– advocates accelerated lending
A review of the liquidity profile of Guyana’s commercial banking sector has revealed that commercial banks are positioned to significantly increase the extent of its lending to both individuals and the private sector though he cautioned that the growth of lending “has to be orderly and should not in any way upset the safety and soundness of the banking sector.”
Addressing a July 25, Banking and Investment Seminar organized by the Georgetown Chamber of Commerce and Industry (GCCI) for business houses, Bank of Guyana Governor Lawrence Williams said that while as a prudential measure commercial banks are required to have a prescribed level of liquid assets local banks have been exceeding that ceiling for years. “At the end of 2011 the holding of excess liquid assets was 76.1 per cent, $44.6 billion above the requirement,” Williams said.
Lawrence Williams
“Over the years, the banks have been very conservative in their lending policies, putting in place stringent underwriting policies and endeavouring to maintain a significantly well-balanced and performing loan portfolio, well-balanced in the sense of monitoring the extent of their respective concentrations in the various economic sectors and containing exposure to individual and group borrowers within statutory limits,” Williams told the seminar, advocating that some of this excess liquidity should be converted into loans.
Addressing the issue of the banking sector’s overall loan portfolio Williams said that the level of the banks’ loan portfolio indicates that non-performing loans have been continually decreasing, moving from 13.9 per cent of total loans in 2005 to 5.4 per cent of total loans at the end of 2011. And according to Williams, the level of non-performing loans is expected to fall even further in the future after the Credit Bureau is established “since the use of credit reports would strengthen the underwriting function by assisting the lenders in making better-informed decisions on the capacity and capability of a potential borrower to repay his/her credit facility.”
While the central bank governor is advocating that commercial banks’ excess liquidity by converted into loans he acknowledges, nonetheless, that the banking sector has, over the years, taken steps to improve access to capital by citizens by expanding services as well as branch network.
Meanwhile, according to Williams, growth in private sector credit increased significantly between 2005 and 2011 with loans to the agriculture and manufacturing sectors increasing by 189% and 106%, respectively, and loans to the construction and engineering and distribution sectors growing by 202% and 135 %, respectively. During the same period loans to the real estate sector grew by 351%.
Given the availability of resources and the relatively low credit/deposit ratio, banks have sought investment opportunities abroad and at the close of 2011 foreign currency deposits and investments held overseas totalled $52 billion representing approximately 19 per cent of the banking sector’s total deposits,” Williams added.
