Lack of access to financing crippling local Private Sector competing in O&G, Public Sectors – GCCI

– calls for bankers to disclose hindrances to accessibility

The continued bureaucracy at commercial banks in making access to financing easily available is putting local businesses at risk of becoming unable to compete in Guyana’s oil and gas sector, as well as losing out in Government’s projects. This is according to the Georgetown Chamber of Commerce and Industry (GCCI), in a statement on Thursday in which it called on the local banks to be proactive and outline the hindrances – whether legislative, economic, social, or environmental – that are restricting better access to finance for the local Private Sector.
It was pointed out that despite charges from the highest level of Government, including President Dr Irfaan Ali and Senior Finance Minister Dr Ashni Singh, coupled with concerns from the Private Sector, the banks have not been forthcoming with the information that could mitigate the challenges facing access to finance for local businesses.
This has led the Private Sector to believe that the issues affecting easy access to finance may be caused by the banking sector itself, hence the calls for the hindrances to be clearly stated.
“Access to finance is one of the most critical issues facing the business community, and the Chamber believes that the banks play a major role in mitigating the existing challenge. The banks’ failure to respond to the concerns of the Private Sector leads to the assumption that the issue of access to finance may be a question of internal diffidence at their level, as opposed to a national legislation or policy concern,” the Chamber said.
Moreover, GCCI President Timothy Tucker underscored the importance of having access to multiple instruments of borrowing.
“Access to financing is the single most important thing for the Private Sector achieving their place as the engine of growth for Guyana… The Bankers Association and none of the banking institutions have so far presented any legislation or anything that needs to change in order to achieve contract borrowing, invoice factoring, lending on moveable assets, and receivable lending. So, legislatively, they have not identified what they said is prohibiting them from doing this additional source of lending; these new instruments of borrowing for the Private Sector,” Tucker told Guyana Times.
Consequently, it was further noted that the local Private Sector “…risks becoming unable to compete with regional and international counterparts in the oil and gas sector.
The GCCI President added that it is also hindering opportunities in the Public Sector. “…it’s leaving the Private Sector, many members in the Private Sector, unable to take their receivables owed on projects that they’re doing, whether it’s in the oil and gas industry or whether it’s [in the Public Sector]. The Government is spending an extreme amount of money, and the Government has a process in which they pay, and you’re seeing that not being given priority [by banks] or have the [hindering] areas removed so that the Private Sector can borrow to fund and execute those projects in a timely manner with good access to finance,” he stressed.
According to Tucker, these concerns by the Private Sector have been raised on numerous occasions with local banks as well as the Guyana Association of Bankers Inc. (GABI), but nothing has been done to remedy the situation.
The GCCI’s statement on Thursday is in keeping with the Private Sector body’s commitment to continue to push for greater access to financing for the local business community in 2023.
“We endeavour to enhance our efforts to push for amendments to policies and legislation, where possible, to promote better access to finance, capital markets, and tax reform…More needs to be done to foster capital markets developing for supporting business growth, which will boost their competitiveness,” Tucker indicated at an event in December 2022, during which he highlighted the Chamber’s goals for enhancing the local business sector this year.
He had expressed hope that the commercial banks would be able to fulfill the needs and demands of micro, small, and medium-sized enterprises, so as to enable them to realise their full potential.
Based on work done by the GCCI, it was noted that more than 50 per cent of businesses need formal financing to meet basic working capital needs, and less than 50 per cent need financing for fixed investments and to pay off debts.
To this end, Tucker had stressed the need for collaborative efforts to ensure there are more allowances for businesses to augment their growth potential through innovative forms of financing, such as invoice factoring, contract borrowing, and financing through receivables. Non-traditional ways of financing, he had added, can be spurred to support the participation of these entities and boost competition. Investor inclusion by floating micro bonds in the public domain would ensure that every Guyanese can participate meaningfully in the country’s growth.
In recognition of the challenges that local businesses face, the Finance Minister, in his Budget 2023 speech back in January, had stated that the Guyana Government is committed to ensuring that movable collateral and financial receivables can be pledged as security for financing in the interest of promoting easier access. To this end, it was announced that the necessary legal amendments will be enacted this year to facilitate this process.
“Our Government considers an efficient, deep, and vibrant capital market to be an essential aspect of a modern financial system. Investors in the productive sector should be able to consider, as a viable option, the possibility of raising finance on the capital market. In order to advance this objective, we will be convening stakeholders, including the regulator, self-regulatory organisations and the Private Sector, to identify practical actions that can be taken to promote capital market development,” Dr Singh had stated.