President of the Georgetown Chamber of Commerce and Industry (GCCI), Clinton Urling made a pitch for commercial banks to come up with different lending models to cater for businesses that would not qualify under existing rules.
He was speaking at a forum last week on the banking sector held at the Pegasus Hotel.
Urling was one of several officials who addressed the GCCI-organized forum. He noted the importance of examining different financial models to eventually pave the way for every prospective borrowing business owner to be given a fair chance at accessing loans for development.
“We have young entrepreneurs they are excluded from banks’ lending systems… example a young man may go to a bank and hear ‘you are high risk we are sorry we can’t lend you’ but they may have an excellent idea and excellent business proposals but are turned away based on collateral capital and so forth,” Urling said. Urling’s recommendation was made against the background of high liquidity in the commercial banking sector.
Minister of Finance Dr Ashni Singh gave a detailed report on the positive economic growth, citing statistical data, of the country’s banks much of which he accredited to his government.
Governor of the Bank of Guyana, Lawrence Williams, in his presentation, noted that “In 2011, only 49 per cent of deposits received by the banking system is actually going out in the form of lending so there are funds available that the private sector could access.” Latest available Central Bank statistics show that at the end of 2005, total deposits in the banking sector grew from $140 billion at an average annual rate of 12.5 per cent to more than $270 billion.
The Central Bank Governor advised that it is more attractive for commercial banks to lend to the local private sector than invest in government securities. “There isn’t anything compelling that may well be attractive to the banks investing in government securities; they are better off lending,” he added. The current yield on Treasury Bills is 2 per cent per annum.
The GCCI President underscored the importance of ensuring that businesses owned by young persons are given a fair opportunity to access resources.
The finance minister recalled that government has already enacted laws for the establishment of a Credit Bureau which would be a database of good and bad borrowers. That would help reduce risks taken by financial institutions by tracking even hire purchase debt payments to determine borrowers’ creditworthiness. “We also support the call for a credit bureau to be formed where if for example you pay accounts and mortgage on time, banks will have this report and won’t wait for you to approach them, [but] will approach you and loans can be extended easily to you,” Urling said.
Currently, at least one commercial bank verifies the creditworthiness of prospective home loan borrowers with other banks and stores that offer hire-purchase deals.
