Development bank welcome
EDITORIAL
Stabroek News
April 16, 2004
Development Finance Limited (DFL) of Trinidad has agreed to relocate its planned development bank, to be called SME Finance, to Guyana. This is indeed good news.
The company had entered into talks with the Guyana Manufacturers' Association (GMA) in 2000 to set up such a bank following the Presidential Business Summit in 1999. However, because the government had dragged its feet on whether it would be willing to offer a five-year withholding and advance corporation tax break to the firm, it withdrew its planned investment in late 2002. This was a result of the insistence of the European Investment Bank (EIB), which is backing the project, that DFL move ahead with the project, which had already been delayed. DFL announced it would be relocating that investment to Suriname and in April last year said it would consider a branch for Guyana.
However, Director of the Guyana Office for Investment (Go-Invest), Geoffrey Da Silva, felt otherwise and made a plug for the return of that investment at DFL's launch of its private equity finance arm in Guyana, DEVCAP in April last year. He undertook to do all that he could to have that investment back in Guyana.
He has been true to his word and in March of this year, following DFL's board agreement to return the investment to Guyana, he dispatched the letters granting the waivers to DFL.
SME Finance and a micro finance operation, MICROFIN, under the trade name DFL South America are expected to be up and running before the end of the year as certain formalities have to be completed, including DFL signing off on the agreement with the EIB, sourcing funding for the SME advisor, and putting in an application for a banking licence.
The announcement of the return is indeed heartening for businesses, which have been clamouring for years for long-term loans, especially in US dollars. Interest rates would be pegged to the US 10-year Treasury bill. SME Finance would also provide advisory services and would target export-oriented industries.
The manufacturing sector, which has been struggling for years and accounts for a small part of the Gross Domestic Product (GDP), will be able to latch on to an avenue of funding (once the projects are viable) to knock their businesses into shape to face competition.
While long-term funding is just one of the prerequisites for companies to start cutting costs, it would certainly go some way towards achieving that goal.