The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas Development Bank's (BDB) chairman yesterday pledged to tighten lending protocols, adding: "The days of giving someone $50,000 and saying: 'Go get it done' are gone".

Lynden Nairn told Tribune Business that the BDB had little choice but to re-examine "the entire lending regime" given that more than 60 per cent of its $34 million credit portfolio is non-performing, or more than 90 days past due.

While the high loan delinquency levels have prevented the BDB from fulfilling its mandate to Bahamian entrepreneurs, Mr Nairn said the institution - once reformed - still had a vital role to perform in filling the void left by commercial banks.

He pointed out that outstanding credit extended to the agriculture, fisheries and manufacturing sectors had declined by 56.4 per cent since the turn of the century, falling from $106 million in 2000 to $46 million today, as Bahamas-based commercial banks withdrew from lending to the productive sectors in favour of consumer credit.

In an earlier speech to the Rotary Club of West Nassau yesterday, Mr Nairn sought to both define and redefine the BDB's future role, explaining that it would stay relevant - once cleaned-up - by supporting foreign exchange-earning industries central to the Government's announced policy goals.

To get there, he explained to Tribune Business that the BDB was seeking to restructure $64 million in long-term debt (see other article on Page 1B) plus revamp its lending approach by focusing on borrowers' business plan sustainability and corporate governance.

"We have to do a better job assessing credit," Mr Nairn told Tribune Business.

"We are certainly looking at our protocols generally. We do know that we are going to require our borrowers to have a strong corporate governance element. "We need to understand the level of accountability that our borrowers will have with a Board or advisory team. We need to know who those people are, and have a sense of the extent to which they've been successful. Gone are the days of giving someone $50,000 and saying: 'Go get on with it'."

Mr Nairn continued: "We're looking at the entire lending regime. The bank has always had a committee that examines all of the loan applications. We're strengthening that committee.

"Frankly, we're more concerned with the strength of the business plan than we are about the underlying collateral. That ought to be the root of development banking anyway.

"Historically, we have insisted on collateral in most cases.

"But just because someone has collateral doesn't mean they will get a loan from the bank.

"You have to have a solid business plan."

Despite its problems, Mr Nairn argued that an institution such as the BDB remained relevant to the modern Bahamian economy and its entrepreneurs as there were precious few financing sources for Bahamian start-ups.

Tying the commercial bank withdrawal from start-up lending to a lack of growth and economic diversification, he added: "We've not been able to support entrepreneurs. They've had no real access to funding."

Pointing out that developed world nations such as Canada, as well as the likes of Jamaica and Barbados, all have development banks, Mr Nairn said the BDB planned to focus on lending to entrepreneurs in the energy, tourism, cultural, agriculture, marine, technology and natural resources sectors.

"They've got significant foreign currency earning potential," he told Tribune Business. "We believe the barriers to entry are very, very low, and we think they can generate a significant amount of new employment."

Mr Nairn said the BDB had partnered in the development of eco-tourism in the southern Bahamas, starting with Inagua. "The objectives of the programme include increasing sales and promotion of the selected island as an eco-tourism centre, increasing overnight tourist arrivals sufficient to deliver occupancy rates above 60 per cent for participating guesthouses, and establishing 15-20 small tourist-related businesses that provide activities for guests," he added.

Given the restrictions imposed by the BDB's own Act, Mr Nairn said it also planned to target the agricultural distribution and processing sector, arguing that this would potentially relieve the Government of responsibility via its packing houses and produce exchanges.

"A business that improves distribution, meets the quantity and quality needs of the marketplace, pays farmers in a timely manner, effectively allowing farmers to do what they are best able to do, farm, would do wonders for our economy," the BDB chairman added.

Mr Nairn said the BDB had also worked with the Inter-American Institute for Cooperation on Agriculture (IICA), Prime Minister's Office on Grand Bahama and the Department of Cooperatives to create the Youth Apiculture Development Programme.

"This programme is intended to create 20 apiarist entrepreneurs per year over the next three years, with a view to creating a minimum of 100 jobs for persons between the ages of 16- 25 while substituting imports or generating exports of $4 million in product value, and establishing at least three commercially viable apiary cooperatives in Grand Bahama," he explained.

Mr Nairn said the BDB was also developing a three-year strategic plan in a bid to become profitable within that timeframe, and is seeking to become more transparent and accountable via regular public updates starting next month.

He added that the BDB was well-placed to administer public-private partnership (PPP) arrangements on the Government's behalf, serving "as an intermediary between the.... sectors with respect to identifying potential PPPs, locating various sources of funding and initial and long-term administration".

"We think that's an exciting opportunity," Mr Nairn told Tribune Business of PPPs. "We think that we can perhaps identify opportunities for the Government, put the two sides together and actually administer them as well.

"We think that would do wonders, and we are well-suited for that. As a bank we have people who can assess these things. We've got lenders, financial people who can make the assessment, follow up with both sides and, on a long-term basis, obtain reports and liaise with lawyers. We've got the infrastructure for it."