-Proposes reform of collateral regime
Ambassador Shapiro at head table as Secretary Clinton addresses a conference in New York on September 22 to launch the Inter-American Social Protection Network. AT A Digital Video Conference (DVC) with Ambassador Charles Shapiro, Senior Advisor for Economic Initiatives Bureau of Western Hemisphere Affairs US Department of State, Rachel Shahid-Saless and John Wilson from the OAS,  on Wednesday, April 14, 2010 at the US Embassy, with the objective of this being to start a conversation on Secured Transaction (ST) reform and its importance to economic development in the hemisphere, Ambassador Shapiro began the DVC with opening remarks, explaining the issue to  participating audiences before inviting questions and comments from participants.
The proposed scheme would enable small and medium sized entrepreneurs to access loans with moveable capital being used as collateral. This proposal evolved in 2002 from the Organization of American states (OAS), which has drafted model laws and regulations that can be used as a blueprint for Governments, which will then modify the model to fit their own peculiar legislative framework and social needs.  However, it was not until 2009 that the requisite regulations for implementation of the laws were approved.
Evolving from the interactive session, which had in attendance representatives of various financial institutions from Guyana, as well as participants joining the teleconference from Nassau, Bahamas, was the guarantee that a letter of interest and intent from governments to the OAS could elicit assistance to facilitate enabling mechanisms to effect implementation of such a scheme.  The Ambassador assured participants that the choice to implement the scheme here is the prerogative of the Government of Guyana.
This strategy for empowering small and medium sized businesses is as a result of findings that revealed that in Latin America and the Caribbean in excess of seventy percent of small business capital is not acceptable as collateral to the conservative financial regimes because they are moveable properties.  This proposed strategy will enable small and medium sized businesses to access larger loans at lower rates of interest with lengthier repayment schedules.  The model laws and regulations for this new lending paradigm has been named the “Secured Transactions Legal Reform.”  This new loan regime will allow inventory and other types of assets to be used as guarantees for loans.  The current loan regime for access to capital by small and medium sized businesses stymies entrepreneurial activity and inhibits growth and expansion of small enterprises.
Ms Sheliza Shaw, representing the Guyana Bank for Trade and Industry (GBTI), said that GBTI does make special concessions for special circumstances and has given unsecured loans.  She cited the farming community, which is a high-risk area for lending at all times, given the uncertainties of the extant dynamics where crops are lost through several contributory factors, which lead to bad debts.
Shapiro highlighted the economic and social benefits that would accrue from the reformed laws, but conceded that there is some degree of risk that the borrower may default on repayments and the moveable assets used as collateral be lost to the lender, but he maintained that these risks would be minimal if there is proper implementation of the initiative.
Senior Legal Officer at the OAS, John Wilson, said that at the G20 Summit held in Pennsylvania several international agencies, such as the World Bank, the Inter-American Development Bank (IDB), Organisation of American States (OAS) and the US Agency for International Development (USAID) agreed to collaborate on this initiative.  The focus of prior discussions on this issue, according to him, was centered on states in Central and South America and not on Caribbean states.
This innovative proposal has not yet been fully appraised by Guyana’s Government to determine its feasibility, but Finance Minister, Dr. Ashni Singh, has given the assurance that the Government is open to considering all options for reforming and modernizing the financial system.
In Guyana there already exists two such schemes, but the loans are limited.  In keeping with the human development thrust of the Gafoor Group, the Small Business Development Finance (SBDF) was initially funded by Gafsons Industries Ltd, with a donation from His Excellency, President Jagdeo, and was launched on 22nd October 2002.
The Mission Statement of the Fund is: “To strengthen the economic base of micro and small-scale sector entrepreneurs in Guyana through increased access to lending, technical support and non-traditional financial facilities; so that small enterprises could position themselves to be most competitive and take advantage of their size to participate in the world markets in an era of intense global competition.”
Chairman of the SBDF, Mr. Sattaur Gafoor, said during the sixth AGM of the Trust: “…an institution… (that) has taken its place in the arena of High-Risk Micro-Finance in Guyana.  The main goal behind the establishment of SBDF was the creation of opportunities for employment and income-generation among the poor and the working-class in our society so as to be able to create equal opportunity and growth.  SBDF has so far been able to provide Non-Traditional Financial as well as Technical Training Services to Micro-Entrepreneurs in Guyana.”
“The Trust has played a significant role in the Development Process.  SBDF has joined with the Ministry of Agriculture’s drive to Grow More Food by launching a special programme for Cash Crop Production and Expansion.  In the brief period of its operations the Trust has funded over 3,971 loans and provided managerial and technical training to a large number of entrepreneurs.”
The Institute of Private Enterprise Development (IPED) also operates along the same principles as the SBDF and both institutions have received tremendous support from this current administration, so this admirable and visionary initiative that is currently being proposed by the OAS will most likely find fertile grounds in Guyana, because the Government is driving development at an accelerated rate and, as Finance Minister Ashni Singh said, the Government is amenable to suggestions and options that would optimize and enhance its developmental thrust.
Development has many faces, and often there is inter-relation in initiatives that drive social and economic growth, providing equity in societies.  One participant queried if this new loan regime cannot be linked up to the Guyana Government’s dynamic housing drive so that there is a parallel, whereby the need for a secure home and operational base is filled in an affordable manner, synonymous with entrepreneurial activities.
The Government has made many interventions to provide low and middle income housing, with no collateral needed, except the land title and/or transport.  However, although the interest rates have been considerably reduced, the compound interest has resulted in many homeowners losing their homes in instances where circumstances render them unable to sustain mortgages for a duration.
If vulnerable persons have to maintain two loans for an indefinite time – one for a budding business and one for a home that generates no income, then the strategy could very well prove counter-productive.
The proposed initiative, while an admirable one singly and separately, need to also factor in extenuating circumstances to ensure enhanced efficacy, and this too will entail working with the Government in a collaborative effort to boost Guyana’s already expansive development paradigm.