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‘Development bank risks becoming PPP slush fund’ – Norton
…says APNU will table amendments to legislation
(Kaieteur News) – Leader of the People’s National Congress Reform and chairman of the APNU, Aubrey Norton said his party will table amendments to the recently passed law to govern the Development Bank.
Norton explained that while the party supports the idea of a development bank, he believes the current framework to manage the institution makes it more of a “slush fund” to support those close to the ruling administration.
“I do know among the Members of Parliament it (amendments) was being discussed…I know it is being discussed and I think we have said previously we support the idea of a development bank. In fact, our manifesto had one, but what we are seeing is not a development bank, this looks like a slush fund that the PPP can use to give PPP people what they want and continue the process of discriminating against those who are not linked to the PPP,” he said.
Leader of the PNC/R, Aubrey Norton
Member of Parliament (MP) for APNU Dr. Terrence Campbell had flagged deficiencies within the law passed by the government on July 27, a mere 52 days after the Bill was first laid in the National Assembly. The Bill was not debated in the House as the Opposition staged an in-house protest for two ministers of government to tender their resignations over the MV Barima tragedy.
In a public statement, Campbell noted, “The Act contains several serious deficiencies.
The first is the proposed $3 million loan ceiling. That amount may be useful to a micro-enterprise, but it is hardly transformative for a genuine small or medium-sized business.”
He said a business employing 25 people at the private-sector minimum wage of $60,000 per month could pay out half the amount in one month on salaries.
According to him, “A $3 million ceiling therefore risks creating a bank for micro-businesses while leaving larger small businesses and medium-sized enterprises largely underserved.”
The MP also suggested that the Act should also provide a clearer definition of a medium-sized business and establish safeguards to prevent borrowers from circumventing the loan ceiling by obtaining multiple loans through different companies.
Campbell added, “More fundamentally, the governance structure is troubling.
The Minister appoints the entire Board of Directors, including the Chair and Vice-Chair. That creates the potential for political interference in an institution whose success will depend on independent and commercially sound lending decisions.”
The Opposition MP argued that a development bank dispensing billions of dollars cannot become an instrument of political patronage. As such, he opined that the Board should include representation from the Opposition and nominees of the banking and professional communities.
Additionally, Campbell explained, “The same principle should apply to lending decisions. The Act should have established an independent Credit Committee to protect lending from political pressure and strengthen risk management. Again, there is nothing to prevent the Board from establishing such a Committee. The proposed $40 billion authorised capital makes strong governance even more important.”
Furthermore, the MP said government should resolve the contradiction between providing loans with little or no collateral and potentially no interest, while simultaneously requiring the Bank to be financially sustainable.
He argued that there is no such thing as “risk-free” lending. To strengthen accountability, he suggested that the bank not merely be audited by the Audit Office, but should have oversight from the Bank of Guyana. “Finally, the legislation should have demanded reporting on measurable performance targets: the number and categories of loans issued, jobs created, geographic distribution of lending, and the level of non-performing loans. Annual performance reporting, along these lines, should be mandatory,” Campbell said.
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