–Granger urges as Demerara Bank opens $800M head office

By Ariana Gordon
DEMERARA Bank Limited opened its new $800 million head office and corporate banking facility on Camp Street, Georgetown yesterday; and in his address at the ceremony, President Granger charged commercial banks to “zealously guard against illicit funds” that are finding their way into the financial system.

“Money-laundering is associated with distortionary effects on an economy. Illicit funds can undermine the integrity of the country’s financial system, thereby exposing the country to sanctions,” President Granger cautioned.
Noting that it is because of the dangers associated with money laundering that his government passed the Anti-Money Laundering and Countering the Financing of Terrorism Act (AML/CFT), the President said: “Our government remains committed to doing everything necessary to remain compliant with the requirements of the Financial Action Task Force (FATF). We look forward to the vigilance of commercial banks and our regulatory bodies to prevent the contamination of our financial system with ‘dirty’ money.”
The President also charged financial institutions to be more inclusive, and to cater to vulnerable groups and residents in far-flung communities. He said Guyana has a diversified commercial banking sector, and he stressed that commercial banks form the core of the country’s financial system, having accounted for 81.3 per cent of the total gross assets of the financial sector at the end of 2014.
“Total private sector loans, advances and securities emanating from the banking sector amounted to G$137.7 billion in 2014, a 7.4 per cent increase over 2013,” the President disclosed.
“Deficiencies” in the reach of our commercial banking sector continue to exist despite these gains, the President explained. “Vast areas of our country have no access to banking services. There are no commercial banks, for example, in Mahdia and Mabaruma, the administrative centres of the Barima-Waini and Potaro-Siparuni regions respectively, and two major gold and diamond-mining zones. They are soon to become towns, but have no banks,” he lamented.
Also lamenting that vulnerable groups, particularly rural and hinterland communities, “are still excluded from basic financial services, while small entrepreneurs are excluded from accessing credit because they lack the necessary capital and assets for collateral”, President Granger called on the financial sector to implement “a flexible financial system” with the aim of connecting a larger number of citizens to banks.
“Increased access to banking services everywhere is an important goal of this government,” he disclosed. “There is a special responsibility of those involved in financial intermediation to ensure greatest access to banking services for the greatest number.”
The President pointed to an International Monetary Fund (IMF) report which said that access to savings has increased savings, investment and consumption; while access to credit has increased entrepreneurship and reduced poverty.
“Financial services provided by commercial banks must therefore become more inclusive if they are to contribute to these economic and social goals” he said. “The establishment of branches by commercial banks in unserved areas will allow for wider geographic coverage and greater access to services. It will bring banking to the people,” he said.
Greater inclusion
Government is prepared to partner with all financial institutions to implement appropriate policy measures to promote greater financial inclusion, the President said. He believes that increasing the reach of commercial banks is best achieved under a banking system that is built on the four pillars of stability, security, integrity and flexibility.
Speaking to stability, the President said Guyana’s financial system has not been “spared the implosion of financial institutions”. He pointed to the thousands of depositors in Globe Trust and Investment Company who suffered losses in the collapse of that company in 2001. Similarly, investors experienced significant losses when CLICO collapsed in 2009.
The collapse of the two financial institutions “signalled the need for continued vigilance in the way our banking system is regulated and managed,” President Granger said.
Government, he said, is committed to strengthening both the regulatory and supervisory capacities of the Bank of Guyana. The collapse of both CLICO and Globe Trust and Investment Company underscored the need to “safeguard deposits and investments in the eventuality of institutional failure.”
“Our government proposes to discuss with bankers the implementation of a deposit insurance scheme to ensure that individuals who hold deposits at failed financial institutions would be compensated up to an agreed amount within a specified timeline,” he added.
Also critical to the extension of the reach of commercial banks is security. Commercial banks and their depositors must be safe from crime and fraud. “Cash transactions are still too prevalent. Persons are still moving around with large amounts of cash, thus exposing themselves to robbery,” President Granger said. Banking institutions can help in reducing the “high incidence of cash transactions” in the economy, by developing appropriate instruments for the benefit of the populace while encouraging clients to make use of those very instruments.
President Granger added that the Guyana Police Force is in the process of being reformed. He noted that with the reintroduction of the United Kingdom-funded Security Sector Reform Action Plan, Guyana will become a safe place to do business, and a “safe destination for foreign direct investment.”
Speaking to flexibility, President Granger said because Guyana is an agriculture-based economy, the country’s agricultural and manufacturing sectors need investment to become more diversified and competitive.
“Our government is considering the establishment of a development bank in order to boost the development of these sectors,” he announced.
Shed over-cautiousness
Commercial banks, he said, must also shed their “over-cautiousness towards investment in agriculture, infrastructure, and manufacturing enterprises and projects.”
Government’s plan also includes creating a green economy by generating electricity from renewable sources. “It includes reducing poverty through investment in increasing farm production and agro-processing. It includes expanding our infrastructure with the establishment of aerodromes, bridges, highways and stellings. Investment in infrastructure will allow the commercial banks to diversify their portfolio and to reduce portfolio volatility,” the President added.
He lauded the Board of Directors of Demerara Bank for taking “a step in the right direction.” He noted that with the opening of the bank’s 7th office, a strong message is being sent to investors. “It is an expression of confidence in the economic prospects of Guyana. These are the signs to which local and foreign investors pay attention when making investment decisions. If the commercial banking sector is buoyant, as your profits seem to suggest, investors will read that as a vote of confidence in the future,” President Granger said, as he congratulated the Board of Directors and staff of that financial institution.
The 25,000 square feet building is fully equipped with modern, environmentally- friendly equipment. Customers will be able to conduct their business in a safer, more convenient and modern bank as security, exclusive facilities for corporate customers and parking will all be available at the new head office.
The opening of the new head office coincides with the bank’s 21st anniversary. The bank begun operations at 230 Camp and South Roads and then expanded its reach. Demerara Bank now has seven locations including the two offices in Georgetown and one each in Rose Hall and Corriverton, Berbice; Anna Regina, Essequibo Coast; Diamond, East Bank Demerara; and Le Ressouvenir, East Coat Demerara.