With no short-term end to the long-standing problem of limited access to affordable financing to support the development of the country’s construction and engineering sub-sector in sight, the Guyana Manufacturing & Services Association (GMSA) says it wants “a comprehensive overhaul” of the country’s financial system on the back of the emergence of an oil and gas economy that will bring with it a Development Bank that will help to overcome what it describes as “this key challenge” facing manufacturers.
In an article appearing in the GMSA’s recently released 2018 Annual Report, members of the construction and engineering sub-sector, mounted an assertive lobby for a revamping of the “cost and structure of financing” for the execution of projects in the sector. Noting that access to lending has, over the years, been constrained by a national financial sector dominated by six commercial banks, a smattering of insurance companies, two micro-finance lenders and two mortgage finance companies,” the article contends that what this has meant is that the burden of providing financing for manufacturing and other projects in the construction and engineering sub-sectors has continued to fall largely on the shoulders of those commercial banks with the largest portfolios. These banks, the article says, have become the critical option for the acquisition of capital investment for equipment purchase, land and building acquisition, re-tooling and expansion projects.
The concerns of the sub-sector, the GMSA says, are also related to the difficulties associated with accessing loans at an industry cost that the industry can bear “and with the term of the loan spread over a time frame that matches the cash generation of the business and supports the growth of the business in the face of competition from external sources.” Rather than benefitting from such favourable conditions, the GMSA says, businesses in its construction and engineering sub-sector are the beneficiaries of loans that are “routinely granted on relatively short-term bases” with interest rates that are “notoriously high.”
And according to the article, borrowers from the sub-sector are contemplating shifting their focus from “continuing to berate the commercial banks who continue to record higher levels of profit every year” to an alternative approach that aggressively engages government so that it can be “an active participant in the solution” which it says will “redound to the economic growth and well-being of the country.” In this regard the GMSA is echoing the oft-made call for the country to create “a well-funded Development Finance institution modelled to deliver capital investment finance to manufacturers and others in the construction and engineering sub-sector.”
Bank funding, the article says, must also cover crop insurance, backing for agriculture, as well as “export finance to exporters.”
Noting that this was no new idea, the article contends that various administrations had engaged the business community on the issue but that nothing had come out of those talks.
