Guyana’s microfinance sector although small, has played a significant role in improving the living standards of those who have access to its services.
Over the years, it has also shown that it can provide investment opportunities for the working poor, who have conventionally been incapable to access the formal financial market.
Microfinance refers to the activity of providing a broad range of financial services to low income clients who lack access to the formal financial institutions.
These financial services include very small loans (microcredit), savings, insurance and payment services.
Access to credit is seen as the important step in improving households’ welfare and hence helps in breaking the cycle of poverty on their own terms.
Based on its performance which is monitored by the Bank of Guyana, the sector continues to prove that it has great potential to reduce poverty in Guyana.
As of June 2014, there are two entities in the micro finance sector.
These are the Institute of Private Enterprise Development (IPED) and Small Business Development Trust (SBDT).
IPED happens to be oldest and the largest microfinance institution in Guyana. It is registered as a non-profit limited liability company and is exempt from corporation tax and all donations to this company are exempt from income tax.
IPED, according to the Governor of the Bank of Guyana, Dr. Gobind Ganga, is the only microfinance institution in Guyana, which covers all the ten administrative regions of the country.
Dr. Gobind said that SBDF was launched in November 2002, with locally generated funds of about G$12 million, which were then supplemented by support from the government of Guyana, Canada, United Kingdom, and a loan from one of the commercial banks.
He said that SBDF is a tax exempt non-profit institution. SBDF provides four types of loans: micro; developmental; consumer; and housing loans. Micro and consumer loans are payable in six months and developmental and housing loans within two years.
The Central Bank Governor said that the security required for the micro and consumers’ loans are mostly moveable tangible assets. In case of the developmental and housing loans, required securities are in the form of transport and land titles.
According to the Central Bank, total assets held by the two microfinance institutes -IPED and SBDT – amounted to G$3,926 million as at end-June 2014, a 9.3 percent (G$401 million) decline from the end-June 2013 level and 2.7 percent (G$108 million) below the end-June 2012 level of G$4,034 million. It is projected however to improve significantly.
Loans, which represented the largest asset category, accounted for 77.3 percent of the sector’s total assets at end-June 2014. The companies reported aggregate loans of G$3,036 million, a 13.2 percent (G$354 million) increase when compared with the corresponding period last year.
The Bank of Guyana said that the portfolios of the institutions consisted mainly of micro credit and loans to Small and Medium-sized Enterprises (SMEs), which together accounted for 99.6 percent of total loans.
It said too that loans to the SMEs totaled G$2,644 million, and accounted for 87.1 percent of the sector’s aggregate loan portfolio, resulting in a 15.1 percent (G$347 million) increase for the same period in 2014 and 2.1 percent (G$53 million) below the June 2012 level.
Loans to the SMEs were 85.7 percent and 85.8 percent of total loans as at end-June 2013 and end-June 2012 respectively.
Micro credit, the second largest loan category, amounted to G$375 million and represented 12.4 percent of total loans for the review period. Micro credit loans at end- June 2014 reflected a 0.6 percent (G$2million) decline from the June 2013 level.
During that review period, the total number of loans granted stood at 3,475 compared with 764 for the corresponding period in 2014. The increase in the number of loans disbursed contributed to an increase in the number of jobs created. The share of loans to men, women and couples were 60.4 percent, 38.7 percent and 0.9 percent respectively.
Total liabilities of the micro finance sector as at end-June 2014 amounted to G$940 million. Borrowings from local financial institutions of G$696 million as at end-June 2014 accounted for 74.1 percent of total liabilities. Borrowings from local financial institutions to total liabilities were 69.0 percent and 71.7 percent as at end-June 2013 and end-June 2012 respectively.
Additionally, capital and reserves amounted to G$2,986 million at end-June 2014. Retained earnings and undistributed profits grew by 14.3 percent and 17.3 percent respectively when compared with the corresponding period in 2014.
The micro finance sector’s major source of funding was that of interest income which amounted to G$300 million and accounted for 81.9 percent of total operating income as at the end-June 2014.
Further, interest income increased by 38.7 percent when compared with the corresponding period for in 2014.
Other income of G$66 million represented 18.1 percent of operating income as at end-June 2014. Interest expense and other expenses which amounted to G$17 million and G$214 million respectively, represented 7.3 percent and 92.7 percent of total operating expenses.
Net income of the sector amounted to G$135 million as at end-June 2014, an increase of 17.2 percent when compared with end-June 2013.
As for statistics last year, the Bank of Guyana indicated that total assets held by IPED and SBDT amounted to $4,017 million as at end-June 2015, a 2.3 percent increase from the end-June 2014 level and a 7.2 percent below the end June 2013 level of $4,327 million.
With regard to loans which represented the largest asset category, the Central Bank recorded that this accounted for 68.8 percent of the sector’s total assets at end-June 2015.
It said that the reported aggregate loans amounted to $2,763 million, a 9.0 percent decline when compared with the corresponding period in 2014.
The Bank said that loans to the SMEs totaled $2,442 million, and accounted for 88.4 percent of the sector’s aggregate loan portfolio, resulting in a 7.6 percent decrease for the same period last year and 6.3 percent above the June 2013 level.
It was observed that loans to the SMEs were 87.1 percent and 85.7 percent of total loans as at end-June 2014 and end-June 2013 respectively.
Micro credit, the second largest loan category, amounted to $306 million and represented 11.1 percent of total loans for the review period. Micro credit loans at end- June 2015 reflected an 18.4 percent decline from the June 2014 level.