The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians should be permitted to hold a limited amount of US dollars in their account without needing Central Bank approval as part of wider reforms to the commercial banking industry, a report has recommended.

A public consultation document, crafted for The Bahamas Think Tank following presentations by both the Central Bank governor and Securities Commission’s head, calls for the introduction of a series of measures to boost financial inclusion, access and the provision of lower-cost capital to small businesses that “drive the economy”.

Edison Sumner, principal of Sumner Strategic Partners, who compiled the report for the Think Tank told Tribune Business that by the end of the 2023 first quarter he hoped to have sufficient public and banking industry feedback to compile into a final document with the ultimate goal of having the recommendations incorporated into a reactivated National Development Plan.

“We wanted to examine what we see as some of the challenges with the banking industry of the country today,” the former Chamber of Commerce chief executive explained. “It has to do with exchange control, it has to to with regulation and the opening of bank accounts, and the level of Know Your Customer (KYC) and compliance to get this done....

“Addressing the banking industry is critical to the further development of our economy. The banking industry is absolutely essential for the functioning of the economy, it’s essential for the growth and development of the national economy and increased domestic investment.”

Mr Sumner added that, if the recommendations in the report were adopted, “I think you’re going to see a more robust economy, more money flowing through the economy. You’re likely to see more funds become available to small businesses through the banks if we can get these recommendations considered by the Government and the industry. We’ll see a more streamlined process to get bank accounts opened up, especially for commercial clients, which at the moment is a little onerous for many of them”.

To ease the burden associated with exchange controls, the report calls for the introduction of “a US dollar/foreign currency threshold per person (bank account) per month that does not require Central Bank pre-approval in all banks and on all bank account types”.

Besides calling on commercial banks to tackle the red tape and bureaucracy created by KYC and anti-money laundering regulations, it also urges that there be greater competition in the commercial banking space. “Include in new legislation the terms for entrance of other international banks – regional, American, European, Asian, etc to increase competitiveness for Bahamian and non-Bahamian banks in The Bahamas,” it says.

The Bahamas Think Tank report focuses on broad reforms, without going into details, how they will be implemented or a proposed timetable for doing so. It does, though, note the challenges many Bahamians face in gaining access to credit as well as the predicament facing those who have over-borrowed.

“Non-performing loans grow out of sustained low wages and the real inability to pay; a genuine lack of mortgage understanding; predatory lending by commercial banks for credit cards, credit lines, consumer and auto loans; an established culture of not paying; and lost or reduced income resulting from natural disasters and the global health crisis,” the report said.

“Average Bahamians won’t qualify for good loan and credit interest rates because most cannot afford to own anything to use as collateral. They start out with deficiency and insufficiency, and decline from there. Consider the majority of funds now being in checking accounts versus fixed and savings deposits as a sign of the times, with the average Bahamian making only enough to spend on some of the basic costs of living.

“Once the credit bureau is established, and there is better information to lend on, consider that a very large percentage of borrowers/loan applicants will not qualify to borrow at all. What then? How are banks currently evaluating loan worthiness? Is there a standardised system uniformly applied across the industry, or does it vary based on bank/bank manager?”