16% interest rates at commercial banks uncompetitive – GCCI
– says banking rates one of several hurdles local businesses have to overcome
The 16 per cent interest rate being offered by commercial banks when businesses apply for loans has been cited as one of several challenges that face local businesses in Guyana when seeking start-up capital or even maintaining their businesses.
During the launch of their Business Development Forum at its Waterloo Street office on Tuesday, Georgetown Chamber of Commerce and Industry (GCCI) Executive Timothy Tucker spoke to these challenges.
“The biggest problem we have, apart from electric it costs in manufacturing, is financing a business. At 16 per cent interest rate on a commercial loan, it’s ridiculous for us to be competitive in any sense of the word competitive”.
“And that’s the banking sector. That relies completely on how much it costs to borrow. We cannot blame anybody for that, but we’re saying it’s uncompetitive for us to take 16 per cent and try to develop a business,” Tucker added.
He cited some other sources of capital that businesses use in this modern age. Some examples he used were crowdfunding, equity, venture capital and Initial Public Offerings (IPO). Crowdfunding involves a business raising money from large number of people in an open space, usually internet-based.
Equity is using the difference in the value of an asset, for example land, and the value of the liabilities, such as the remaining mortgage, in order to raise money. Venture capital has been described as private equity. On the other hand, an IPO is the act of raising money through offering shares of a company on the stock market.
But the difficulty in getting affordable commercial loans will ring familiar for many, particularly those familiar with the Guyana Agriculture and Industrial Development Bank (GAIBANK). This bank was initially established as a State-owned development bank that focused on providing financing for the Agricultural and Industrial sectors.
The bank was initially supposed to address the difficulty in accessing affordable loans by offering sometimes concessionary loans. While the coalition Government has previously said its reestablishment was on the cards, these talks soon petered out.
Government has for some time touted the financing provided by its Small Business Bureau (SBB), which recently got a new board headed by former Business Minister Dominic Gaskin, who stepped down from this post this year by virtue of being a dual citizen.
The former Minister took over from previous Chair and Jamaican businesswoman, Valerie Grant. Other members of the council include local entrepreneur and Founder of Girls+ Tech, Evie Kanhai-Gurcharan.
Kanhai-Gurcharan, who also manages Java café and is a former participant in the United States-sponsored Young Leaders of the Americas (YLAI) Professional Fellows Programme, uses Girl + Tech to get more women involved in the Information Communication Technology (ICT) sector.
Meanwhile, the council will have representatives from the Business Ministry, Ministry of Finance, the Linden, West Berbice, Essequibo and Region Three Chambers of Commerce. Also present on the council are representatives from the Bankers Association, and the Institute of Private Enterprise Development (IPED); the Chief Executive Officer of the Small Business Bureau (SBB); a youth representative and Dason Anthony.