Government is trying to reconstitute a Development Bank

Jun 10, 2026 Letters

Dear Editor,

Reference is made to a presentation in Parliament on the reestablishment of a development bank in Guyana: ‘The Guyana Development Bank (GDB) Act 2026’. While there is much that can be discussed about the GDB, I would like on this occasion to refer to section 5.2 (page 8) of the Official Gazette dated 4^th June,2026; and in which the following is recorded:

“…assist small and medium-sized enterprises in establishing, carrying on or expanding their operations by providing loans with or without collateral and with or without charging interest;”. Undoubtedly, this interest rate and collateral specification introduces four Case outcomes that are summarized in Table 1, and will be further explained below.

Case 1: A loan in which interest is collected from the borrower and collateral is deposited from the borrower in order to guarantee the repayment of the contracted loan. This is the standard approach in banking, since the interest payment provides:

Income to the bank to cover its operating costs and a profit margin; while the collateral:
Ensures that the borrower is committed, given that a portion of the borrower’s assets (wealth) in the form of the collateral is legally contracted to the bank; and it can be taken by the bank, if the loan repayment amount and repayment conditions are not satisfied.

Case 2: A loan in which both interest and collateral are excluded. This is not a bank loan; instead, this is a financial transfer, given by government. In fact, the welfare agency receiving this transfer from government to disburse funds to a non-committed client will not be in a position to financially sustain itself, as there will be no money to cover operating expenses, even if the loans are repaid in full. Government funding will therefore have to be approved every year in the national budget to cover the operating cost. It is reported that the GDB will be given G$40.0B as a starting amount. And of this amount, a sum must be set aside every year to cover operating expenses. Currently, no information on this expense has been presented.

Case 3: A loan without interest, but with collateral provided. In this case, the bank will not have funds to cover operating expenses, and it will have to receive grants or government funds to cover its operating expenses.

Case 4: A loan in which interest is applied, but no collateral provided. In this case, the bank will have to deploy a significant amount of timely and continuous supervision in order to collect its interest and loan repayments. Establishing a link with the buyers of the goods and services produced by the borrower is an option that can be explored to assist in reducing loan losses and non-payment. An ‘Assignment of Sales’ can be one arrangement that can be considered in this case.

Given the information above, it is clear that if the GDB utilizes the credit framework in Cases 2 and 3, this will be a serious drain on scarce resources and it will not be a development bank, but a welfare agency. Consequently, the Parliament has some serious work to do to strengthen this so-called proposed development institution.

In conclusion, it is pertinent to note that some three decades ago, the PPP Government closed GAIBANK, a financially viable development financial institution. This imprudent decision occurred because the PPP refused to implement the recommendations of Mr. S. A. Goolsarran, Auditor General of Guyana, who wrote letters dated 31-12-1993 and 9-16-1994 in which he provided the relevant justification. So, in the current Parliament Meetings, some 30 plus years after that most unfortunate decision by PPP Government to close GAIBANK, the PPP Government is trying to reconstitute an institution which they claim will be the Guyana Development Bank. Any bets on its credit policies, operational targets, and operational efficiency? Is there any understanding of the trained staff required to manage a decentralized development banking system in the ten regions of Guyana? More in a follow-up letter.

Sincerely,

Dr. C. Kenrick Hunte

Professor and Former Ambassador

Discover more from Kaieteur News

Subscribe to get the latest posts sent to your email.

Development Bank, Kenrick Hunte, Letters

Latest News