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Former Prime Minister, and leading economist in Barbados, Owen Arthur, is right. He said that commercial banks need to redirect funds to finance start-ups, innovation and other investments, instead of satisfying the need for the latest consumer electronics.
The general role of commercial banks is to provide financial services to the general public, businesses and companies ensuring economic and social stability, and sustainable growth of the economy. In this respect, “credit of creation” is the most significant function of commercial banks. Banks also provide long-term credit to the Government by investing their funds in securities and short-term financing by purchasing treasury bills.
Donna Wellington, president of the Bankers Association of Barbados, and chief executive officer of FirstCaribbean International Bank, indicated that commercial banks have “turned off the taps” and have not lent to the Government since about 2013. Banks do not appear interested in working with the Government in these difficult economic times, but I am sure will work with them in good times when their bottom lines show significant increases each year.
Wellington further stated that there were corporations looking to do big things, but none of them would do anything until they knew what was going on. Is it possible that corporations and other private sector agencies approached commercial banks seeking financial help to advance their innovations, start-ups and other investments, but the same commercial banks declined their loan applications, blaming the Government for the current economic outlook, and not accepting a policy direction as dictated by them?
Banks have to be careful to ensure their role in the economy is not relegated to that of a pressure group that opposes the Government on most issues, rather than playing a decisive role in the trade, industry and commerce of this land. Yes, by all means, continue to give Government the best possible advice, recognising that some of the recommendations submitted will not be accepted while others will be taken on board. I recommend that you seek a separate seat on the Social Partnership as a separate and distinct sub-set of the private sector because your views are very important with respect to the overall development of Barbados.
What about the commercial banks’ concentration on foreign-based consumer goods such as motor vehicles and consumer electronics? When banks finance these type of non-productive transactions requiring the use of foreign exchange, they are in fact contributing to the depletion of our reserves, which will have a deleterious impact with regards to the destabilisation of our economy.
Banks have again missed the boat by not only acting as custodians of our wealth, but also as resources of our country, which are necessary for our economic development. They hold 55 per cent of the domestic financial assets and at least $1.4 billion in excess liquidity, and may in fact be one of the main contributors to Barbados’ slower growth towards full economic recovery. Investing money in private sector enterprises, which is really the engine for growth in our economy, is the necessary stimulus that the country needs at this time to ensure sustainable growth and development, and banks can do it.
It is noted that none of the commercial banks in Barbados is indigenous. I wish to recommend that Barbados moves towards ensuring that a properly set up, managed and accessible indigenous commercial bank is restored. There is also the need to re-establish the Barbados Development Bank that would focus on small and medium sized enterprises.
My further call is for Barbadian businesses, and the whole nation, to support such moves, if and when they come on stream.
– ALGERNON ATHERLEY