The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank is set to study the feasibility of creating “a registry to track movable chattel pledged by borrowers”, such as vehicles, in a bid to improve credit access for deserving borrowers.

John Rolle, the Central Bank’s governor, yesterday confirmed the regulator had been asked to investigate this by the Ministry of Finance as a means to improve the information available to commercial banks and other lenders when assessing the creditworthiness of loan applicants.

“What’s important when we talk about access to credit, so that there are no misconceptions, is the need more legal reforms in the country so the information system lenders rely on improves,” he said. “The credit bureau is one of them. The Central Bank has also been asked by the Ministry of Finance to put in place a registry to track movable collateral pledged by borrowers - automobiles and other items used to secure debt.”

He added that such a registry could also be used to “create information and monitor what happens with legal judgments awarded, and claims made against legal assets. That part of the information system needs to be improved”.

Mr Rolle said he was unable to provide “a timeline” for when such a registry will be implemented, but added that technology advances had potentially enabled its creation so that banks and other lenders will be better able to perfect and oversee loan security/collateral and avoid competing claims to the same asset.

“We are going to study how it could be done,” he explained. “With the infrastructure improvements the possibility came to mind. We’re going to look in detail at what possibilities exist. At some level it may require some legal reforms.”

Bahamian commercial banks and other lenders currently lack complete information on the credit history of many potential borrowers, which makes it impossible to properly assess the risk they pose and price the loan (interest rate) accordingly.

And, as a result, delinquent borrowers are able to bounce from institution to institution, obtaining credit and subsequently defaulting with banks unaware of their previously wretched history with competitors.

A registry of “movable assets” pledged as collateral, together with judgments and liens secured on them, would certainly boost a lender’s ability to properly assess a borrower’s creditworthiness it may be difficult to pull together given that information would have to be sought from numerous sources within a court system and public sector that is not digitised.

Mr Rolle, meanwhile, said the bankruptcy “laws and systems need to be strengthened” as they dealt with how credit disputes are resolved. “That’s an area in terms of credit ease that we should be looking to seen an improvement,” he added.

The Government’s ease of doing business committee, chaired by Lynn Holowesko, recently blamed The Bahamas’ eight-spot fall to 152nd in the World Bank rankings for access to credit on the time taken to establish this country’s first credit bureau.

“With particular reference to getting credit, The Bahamas missed an opportunity for an improved ranking because of delays in passing legislation and licensing of the Bahamas credit bureau. We now understand that licensing of the credit bureau is expected by year-end,” the committee said in a recent statement.

Mr Rolle, responding yesterday, said the Central Bank was “in the final process of licensing the operator”, Italian-headquartered CRIF S.p.A. “I would say that in terms of the credit bureau process, and how it factors into the ease of doing business, there was nothing in that process where the country regressed or fell back,” he added.

“From an access to credit point of view, the credit bureau will be up and operating next year. It will be going through a lot of outreach with stakeholders needing to be reporting information. It will also be expected to progress to the point in 2020 where financial institutions begin to provide information.”

While the creation of the credit bureau will “itself lead to a significant improvement”, Mr Rolle cautioned that The Bahamas needed to understand rankings such as those produced by the World Bank and focus more on tangible improvements that helped spur greater private sector profitability and investment.

Meanwhile, he confirmed that the Central Bank’s initiative to develop a digital version of the Bahamian dollar will launch its pilot test phase in Exuma before year-end and then roll-out in Abaco as a “follow up” in early 2020.

“There’s been a lot of technical work going on behind the scenes,” Mr Rolle added, “testing aspects of the communications infrastructure. There’s even been some revisits in terms of the communications hardware given some of the damages experienced during the hurricane.

“We have been focusing more intently on the kind of mobile communications one can put in very quickly after a storm so that wireless communications can be enabled. This is fine tuning so that as we enter the final months of the year we can enter into the pilot phase on Exuma.”

The Central Bank governor said the digital currency initiative, known as Project Sand Dollar, would “get into Abaco in early 2020 as it provides an opportunity to put in place systems almost from the ground up as business and industry returns to the community and likely have to rebuild”.

Expressing concerns over whether there was “an adequate supply of labour” for a speedy reconstruction post-Dorian, Mr Rolle added: “Economic activity came to a halt in Abaco and Grand Bahama during September 2019 as a result of Hurricane Dorian.

“Neither island recorded any tourism activity, given the complete shutdown of the infrastructure. The rest of The Bahamas was not entirely spared, as these regions experienced either visitor declines or much reduced arrivals gains for both hotels and vacation rental properties.

“However, the timing of the storm during the slower part of the tourist season allowed The Bahamas to preserve strong tourism performance over the first nine months of the year,” he continued. “This momentum is sufficiently strong that the Central Bank expects The Bahamas will still record positive growth in 2019, underpinned by tourism, but much lower than had the storm not occurred.

“In addition, foreign investment stimulus is expected to be sustained, with inflows targeting expansion in resort and cruise infrastructure in New Providence, Grand Bahama and several Family Islands. The setback from the hurricane is projected to be more noticeable in 2020, with resort facilities in Abaco absent during the peak winter season and Grand Bahama’s economy only expected to be partially recovered. An overall contraction in the economy or a flat outcome is possible.”