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WILD COOT – Freeing up credit

Harry Russell

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THE CLARION CALL to free up credit to the small man and small business is like John the Baptist crying in the wilderness.
In an impassioned plea at a seminar on Banking, Credit, Financial Services, And Consumer Protection In The Caribbean at the Amaryllis Beach Resort, our Acting Permanent Secretary in the Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce, Ernesta Drakes, hoped to awaken the consciousness of the participants to the plight of the small man and small business.
This could not have come from a better person, and I commend the forthrightness of the delivery. Being at the batman’s end of a hostile spell, she played with gutsy aplomb. She obviously has seen the failure of the plethora of institutions set up by Government in an attempt to deliver credit. Albeit a creditable attempt, it has failed.
In an earlier article I outlined the numerous Government bodies to which the small man has access; but indeed he goes from pillar to post, as each window is a specialist window and is limited in funds and scope.
The call to free up credit is an obvious call to the banks and credit unions. They are the ones to whom it should be rightfully addressed, since that they are the ones with the credit funds, the credit experience and presumably the credit skills. But it does not go so.
The last but most important question a banker asks when he has agreed on the viability of a project is: “What ya gat to give me?”
If you do not have land, insurance, surety, and so on, “crappau smoke ya pipe”.
But it is to those same institutions that Ernesta Drakes is addressing her remarks since they are the custodians of the country’s credit – over $2 billion. On the other hand, those to whom they are addressed may be saying in their minds, “no security, no credit”, or “I am not leaving my cool air-conditioned office to go out in any hot sun in order to verify the veracity of your proposal”.
So what are we left with? Either the Government provides the borrower with some form of security to give to the banks, one that the banks will accept (and I have suggested a security bond), or the small man or small business must “brek fuh himself”. The security must be readily encashable and easily enforceable. The Central Bank Guarantee Scheme has shown little success for whatever reason.
The small man or business has no option but to try “el otro sendero” – the other path. According to Hernando de Soto, writing about the underground economy in Peru, the contribution of the alternative underground market is surprisingly big.
Perhaps this is what is sustaining us at the present time. Maybe Government had noted that, but its efforts are in the wrong direction.
• Harry Russell is a retired banker. He may be reached at [email protected]