banker says mainstream businesses must invest more in farming
The need to create a more favourable commercial bank lending regime to spur “more intensive investment in the agricultural sector” has become “a priority for Guyana” in the face of the current economic crisis and the role identified by government for the sector in responding to the crisis, a senior official in one of the country’s commercial banks told Stabroek Business last week.
“As far as I am aware, since the forum last year organised by the President at which the issues of commercial bank lending and crop insurance were discussed, there have been no significant moves to take the process forward. Now that the global economic climate has changed and agriculture appears to have assumed a much more central role in our economy this particular issue has become far more urgent,” the city banker said.
The banking official told this newspaper that he shared the view that “outside of sugar, rice and a few large agricultural projects,” the commercial banking sector was “uneasy about lending for agriculture”. However, he said, he believed that a multi-stakeholder approach that included government, the farming community, the private and banking sectors could work towards the resolution of what he described as the “entirely understandable concerns” of the banking sector.
“Not only do I believe that the current situation can change; I believe that it has to change. We cannot talk seriously about the expansion of the agricultural sector and having it play a critical role in a national crisis response strategy without discussing the role of the commercial banking sector in providing liquidity to the process.”
However, the banker told Stabroek Business that making the banks feel as though their outlook could be equated with “some kind of human rights transgression” was not the way to take the process forward. “Banks operate on rules and procedures that are, first and foremost, designed to protect the interests of their depositors and what we need to do is to find ways of ensuring that those interests are protected as part of a process that also allows for more lending to farming ventures.”
The city banker told Stabroek Business that the issue commercial banks would be most concerned about would be “the “soundness of the business platform on which investments in the agricultural sector are built,” which would be used to determine the borrower’s ability to sustain repayments. He said that while he was not suggesting that commercial banks had adopted a posture of profiling smaller agricultural projects, there was a perception in some sections of the private sector that some farming ventures are not as sound as they seem.
The official told Stabroek Business that he believed commercial banks may be inclined to view the sector “as a whole” differently “if there were to be indications from investors with well-established track records in other areas that they are interested in investing in the sector. “I suppose that what I am saying is that tried and proven businessmen inspire more confidence in the commercial banking sector.”
Chairman of the Private Sector Commission Captain Gerry Gouveia had told Stabroek Business some weeks ago that he believed a case had been made for serious investment in the agricultural sector by the mainstream business community. However, he conceded that since last year’s ‘food forum’ he had detected no discernable moves by the business sector to become involved in farming on a large scale.
Asked whether he shared the view expressed by the city banker that banks may be persuaded to effect a greater shift in their posture towards lending for agriculture if more mainstream businessmen invested, Gouveia said while he could understand that tried and proven businessmen might serve to provide the banks with more assurance, this would not mean that there would be no conditionalities to meet and no criteria to be applied.
Asked whether commercial banks were likely to be more forthcoming in their policy towards lending for smaller agricultural projects, the banking official said, “a lot depends on whether those enterprises met the conditions that the banks were looking for”. He said his own observation about “some of the more modest agricultural projects” is that many of them had a “turnover orientation” that is, an orientation that was not underpinned by orthodox management practices including concerns over growth, market expansion, mechanisation “and other practices associated with sound and growing business ventures.” He said that in such cases one of the issues the commercial banks would consider “is the sustainability of the venture.”