(21st November 2015) His Excellency, President David Granger: Thank you Madam Chairperson, Master of Ceremonies, Honourable Minister of Finance, Mr. Winston Jordan; Chairman of the Board of Directors, Dr. Yesu Persaud; Ambassador Claudio Rachel Rojas from the Republic of Chile, Chief Executive Officer, Mr. Pravinchandra Dave; directors of the bank, particularly Mrs. Sheila George who is at the head table of directors, special invitees, members of the private sector, employees and shareholders of Demerara Bank Limited, members of the media.
I was happy to come under the tent this evening to see the amount of green curtains. I was happier still, to have a green napkin. You know, a few months ago when I was wearing my green shirt everywhere, people would ask me if that’s the only shirt I had. I said, “No, I have two: I wear one on Monday, Wednesday and Fridays, and the other on Tuesdays, Thursdays and Saturdays.” I was going to talk about a ‘green’ economy this evening but the Chairman himself was ahead of me, but that is the right way to go and I’m very happy, very interested in hearing the development that the Bank had undertaken in charting a course to develop and to exploit green energy right here in Georgetown.
Part of the green objective, the green mission of Georgetown, which you can see unfolding before your eyes almost every day, thank you very much Demerara Bank for once again leading us the green way…
I’m happy to be part of this commissioning ceremony this afternoon, of your new corporate headquarters and the seventh branch of this Bank. This new structure, the 39th branch in Guyana is a welcome addition to our country’s financial landscape. Banking in Guyana has a long past, a long history. It has always been essential to our country. Our first bank was the British Guiana Bank, which was established a hundred and seventy-nine years ago. It is a long time. We have a hundred and seventy-nine year history of banking. That bank came in to reap the short-term profits which the generous compensation of the United Kingdom Government was paying to the slave owners for their emancipated property.
The British Guiana Bank came in to anticipate the augmentation of an immigrant labour force and to exploit the expected expansion of trade as a result of the unification of the three colonies: Essequibo, Demerara and Berbice, into the colony of British Guiana, which only occurred in 1831; before that we were three different colonies, as you know, so the BG Bank came to look for short-term profits and I believe that short-term-ism made a mark on banking for the next century.
In the run-up to independence therefore, this tiny commercial banking sector was dominated by three multinational banks: the Royal Bank of Canada, Barclay’s Bank DCO, which you know means Dominions, Colonies and Overseas; and later Chase Manhattan. These banks up to the period of just after Guyana’s Independence placed great emphasis on short-term instruments for the financing of trade and working capital. They were, however, insufficient to satisfy the development needs of a newly-independent nation.
Guyana sought a new type of banking, other than short-termism. Guyana sought a form of banking that would mobilize greater resources for local investment; one that would bring long term benefits to a larger portion of the population. With that in mind, the Government of the day established the Guyana National Cooperative Bank, the Guyana Cooperative Mortgage Finance Bank and the Guyana Agricultural and Industrial Development Bank, all three State-owned in a bid to provide wider banking services to the population at large.
The intervention, in historical terms, was short-lived. It ended with the implementation of the Economic Recovery Programme in 1989 and the liberalization of the financial sector. The government, more or less, exited from the field of commercial banking and, at the same time, removed barriers to new entrants. That is when Demerara Bank walked through the door. That is what gave the Chairman the idea. Demerara Bank was a product of that new liberalization under President Desmond Hoyte which finally was taken to a higher stage after the entry of Dr. Jagan into government.
Guyana today therefore, has a diversified commercial banking sector involving both indigenous and foreign-owned banks. These commercial banks form the core of the financial sector, accounting for 81.3 per cent of the total gross assets of the country’s financial sector as at the end of 2014. Total private sector loans, advances and securities emanating from the banking sector amounted to G$137.7 billion in 2014, a 7.4 per cent increase over 2013. Things are looking up!
Deficiencies persist however, in the reach of our commercial banking sector despite these gains and advances. Vast areas of our country have no access to banking services. There are no commercial banks, for example, in Mabaruma and Mahdia. These two communities are the administrative centres of the Barima-Waini and the Potaro-Siparuni regions, respectively, two of our most important gold and diamond-mining zones. These two centres are soon to become towns, but there is no sign of a bank on the horizon.
Vulnerable groups, particularly in rural and hinterland areas, are still largely excluded from basic financial services. Small entrepreneurs also feel excluded from accessing credit because they lack the necessary capital and assets for collateral. A flexible financial system should be able to connect a larger number of citizens to banks.
Increased access to banking services everywhere in Guyana is an important goal of this government. There is a special responsibility of those involved in financial intermediation to ensure greater access to banking services in the greatest number. Access to savings, according to the IMF, has increased investment and consumption while access to credit has increased entrepreneurship and reduced poverty.
Financial services provided by commercial banks must therefore become more inclusive if they are to contribute to the economic and social goals of our government and our nation. The establishment of branches by commercial banks in unserved areas will allow for wider geographical coverage, greater access to services and will bring banking closer to the people. And in this regard we must commend Demerara Bank for leading the way.
Government is prepared to partner with all financial institutions to implement appropriate policy measures to promote greater financial inclusion. We accept the view that increasing the reach of our commercial banks is best achieved under a banking system which is built on four pillars:
Madam Chair, first of all: Stability. Guyana’s financial system has not been spared from the implosion of financial institutions. Thousands of depositors in the Globe Trust and Investment Company suffered losses in the collapse of that company in 2001, 14 years ago. More investors suffered losses in the collapse of CLICO in 2009. The collapses of these two institutions signalled the need for continued vigilance in the way our banking system is regulated and managed.
Our government proposes the strengthening of the regulatory and supervisory capacity of the Bank of Guyana. The collapses that I spoke of underscored the need to safeguard deposits and investments in the eventuality of institutional failure. Our Government proposes to discuss with bankers, the implementation of a Deposit Insurance Scheme to ensure that individuals who hold deposits at failed financial institutions would be compensated up to an agreed amount within a specific time.
Secondly, Madam Chair: Integrity. Commercial banks must continue to zealously guard against illicit funds finding their way into the financial system. Money-laundering is associated with distortionary effects on the economy and we’ve seen that. Illicit funds can undermine the integrity of the country’s financial system thereby exposing the country to sanctions.
That is why Madam Chair, one of the first acts of our Government was to pass the Anti-Money Laundering and Countering the Financing of Terrorism Act and I readily assented to that. Our Government remains committed to doing everything necessary to remain compliant with the requirements of the Financial Action Task Force. We look forward to the vigilance of commercial banks and our regulatory bodies to prevent the contamination of our financial system with ‘dirty’ money.
Third, security. Commercial banks and depositors must be safe from crime, safe from fraud. Cash transactions are too prevalent in Guyana. Persons are still moving around with large amounts of cash thereby exposing themselves to robbery and as I say again, two of the major settlements in our major gold mining areas; Mabaruma and Mahdia have no banks. People must still walk around with their money in black, plastic bags. Luckily with the introduction of the green currency notes they can use smaller bags. That’s the way to build a green economy. Our banking institutions can help to reduce the high incidence of cash transactions in the economy by developing appropriate instruments for the benefit of the population and by encouraging their clients to make use of these instruments.
Let me assure you that our Police Force is being reformed. We have sought the introduction, or, I will say the re-introduction of the United Kingdom sponsored Security Sector Reform Action Plan. I met with Prime Minister David Cameron when I was at the United Nations in September. He asked me what I want and I said, “I want a Security Sector Reform Action Plan.” That is my commitment to security reform. I’m not running away from that.
The last administration had agreed to such a plan and signed on the dotted line in August 2007, and it promptly abandoned the 3.5 million Sterling Security Sector Reform Action Plan; that’s why we are in so much trouble today because a plan that should have reformed the Police Force was thrown out of the window and this administration has got to deal with the Police Force that has not been reformed. We will deal with it, and I ask you to be patient with us, but we are changing, we are transforming the Police Force.
Recommendations from several commissions -the GDF has a tattoo: “we’re not under attack by ISIS” – in fact, I should have been there.
Recommendations from several commissions and consultancies over the last 15 years have been studiously ignored and unimplemented. This Government is determined to make Guyana a safe place to do business, a safe destination for foreign direct investment.
And finally, flexibility: Guyana is an agriculture-based economy. Our agricultural and manufacturing sectors need investment; they need to become more diversified and more competitive. Our Government is considering the establishment of a development bank in order to boost the development of these sectors.
Commercial banks also must shed their over-cautiousness towards investment in agriculture, investment in manufacture, investment in physical infrastructure. Our plan includes creating a green economy by the generation, like you, thanks again, of electricity from renewable sources – the sun, water, wind. Our plan includes reducing poverty through investments in increasing farm production, building farm-to-market roads so that farmers in the hinterland can get their produce to their destinations.
Investment in agro-processing so that every fruit, every fish, every cassava we produce could be processed and packaged and sold in the Eastern Caribbean and other distant markets. Our plan includes expanding our infrastructure with the establishment of safer aerodromes, bridges, highways and stellings. Investment in infrastructure will allow the commercial banks to diversify their portfolio and to reduce portfolio volatility.
This is what we plan, this is our intention; this is our objective for Guyana. We therefore see the establishment of this new branch and head office of Demerara Bank Limited as a step in the right direction. This event today sends a message to investors. It sends a message to our population; it sends a message to all of the people who want to come to Guyana.
It is an expression of confidence in the economic prospects of Guyana. It is a sign to which local and foreign investors will pay attention when they make their investment decisions. If the commercial banking sector is buoyant – as your profits seem to suggest Mr. Chairman, then investors will read that as a vote of confidence in the future.
I congratulate the Demerara Bank Limited on this extension.
I wish the Bank, its directors and staff continued success in the future. It is my honour to declare open the Seventh Branch of Demerara Bank Limited, and may God bless you all.
I thank you!