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Small businesses to tap US$200M interest-free lifeline through Development Bank – Jagdeo
(Kaieteur News) – The government of Guyana (GoG) is aiming to launch a Development Bank next year, aimed at helping small and medium-sized enterprises (SMEs) access finance to either start or expand their ideas.
Vice President Bharrat Jagdeo
This was explained by Vice President Bharrat Jagdeo on Thursday during a press conference at the Arthur Chung Conference Centre. Jagdeo told reporters that the rollout will see an initial investment of US$200 million by the GoG which will constitute interest-free capital to SMEs.
“This came out of the survey we had and the informal conversation we’ve had over the five years we’ve been in government where a number of Guyanese across all 10 regions of Guyana have great business ideas, many started a business but they can’t either grow the business or get the idea translated into a business because of the lack of financing,” the Vice President explained.
He noted that many of those persons often fall within the bracket of women or young people. Regardless, he pointed out that all Guyanese will have access to finance as early as next year to create income for themselves and families.
Jagdeo said that work has already commenced on the project, with a discussion scheduled for next week on a second draft of the concept.
To this end, the VP revealed, “We want an early budget next year where we will be putting part of the financing to start the bank in the budget. We hope that before the end of next year, that this bank will be fully established and functional, that the seed capital would be put in, and all the parameters for lending these resources would have been in place and met so that we can start delivering on this promise very early in the new term.”
Government plans to invest US$200 million into the Development Bank in the first year but will reassess the demand and make periodic injections if required.
Jagdeo said that government has looked at models around the world which had a higher repayment rate than the commercial banks in some countries. He anticipates that 10% of the loans may fall through. At the same time, he explained, “We anticipate that if you work with the businesses themselves in a hand-holding fashion, that you’d be able to get the loans repaid and the money can be revolved.”
Additionally, he highlighted the need for training in the areas of financial literacy and mentorship to ensure the companies have access to marketing and other technical advice.
According to him, “You would know immediately whether this is a viable project or not, if you go through that whole process.”
In addition to the creation of a new Development Bank, the VP said government will ensure the formal banking system is reformed to allow SMEs easier access to capital and at greater magnitudes.
“We will work with the banking system to develop a range of instruments, from discounting trade invoices to make project financing, to commercial bank financing, that would allow Guyanese to better use the banking system to support their business needs,” he said.
Meanwhile, President Irfaan Ali during a breakfast event earlier that day also alluded to the initiative. He told members of the private sector that in addition to the Development Bank, a technical team was working on modernising the local banking sector.
Ali said, “We want to position our SMEs. Already, I have the technical team working with government to have, by next week, the draft proposal on a Development Bank as we have promised. We have the team working with cabinet members, minister of finance, on modernising the financial sector. In three weeks, that report will come to us as to how we modernise our banking sector, the creation of a modern stock exchange and options for capital mobilisation. Many people are speaking about that, for bonds and all of these, all of these options will be examined.”
Furthermore, the President pointed to the need for all Guyanese to have a bank account. In fact, he stated that government is willing to incentivise the process if necessary. “We have to be able, in the shortest time frame, to ensure every Guyanese have a bank account. Even if the government must incentivise the opening up of those bank accounts.”
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