be considered during the next term of the People’s Progressive Party/Civic (PPP/C) administration.
“At some point in time, we may return to provide some sort of financing for small- and medium-scale businesses at competitive rates. Possibly in the next PPP (People’s Progressive Party/C) term in office, we may get to that.” However, he acknowledged the challenges Guyana has faced with public sector-led financing in the past, emphasising the need for a carefully structured approach to avoid repeating previous missteps.
He reminded: “Our historic experience with public-sector intermediated financing has been a bad one. When we [the PPP] assumed office in 1992, there were eight financial institutions that the government either had participation in or controlling interest in. And they were all tottering on the verge of bankruptcy and we have to exit all of them without recourse to the treasury. We managed to successfully do that without putting a burden on the treasury.”
The state-owned Guyana Co-operative Agricultural and Industrial Development Bank (GAIBANK) was closed in 1995, citing its bankruptcy despite a merger with the Guyana National Cooperative Bank (GNCB), which ultimately failed to salvage its operations. Against this backdrop, he stated that the government remains “very cautious” about investing in public-sector financial institutions. However, he acknowledged that at some point, such investments might become necessary, particularly to support small and medium-sized businesses.
In the meantime, small and medium-sized businesses can access development grants from the Small Business Bureau (SBB) and loans from some commercial banks. The 2024 national budget includes an allocation of $450 million for replenishing the Small Business Development Fund and $331 million for the Small Business Bureau.
Regarding access to finance, Jagdeo stated that the government plans to amend the relevant legislation to allow commercial banks to accept movable collateral for loans, thereby expanding access to financing for more people.
“Right now, before Parliament, we have tabled a piece of legislation to allow the bank to use movable collateral to make loans. So, in the future, that will ensure that more people can have access to financing because they would have a new class of collateral available to securitise their loans,” said the Vice President.
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Publish date : 2024-12-07 20:35:00
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