THE International Finance Corporation – the private sector arm of the World Bank – is partnering with the Guyana Bank for Trade and Industry (GBTI) to back letters of credit which will allow businesses to take advantage of better access to financing for imports all over the world. The line of credit facility will be started in January, with the IFC coming to launch the facility and hold seminars for members of the Guyanese business communities to tell them how they can make use of the line of credit arrangement and how it can ease their cash flow and benefit them.
Speaking to reporters on Wednesday, CEO of the bank John Tracey said the letters of credit are import instruments through which businessmen can import goods into the country.
He said that usually, Guyana banks would use cash as collateral for any such instruments that they establish on behalf of the customers because these banks do not have a credit rating with the large United States banks.
“[It means that] we are constrained by how much cash we can put up for the establishment of letters of credit for the import of all sorts of items. So with this line of credit, it broadens the scope for us…this is a US$5 million revolving line of credit, at very cheap rates charged by the IFC,” he said.
Tracey said that all the letters of credit established by GBTI through this line will be backed by the IFC, “so we don’t have to put up cash collateral, the IFC is guaranteeing payment, to the extent of US$5 million revolving. And this is available to all business persons in Guyana,” he said.
According to the CEO, the IFC through the line of credit put GBTI in touch with over 200 banks in over 100 countries. “That spread we don’t have now…we are now dealing mainly with New York with JP Morgan Chase or with Citibank or Bank of America and through them, to other banks in other countries. This will not be the case now with the IFC line. If somebody wants to import fertiliser from the Ukraine, we can do that directly with the Ukraine [with a bank there]. The letter of credit will be guaranteed by the IFC. The customer pays us when the goods come. We pay and then the fund revolves,” he said, adding that the customer pays no collateral.
Tracey said that while there is no interest with letters of credit, there are commissions on the amounts. “And the IFC is giving us very low commissions, like 0.25 of a percent, compared to 1 percent and 1.5 percent,” he said.
Tracey said that the GBTI has been dealing with the IFC for a long time. He said that the IFC is a partner in the Guyana Americas Merchant Bank, located within the GBTI building in Regent Street, “so they know us.”
He said that the IFC is always looking for opportunities to assist and “they came to us.” He said that so rigorous were the IFC’s requirements that not all of them were fulfilled. But he said that the IFC recognised the efforts of GBTI to bring itself up to scratch and went ahead with the partnership.
Tracey said that while the initial sum of the financing agreement is US$5 million, it can be later increased if it is evidenced that there is the adsorptive capacity to carry the amount to US$10 million.