Development bank risks becoming welfare agency – former ambassador

Jun 11, 2026 News

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…warns against zero-interest, no-collateral lending

(Kaieteur News) – Former Guyana Ambassador to South Africa and Professor, Dr. C. Kenrick Hunte, has raised serious concerns about the proposed Guyana Development Bank (GDB), warning that aspects of the legislation could transform the institution into a costly welfare agency rather than a sustainable development bank.

In a letter to the editor, Hunte examined provisions contained in the Guyana Development Bank Act 2026, particularly Section 5(2), which states that the bank may assist small and medium-sized enterprises (SMEs) by providing loans “with or without collateral and with or without charging interest.”

The provision has already attracted public attention following the tabling of the legislation in the National Assembly by Finance Minister Dr. Ashni Singh. Government has promoted the proposed institution as a mechanism to expand access to financing for entrepreneurs, including the possibility of loans being offered without interest or collateral.

However, Hunte argued that the language of the Bill creates four possible lending scenarios, each with significantly different implications for the bank’s sustainability and effectiveness.

According to Hunte, the first and most conventional model involves charging interest and requiring collateral. Under this approach, interest income helps cover operational expenses and generates profits, while collateral provides security against loan defaults and ensures borrower commitment.

The second scenario, where loans are issued without interest and without collateral, is what Hunte considers most problematic. He contends that such an arrangement cannot properly be described as banking activity.

“This is not a bank loan; instead, this is a financial transfer, given by government,” Hunte wrote.

He argued that without interest income, the institution would have no internally generated revenue to cover operational costs. As a result, annual government budget allocations would be required simply to keep the institution functioning. Given reports that the GDB will begin with an initial capitalisation of G$40 billion, Hunte noted that no details have yet been provided regarding the operational expenses that would have to be deducted from those resources.

A third possibility identified by Hunte involves loans being issued without interest but secured by collateral. While collateral may protect against defaults, he maintained that the absence of interest income would still leave the institution dependent on government grants to finance its operations.

The fourth scenario would involve charging interest while dispensing with collateral requirements. Hunte said such a model would require intensive monitoring and supervision to minimise loan losses and ensure repayment. He suggested mechanisms such as “Assignment of Sales” agreements, whereby repayment obligations could be linked directly to revenues generated by borrowers.

Based on his analysis, Hunte concluded that any significant reliance on the second and third lending models would undermine the bank’s viability.

“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,” he stated.

The former ambassador also used the opportunity to revisit the closure of the Guyana Agricultural and Industrial Development Bank (GAIBANK), which he described as a financially viable development finance institution. Hunte criticised the People’s Progressive Party (PPP) administration’s decision to shut down the bank more than three decades ago, arguing that recommendations made by former Auditor General S.A. Goolsarran in 1993 and 1994 were ignored.

Now, as the government seeks to establish a new development banking institution, Hunte questioned whether sufficient attention has been paid to designing sound credit policies, setting operational targets, and ensuring efficiency.

He also raised concerns about staffing requirements, asking whether there is adequate understanding of the trained personnel needed to manage what could become a decentralised development banking system across Guyana’s ten administrative regions.

Hunte’s intervention adds to a growing debate surrounding the proposed legislation. Critics have already questioned the governance structure of the bank, including provisions that would allow the Minister of Finance to appoint all directors, the chairperson and deputy chairperson. Concerns have also been raised regarding oversight mechanisms, lending criteria and accountability safeguards.

The Guyana Development Bank Bill is expected to be debated in the National Assembly before lawmakers decide whether to approve the legislation.

Hunte indicated that his latest submission is only the first in a series of observations and that further commentary on the proposed institution will follow.

Flaws

Just last week Chartered Accountant and Attorney Christopher Ram warned that flaws in the legislation governing the institution could leave billions of taxpayers’ dollars vulnerable to misuse.

In an invited comment, Ram, an advocate for good governance told this publication that the proposed legislation raises serious concerns about governance, accountability and financial prudence.

He said, “The most troubling feature is that the Bank is exempt from the Financial Institutions Act and therefore from oversight by the Bank of Guyana. Unlike every other financial institution, it will not be subject to independent prudential supervision, inspections or regulatory intervention. With $40 billion of taxpayers’ money at stake, this is a significant weakness.”

Ram went on to point out that governance is another concern. The lawyer explained that the Bill tabled in the National Assembly lays the foundation for the Finance Minister to appoint all directors, including the Chairperson and Deputy Chairperson. ‘That concentration of authority is particularly troubling given his well-documented history of delayed appointments to statutory bodies and institutions under his oversight. Ironically, the same Minister was once a vocal critic of similar shortcomings when they occurred under the previous administration,” Ram said.

Additionally, the attorney noted that the Guyana Development Bank also falls outside of the Companies Act. As such, the lawyer flagged that the legislation contains no statutory indemnity for directors acting in good faith and omits many of the governance safeguards normally associated with corporate entities.

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• Ashni Singh, Development Bank, Kenrick Hunte, welfare agency

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