‘Major gap in financial system’ still exists
Sat, 10/29/2016 - 12:00am Barbados1
THERE appears to be no major shift in the lending practices of commercial banks 50 years after Independence in Barbados.
That’s the view of Dr. Justin Robinson, Dean of the Faculty of Social Sciences at the University of the West Indies, Cave Hill campus.
Presenting a lecture on the Barbados Financial System since Independence, Dr. Robinson said that our country’s financial system provides excellent access to personal credit and debt financing for commercial projects in distribution and relatively low risk commercial investment.
“However, there remains a major gap in the financial system in terms of its capacity to finance riskier commercial-type investment and the provision of equity financing,” he said in the lecture presented at the Errow Barrow Centre for Creative Imagination on Thursday night.
Dr. Robinson queried how is it that Barbados, with a well-functioning financial system, is still facing issues that include access to financing.
He is of the opinion that the major issue is the distribution of credit. According to him, “The sectoral distribution of credit has been an issue in Barbados for a long time.”
He said that if one requires a car loan, a loan to put down some apartments, wants a credit card, or to have an ATM, the Barbados financial system is world financial. “However, if you want to finance a fast ferry between Barbados and the Organisation for East Caribbean States, that is a different matter,” he declared.
The UWI official indicated that one of the reasons for this is the structure of the banking system where this country has a bank-dominated financial system. The independent commercial banks will have accounted for about 82 per cent of the total assets in the financial system.
In 2015, Dr. Robinson went on, commercial banks are still the dominant player accounting for 60 per cent, although other financial institutions have emerged.
Insurance companies account for 14 per cent of the assets, the mutual funds nine per cent, and the credit unions nine per cent.
“The nature of their liabilities and regulatory burden often lead commercial banks to be biased towards retail financial products and commercial projects; the banks do not lend for productive financial products,” the UWI official said.