Dnp Co-Chairman: Country's High Interest Rates Major Deterrent For New Businesses


Tribune Business Reporter


THE cost of borrowing in the Bahamas is a major deterrent to persons looking to start up developments or small business according to the Downtown Nassau Partnership's (DNP) co-chairman Charles Klonaris.

He told Tribune Business yesterday that the country's high interest rates were contrary to trends in some of the world's largest economies.

Speaking with Tribune Business following a forum hosted by The Bahamas Investment Authority (BIA) and the Bahamas Chamber of Commerce and Employers' Confederation (BCCEC) on local business incentives, Mr Klonaris said: "To do developments or to get into business in the Bahamas is expensive so we welcome legislation like the Revitilisation Act. Borrowing costs and energy costs are two big issues that need to be addressed. To get into the retail business is expensive. The borrowing costs are high. You are talking a minimum of seven per cent or higher."

Mr Klonaris added: "When you look around at what's happening in Europe and the United States, money is very inexpensive and that's purposely done to encourage someone to get into business. This is an issue that needs to be addressed. I don't know the reason why it is so expensive. It seems contrary to what is taking place world wide, that we still have these high interest rates when in the rest of the world money is practically free."

Mr Klonaris referred to the cost of electricity that persons interested in starting a development or business have to grapple with. "The cost of electricity is very high. This not only applies to the business person but also to the consumer. By the time he pays his electricity cost, food and gas, he doesn't have a disposable income. There is nothing left for him to go out and shop with. We are in some very serious and very difficult times and these are some of the issues the country needs to look into."

Mr Klonaris also suggested yesterday that tax exemptions provided under the City of Nassau Revitilisation Act start once the developer receives their certificate of occupancy. Mr Klonaris said: "If you are doing a major development it can go on for a long time. A small development could be a year, two years or five years. According to the Act you are exempt on bringing in materials as well as they give you a five year real property tax exemption but that starts once you make the application. To make the application you sit with your architect, sit with the contractor and fill out all the materials you are going to bring in and give it to the Ministry of Finance. It starts then even before construction starts and I'm suggesting that it should start once you receive the certificate of occupancy and I think it fair for everybody."


BaystreetTrader 7 years, 8 months ago

Is there a paper or study produced by BCCEC or another organization that addresses why the cost of borrowing is high in the Bahamas? A proper study on this would be valuable in understanding the situation. World interest rates are extremely low, however, that has not trickled down to the Bahamas. Why is that? The Caribbean has historically had large interest rate spreads since this region is deemed to be Third World. Purely from an economic point of view, interest rates reflect the level of risk implicit in a transaction. Therefore, it is rational for a lender to charge higher interest rates to Third World countries since the ability of repayment or the ability to legally recover the money is low or lacking. In an attempt to reduce the interest rates, the government may look at various factors such as, establishing a credit rating agency, improving the judicial system to allow for appropriate and timely recourse for companies lending money, enforce property rights, and liberalize the banking sector.


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