GMSA weary of difficulties at local banks, Jagdeo says gov’t considering a request for revolving fund
Access to capital has long been a hindrance to the formation and expansion of local businesses but the Guyana Manufacturing and Services Association (GMSA) has a proposal that could change that.
During its mid-year business dinner on Tuesday night, the Association’s President, Rafeek Khan acknowledged this impediment and said a revolving fund would be appropriate to address the issue.
In his words, the fund could “help businesses not to be beggars at international and local banks.”
A revolving fund is established for a specific purpose and used to give loans to members or to be expended or invested for a specific purpose with the condition that repayments are used again for these purposes only.
Businesses in Guyana have long complained about setbacks in accessing financing and there have been targeted efforts in recent years to change that.
Khan said on Tuesday night that lending by local banks has increased by almost 10 per cent, noting that it is a “good sign that the economy is doing well and banks are lending more.”
His comments followed promises by Vice President Dr. Bharrat Jagdeo that the government would consider the revolving fund facility but he emphasised that the private sector must also improve its own financing.
The Vice President said businesses cannot want greater access to financing but are unwilling to explore partnerships or go public.
According to the Vice President, local businesses must look for ways to raise money outside of debt financing.
“Many [businesses] can’t go to the bank because there is transparency in record keeping…it should not be only about government providing the funds to businesses…the private sector also must take steps to improve its own accountability,” Jagdeo added.
He said if the current commercial banks are not fit for purpose, then the government will fix that by bringing in more merchant banks.
Recently, the government issued a license to one new merchant bank and Jagdeo has said that there are several applications for other such financial institutions.
“Several new institutions will be opening their doors in the next few years,” he added.
Meanwhile, Khan said with the oil boom and unprecedented economic growth to take place in the next few years, it presents a golden opportunity for the many businesses that have been holding out for the last decade.
He calls it, “paying the price.” Khan credited future successes to the support offered by lower energy and infrastructure costs.
To this end, competitiveness is expected to increase.
But with that ramped-up competitiveness across sectors, the GMSA President believes local manufacturers must also look to grow into secondary and tertiary manufacturing.
“This is where you see real growth in the economy and value-added. Every sector is preparing to grow,” Khan said.
According to the government’s revised projections, the economy is expected to grow by an average of 59 per cent this year.
Khan believes agriculture and construction, apart from oil and gas, will drive this economic growth.
While the GMSA awaits the official mid-year report which is due by the end of this month, Khan said quarrying and mining, which have been down, are set for a rebound.
The forestry sector, he explained, has increased production by 25 per cent, resulting in increased exports by 30 per cent.
To this end, he made a case for local businesses to be supported in scaling up their capacities for the export markets even as he welcomed the increase in air cargo services.