The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian businesses will not be guaranteed access to capital even if the financing pool is broadened by exchange control liberalisation, private sector representatives have warned.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, and businessman Sir Franklyn Wilson, agreed that Bahamian businesses would face the same stringent qualifying conditions whether they approached foreign or domestic financial institutions.

Sir Franklyn, the Sunshine Holdings and Arawak Homes chairman, told Tribune Business that the $51 million contraction in bank lending to the private sector during the first nine months of 2016 did not necessarily reflect a reluctance to extend credit.

Instead, he suggested it could indicate a lack of “bankable proposals” being submitted by Bahamian businesses, meaning they were producing unrealistic business plans, offering too little collateral or showing no sign of generating cash flow to service the debt.

“The fact that commercial bank lending to the private sector has dropped is not necessarily a function of whether or not banks are willing to lend,” Sir Franklyn told Tribune Business.

“Whether the money is coming from a local bank or an international bank, there’s no substitute for bankable proposals. In this climate we have today, where are the bankable proposals, the leaders trying to do something? Where are the entrepreneurs? Where are the ideas?”

He added: “While the issue of exchange control liberalisation is certainly a topic for discussion and review, the fact commercial bank lending is down is not reason to say we will or will not go down this road.”

The Central Bank of the Bahamas’ own data provides some weight to Mr Wilson’s arguments, as they show excess liquid assets in the Bahamian commercial banking system stood at a very healthy $1.4 billion at end-September 2016.

This figure, which has increased by more than $117 million year-to-date, represents assets available for lending purposes. Yet in the risk averse environment that has prevailed since the 2008-2009 recession, commercial banks have tightened their lending criteria and are only extending credit to the ‘best’ prospects.

Mr Bowe, meanwhile, suggested that should the Central Bank allow Bahamian businesses to seek financing overseas, it would “put to rest” arguments by some companies that they would be successful if it were not for exchange controls.

Pointing out that Bahamian companies will carry the same risk and credit profile whether they are seeking capital domestically or overseas, Mr Bowe said some could face a “harsh reality” even if the financing pool is broader.

“Some of the chatter that says the Central Bank is a hindrance to business success will be alleviated,” he explained. “Just because there is easier access to credit in international markets doesn’t mean you will qualify for it.”

The Central Bank is eyeing further exchange control liberalisation measures that would allow Bahamian companies to obtain capital and financing overseas, while also removing remove obstacles to their participation in, and the financing of, investments overseas.

Emphasising that this was a discussion worth having, Mr Bowe told Tribune Business: “When we talk about access to capital and the ability to raise foreign currency, it could be a tremendous boost, as it will open up a world of capital funding.

“We are certainly encouraged by the direction they [the Central Bank] are trying to move in. We know a large complaint or gripe persons mention is that there is cheaper funding outside the Bahamas, but exchange controls prevent access to that. Some of that is real, and some of that is perception and may not be reality.”

He added that exchange controls, and restrictions on the movement and free flow of capital, were incompatible with the global trend towards free market economies and liberalised trade.

“Every journey begins with one step,” Mr Bowe said. “It’s a journey to free market economies and a liberalised capital market environment. We’re in a free world now, and to have a restrictive capital regime is no longer compatible in the world environment in which we operate.”