Private sector biggest benefactor of trade finance facility – GBTI CEO

Chief Executive Officer of the Guyana Bank for Trade and Industry Limited (GBTI), John Tracey, said the local private sector would be the biggest benefactor of the new trade finance facility launched on Wednesday night, February 3rd. In collaboration with the International Finance Corporation, the GBTI launched the trade financing pact at a ceremony held at the Pegasus Hotel.

“This trade facility would benefit the customers more than the bank; and, as such, the local business community should take full advantage of the facility,” Tracey told the gathering at the launch.

He said that, due to the solid financial standing of the banking institution, GBTI was in a “unique position to offer the facility.” The GBTI CEO also said avenues are being explored to have the bank implement a risk-based model of management, with assistance from the IFC.

This model would allow GBTI to operate in a fast-passed, complicated, financial environment much like those in developed countries. The International Financial Corporation is a facility attached to the World Bank which provides medium and long-term financing to private sector companies worldwide, in an effort to promote economic development globally.

He said that in tandem with the programme, the IFC offers its trade advisory services through which an exporters/importers workshop is run. He said the bank had hoped to have the workshop at the same time as the launch of the facility, but, unfortunately, the training could not be made available at that time, but it will be done shortly.

He said the IFC would help the bank to develop a risk-based model of management that few banks in the Caribbean have at the moment; and that this is a necessity for banks in more fluid and complex financial environments. He said that the trade-financing programme is another product line which GBTI is making at near break-even cost.

“As another arrow in the quiver of the IFC (is) meant to bring assistance to the private sector, we can do no less than to view this facility as the IFC views it – to benefit the ultimate recipients more than to benefit the banks. Fortunately, GBTI can afford to do this,” Tracey said. Having just completed another financial year, and with receipt of the audit report, Tracey said, “I can say that another year of solid performance gives us a springboard to farm out such products at minimal cost.” He said that one of the effects of this would be the driving down of the cost of trade financing across the board.

“All of the commercial banks in Guyana are in a healthy state – as healthy as GBTI is – and (they) should be more than willing to give added support to the business sector. Therefore, at present, Guyanese businesses are in a very favourable position,” he said.

He continued that with the excess liquidity in the financial system being so high and growing, the rates of interest and advances are at an all-time low and are heading towards single-digit figures.

“The effects of increased competition in the sector, which the government intended by opening up the sector in 1994, giving licences to two banks, may have taken a while to be seen. However, most banks are experiencing a narrowing of the interest rate spread and therefore a downward pressure on profits. I want to believe, minister, that you expected this; and having read the financial tea leaves and wanting to keep the banking sector in good shape, which is your duty, you reduced corporation tax in the last budget,” he said. Meanwhile, Finance Minister Dr Ashni Singh, who delivered the feature address, emphasized that the interconnectedness of the world in which we operate can no longer be ignored.

Dr Singh said the interdependence and interconnectedness of the world is important, since hotel employees in the Caribbean are severely affected when there is an economic downturn in Europe, as was recently experienced during the global economic crisis.

The minister said the reason Guyana was not as severely affected as other countries was because of the country had implemented sound economic policies. The finance minister said “protectionism is not the answer” but the private sector needs to take advantage of regional and international opportunities in order to ensure development continues.

As such, Dr Singh said, he was ‘delighted’ to see GBTI offer the trade facility as a means of providing additional opportunities for the local business sector to expand. In order for the partnership between GBTI and the International Financial Corporation to be completed, the financial information of the bank had to be provided for analysis and scrutiny, a process called “due diligence”. That process took approximately 12 months.

The result of that process was that IFC was satisfied that GBTI was among the most successful banks locally, and was in a sound financial state, and as such operated in a healthy fiscal environment. Minister Singh said he was “pleased that the IFC had conducted due diligence and as such can verify the economic climate locally is in excellent condition”. He added that this was no accident, but was due to significantly sound fiscal planning over the years.

Some of the policies which have contributed to the development of the economy have been the lowering of interest rates almost to single digits, and increased competition since 1994. The recent lowering of the corporation tax will also auger well for continued development of the economy. Members of the private sector who were in attendance were urged by the finance minister to take advantage of the facility.

The IFC has been lobbied by the government of Guyana for almost 10 years to increase its presence and operation in the Caribbean, and the finance minister said he is “pleased to see the responsiveness of IFC” in this regard. Apart from providing the trade facility, the IFC also offers advisory services, which are currently being accessed by the government to properly set up the Credit Bureau. Speaking on behalf of IFC, James Smouse, Principal Investment Officer, IFC, said the partnership with GBTI is “a strong demonstration of the confidence IFC has in Guyana”.