THE Guyana Bank for Trade and Industry (GBTI) last evening launched its International Finance Corporation (IFC) Trade Finance Facility, designed to lower the cost of external trade through ‘Triple A’ backing allowing numerous banks to facilitate letters of credit to businesses.
The Bank, in December, announced the facility at the opening of its Diamond branch shortly before the end of last year. With the facility in place, GBTI will be able to offer IFC-backed letters of credit good for numerous banks across continents, allowing importers to have access to finance for their imports at rates more competitive than ever before. The IFC is the private sector arm of the World Bank.
“I am always delighted at any development that I see as contributing to improving the ease with which current entrepreneurs in Guyana might be able take advantage of trade opportunities. We have worked painstakingly to ensure that we establish such an environment and we have made considerable progress in this regard through ensuring that we have a strong and stable financial system,” he said.
“I was glad to hear from the IFC that they did do the due-diligence and confirmed that the financial institutions in general and GBTI, one of our largest institutions in particular, are strong and sound and well-managed, because we have been saying this for a long time and it has not been achieved accidentally. It has been achieved because of a deliberate policy stance, the result of concerted effort, ensuring we have the legislation in place, ensuring we have regulations and that our supervisory capabilities are strengthened,” he said.
He said that having established the environment that government has worked so hard at, “I am pleased and am always delighted to see institutions take additional steps to further enhance this environment.”
He said that there is no doubt that if Guyana is to grow and prosper “we must be attentive to the global and regional context and we must in particular be attentive to global opportunities and indeed threats.” This is applicable for small domestic markets and environments “like ours.”
“We remain convinced that with a small environment such as ours, it is only by identifying these opportunities and capitalising on them that we can and will grow at the pace at which we know we have the potential to grow,” he said.
Some of these opportunities he identified as niche market for tourism products for Scandinavia or other European places, opportunities that emanate from Guyana’s new geographical links with South American neighbours, or specialist products – like gold jewellery – that Guyana manufactures or services that Guyana offers.
“I do believe very strongly that [the partnership] will redound to our private sector. I urge you to take advantage of the facility and to exert every effort to identify the opportunities to which I referred and how you could take advantage of them,” he said.
The minister thanked GBTI and the IFC for collaborating on the facility, which is designed to bring ease to the transaction of trade.
Speaking at the launch of the facility, GBTI CEO, John Tracey, said that the bank looks forward to the start of the relationship with the IFC. “We are aware that the IFC has a lot more to offer. We are already engaged in discussions with the IFC for the provision of training for both our staff and businesspersons in the use and advantages of this trade programme,” Tracey said.
He said that the IFC offers in tandem with the programme its trade advisory services through which an exporters-importers workshop is run. He said the Bank had hoped to have the workshop at the same time of the launch of the facility. He said unfortunately the training could not be made available at this time but will be done shortly.
He said that the IFC would help the Bank to develop a risk-based model of management that few banks in the Caribbean have in the moment. He said that it is a necessity for banks in more fluid and complex financial environments. He said that the trade-financing programme is another product line, which GBTI is making at near break-even cost.
“As another arrow in the quiver of the IFC meant to bring assistance to the private sector we can do no less than to view this facility as the IFC views it – to benefit the ultimate recipients more than to benefit the banks. Fortunately, GBTI can afford to do this,” he said.
Tracey said that having just completed another financial year and with receipt of the audit report, “I can say that another year of solid performance gives us a springboard to farm out such products at a minimal cost.” He said that one of the effects of this would be the driving down of the cost of trade financing across the board.
“All of the commercial banks in Guyana are in a healthy state – as healthy as GBTI is, and should be more than willing to give added support to the business sector. Therefore, at present, Guyanese businesses are in a very favourable position,” he said.
Tracey said that with the excess liquidity in the financial system so high and growing, the rates of interest and advances are at an all-time low and are heading towards single-digit figures. “The effects of increased competition in the sector, which the government intended by opening up the sector in 1994 giving licences to two banks, may have taken a while to be seen. However, most banks are experiencing a narrowing of the interest rate spread and therefore a downward pressure on profits. I want to believe, minister, that you expected this and having read the financial tea leaves and wanting to keep the banking sector in good shape, which is your duty, and hence you reduced corporation tax in the last budget,” he said.
Tracey said that in addition to the prevailing low lending rates, it would appear at the moment that there is a great deal of interest in the international lending agencies in making financing available to Guyanese investors. He said of recent, GBTI entertained visits from the Inter-American Investment Corporation (IIC), the United States Agency for International Development (USAID), and the European Investment Bank, which he said offers to fund large and small projects, whether based on floating interest rates or fixed rates.
He said that in the case of USAID, this agency is prepared to give local banks 50 percent guarantee on loans granted on concessionary terms to certain sectors of the economy. “We propose to engage with the Private Sector Commission and other bodies to inform them of these preferential facilities that are being made available to their members by international lending agencies. It will then be left to the business community to take advantage of these favourable conditions for further investments,” he said.
“I wish to thank the IFC for the confidence placed in us. You have seen from tonight’s event that we have moved with gusto to get the show on the road. It is now up to the intended recipients – you the business sector – to make full use of this trade finance facility being made available to the IFC for your benefit,” said Tracey.