Demerara Bank Limited has become the first local financial institution to tap into the Inter-American Development Bank’s Trade Finance Facilitation Programme (TFFP), which will see five of its clients benefiting from some US$7 million in funding.
The TFFP was set up in 2005 to promote development and economic growth in the Region through the expansion of trade financing to Latin America and Caribbean banks, broadening the sources of trade finance available to importers and exporters, and to support internationalisation.
Under this IDB initiative, Demerara Bank was granted a line of credit facility to be used for short-term international trade finance transactions to support local Small and Medium Enterprises (SMEs).
The five companies that will benefit from the US$7 million facility are: DDL Group (manufacturing); A. Cayume Hakh & Sons and Golden Fleece Rice Investment (agriculture), and Dinar Trading and Pure Diamonds Inc (mining).
During a handing-over ceremony Wednesday morning, Demerara Bank Chief Executive Officer (CEO) Pravinchandra Dave said these companies represented three of Guyana’s priority sectors.
“There were two issues for the exporters. The major issue was cost of credit, which was perceived as high – and I think it’s a little high in Guyana. If you go to an ordinary bank for financing, the bank would charge you between eight per cent to 12 per cent, depends on the bank and size of the loan… The IDB [has] gracefully agreed to provide us with a line of credit where we can provide a cheaper finance to the exporters by way of these shipment facilities,” he stated.
According to Dave, the facility will also inject US dollars into the local economy. He noted that this was just the beginning since Demerara Bank was in discussions with the IDB officials in Washington, who have promised that the TFFP funding would be revolving. As such, the CEO said Demerara Bank would be widening the sectors that would benefit from the facility.
The TFFP initiative falls under IDB Invest, the Private Sector arm of the IDB Group. As such, IDB Country Representative Sophie Makonnen spoke of the expanding role of the hemispheric institution in partnering with the regional Private Sector.
“We recognised the importance of support growth and the growth is also about supporting the private because it is a critical and fundamental part of developing a country. With all the opportunities that are now presenting themselves … the Private Sector is poised to be part of this transformation and the banks are here to support the Private Sector, thus the line of credit,” she noted.
Makonnen went on to note the crucial role small businesses play in the economy as the main source of employment not just in Guyana but the entire Latin America and Caribbean region.
“It is true that they account for small shares of the GDP [Gross Domestic Product] and value creation… But it means that it’s fundamental to support small businesses’ growth, improve productivity and with all the innovation, and in key sectors that are critical in the diversification of the economy,” the IDB Representative stated.
On the same note, Senior Minister with responsibility for Finance, Dr Ashni Singh also lauded the IDB for diversifying its investments, noting that it coincided with the People’s Progressive Party/Civic (PPP/C) Government’s push to have a diversified economy.
“So I was happy to hear amongst your beneficiaries, agriculture, mining and… even manufacturing. Those sectors reflect the direction in which the Guyanese economy will be going… We need to, together – Government, financial sector, domestic Private Sector and our valued and cherished development partners – consider how we ensure that we realise this aspiration of ours to have a strong and widely diversified economy,” he said.
According to the Finance Minister, Wednesday’s disbursement of funding is an important step in that direction and represents an example of what partnerships can achieve.
Dr Singh also praised Demerara Bank for all that it has achieved since opening in 1994.
This was after the indigenous bank’s Chairman and founder, Yesu Persaud had detailed during Wednesday’s simple ceremony at its Corporate Office on Camp Street, Georgetown, the arduous process of establishing the bank. Pointing to the challenges faced back then and to the success the bank has achieved today, the Guyanese business tycoon encouraged the beneficiaries of the TFFP funding to use that as motivation to be resilient and persevere in the face of hardship, to succeed.