The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said yesterday he was “not disturbed” by lower levels of consumer borrowing, with June’s $5.6 million expansion in debt consolidation loans showing many were making “last ditch efforts” to restructure their affairs.

Emphasising that the economy was “starting to correct” the over-leveraged financial positions of many Bahamians, Chester Cooper told Tribune Business that consumer spending/borrowing was not the way to grow the economy.

Calling for “real growth” via the expansion of industry and foreign direct investment (FDI), the BCCEC chief also urged wealthy Bahamians and residents to “unlock” their assets, citing Bay Street and downtown Nassau’s redevelopment as a prime opportunity for them to exploit.

And, speaking after the Central Bank of the Bahamas’ monthly report for July disclosed that total loans to the private sector contracted by $17.73 million that month, Mr Cooper acknowledged that Bahamian commercial banks were understandable “gun shy” when it came to extending business loans.

While the Central Bank report painted a relatively gloomy picture of a still-struggling Bahamian private sector and consumer, Mr Cooper said one positive was that the recession had spurred a much-needed correction in borrow behaviour.

“It seems to me that is a sign of the times,” he said yesterday, after Tribune Business informed him that Central Bank data showed June’s $5.6 million increase in debt consolidation loans exceeded the total $2.7 million expansion in consumer credit for that month.

“I would like to believe it is an indication of the bottoming out of the recession, which I believe to be the case,” the BCCEC chairman told this newspaper.

“What we are seeing at the moment is a last-ditch attempt by consumers to reduce their expenses, their obligations, so in effect we are reaping the results of too much consumer borrowing in the past.

“The economy is bringing correction to some of these habits. If there was a lesson learnt from the recession, as far as consumers are concerned, it is that we should look to save, look to borrow less, and live within our means, so that when there is a decline in the economy we are able to survive comfortably and maintain the same standard of living and quality of life. These are the lessons coming out of this.”

Apart from debt consolidation loans, the Central Bank reported that the only other area to see a June increase was a $2.3 million expansion in home improvement loans.

“Some offset was provided by the net repayments for ‘miscellaneous’ ($4.5 million), credit cards ($3.1 million) and education ($0.5 million) loans,” the report added.

Looking at the bigger picture, Mr Cooper told Tribune Business: “I don’t believe the way to grow the economy is through consumer spending or borrowing.

“What we need in the economy is real growth. We need the expansion of industry, we need FDI. We need to unlock the wealth already in the Bahamas in terms of domestic investment.

“We need to encourage wealthy residents and Bahamians to invest in the Bahamas, and there is no better time to get started now in making these investments.

“One of these key domestic investment opportunities is Bay Street - the creation of more opportunities that can build off the tourist business. Restaurants, we need many more, and also entertainment opportunities and arts and cultural experiences.”

The BCCEC chairman urged local investors, now that the shipping companies had moved and landlords were seeking to redevelop their properties, to exploit the variety of government incentives on offer and “remake Bay Street”, catering to the almost three million cruise passengers that visited Nassau annually, plus stopover visitors.

“I’m not disturbed by low levels of consumer borrowing; I’m encouraged that consumers are seeing how they can restructure their debts in talks with the banking institutions. That’s the best possible outcome coming from the bad situation of the recession.”

The Central Bank report also noted the increased contraction in commercial (private sector loans) to the total of $1.01 billion outstanding in July, the $17.73 million drop representing an increase over the $2.55 million drop during the same month in 2011.

The report said this took place against a backdrop of “high consumer indebtedness, unemployment and the general sluggishness in economic activity”, with total private loans contracting by $10.3 million in July itself.

Mr Cooper said the $17.73 million contraction in business loans reflected the Bahamian economy’s overall condition and lack of “real economic activity”.

Expressing hope that the likes of Baha Mar and Albany would stimulate more activity, the BCCEC chairman said the recession had forced Bahamian commercial banks to take “a more conservative posture by necessity” when it came to business lending.

Acknowledging that banks had to protect their depositors’ funds, Mr Cooper agreed that it was often easier to get car, vacation and furniture loans “than it is to get business investment by bank borrowing” in the Bahamas.

Suggesting that banks needed “more expertise” in the area of commercial lending, and that “a lot more bullishness” was required from them, Mr Cooper said this was only likely to happen when the economy turned around.

“They [the banks] have generally become gun shy in investing in the domestic sector, investing in traditional, indigenous types of business, as they have seen many businesses fail in the recession,” Mr Cooper told Tribune Business.