THE banking sector, and in particular, banks, play an important role in the economic development of a developing country. Economic development involves investment in various sectors of the economy. The banks collect savings from customers and mobilise these for investment in industrial and other projects. Investors borrow from banks to finance the projects, promoting the growth rate through the reorientation of loan policy.
Special funds are provided to the investors for the completion of projects; the banks provide guarantees for industrial loans from international agencies and foreign capital flows to developing countries for investment in projects.
Besides normal banking, banks perform agency services for their clients. The banks buy and sell securities, make rent payments, receive subscription funds and collect utility bills for government departments.
Banks arrange foreign exchange for business transactions with other countries and the facility of foreign currency accounts has resulted in an increase of foreign exchange reserves. By opening a letter of credit, the banks also promote foreign trade.
The banks are not simply collecting funds but also serve as a guide to customers investing their funds. The policy of banks is an instrument in wide dispersal of credit in a country.
A few decades ago, Guyana’s banking sector was virtually stagnated because of a virtually collapsed economy.
However, with the return of democracy in 1992 and a stable economy, investment in the banking sector saw a dramatic transformation and today Guyana can boast of the existence of commercial banks in almost every single administrative region.
In fact, commercial banks have been vigorously competing for space around the country, manifested in branches at Corriverton, Parika, Lethem and on the Essequibo Coast.
This is certainly a demonstration of the growing confidence of bankers in the national economy and in the financial stability of the country.
One of the largest banks, the Guyana Bank for Trade and Industry (GBTI) which opened a branch recently at Diamond on the East Bank Demerara, has announced that it would be introducing services to facilitate international trade for local businesses. And it is pleasing to note that this promise is almost a reality as a team from the International Finance Corporation (part of the World Bank Group) recently visited in connection with this fine venture and expressed their pleasure with it.
Mr. James S. Smouse, Principal Investment Officer at the IFC, during the signing ceremony to clinch the agreement with GBTI declared:  “It is a pleasure to be here with you all to commemorate this signing of this trade finance facility with the Guyana Bank for Trade and Industry, one of the leading banks in Guyana, and which plays an important role in the economic development of the country.”
“I would like to say thank you to the GBTI team and management. It was truly a pleasure to work with them and to perform our due diligence, which I know can be quite rigorous and lengthy; but as we see here tonight they performed with flying colours. This is a strong demonstration in our confidence in the institution as well as the financial sector of Guyana as a whole.”
The official did not only express confidence in the financial institutions but with the entire financial sector of Guyana which is testimony to the successful macroeconomic management of the national economy.
The programme offers GBTI partial or full guarantees to cover payment risk from firms which export or import goods, commodities or services from or to Guyana.
These guarantees are applicable to transactions involving letters of credit, trade-related promissory notes and bills of exchange, bid and performance bonds, and advance payment guarantees or credits to suppliers.
This would be a great fillip for local businesses to expand and grow thereby contributing to economic growth and job creation.
It is hoped that other local commercial banks would seek to emulate the ground-breaking path of GBTI.