By NEIL HARTNELL
Tribune Business Editor
Hurricane Dorian victims were yesterday urged by a well-known banker not to sacrifice their future financial well-being by over-borrowing to recover from the storm's devastation.
Gowon Bowe, pictured, Fidelity Bank (Bahamas) chief financial officer, told Tribune Business that those impacted by the category five storm must borrow for "what they need, not what they want", and avoid falling into the trap of over-extending themselves amid the emotional fall-out from arguably the worst hurricane ever to strike this nation.
Encouraging persons "not to allow circumstances to disrupt financial discipline", Mr Bowe said bankers and other financial services professionals will have to adopt the role of "counsellors" rather than "disciplinarians" when dealing with credit applications from Dorian victims.
While the Central Bank has relaxed lending and debt servicing ratio guidelines, as it did in the aftermath of previous hurricanes, Mr Bowe said the Bahamian commercial banking industry has yet to see loan applications "shooting in" because Abaco and Grand Bahama residents are still focused on recovery.
He further urged them not to "reach for the sky and fall short" with their credit requests, and advised that those affected by Dorian separate their immediate survival needs from these applications - which he argued should address long-term needs, such as home reconstruction.
"That will be phase two," Mr Bowe said of Dorian-related credit applications. "The reality is that persons have immediate needs; food, water and dry clothing. As it relates to what we see people seeking loans for, that exercise has not commenced.
"Those [Central Bank] guidelines and directives have been factored into our underwriting process, but the reality is at this point in time the number of requests has not started shooting in, and I think it is because people are effectively trying to make sure they can touch one."
The Central Bank has relaxed lending guidelines requiring borrowers to come up with a minimum 15 percent of equity, while waiving the maximum debt service ratio applied to distressed borrowers that prevents more than 40-45 percent of their income going to pay back loans.
With the recovery process, and demand for credit, set to begin in earnest soon, Mr Bowe said: "The most important message is that it's not an immediate response. It's going to be a response over time - the provision of credit and funding, and things people need to restore life.
"No one wants to be lectured to at this point in time, but don't allow circumstances to disrupt fiscal discipline. Our message at Fidelity is: Borrow for what you need, not what you want. What can you live with, and build upon with, as opposed to reaching for the sky and fall short."
The Fidelity chief financial officer expressed hope that Bahamians had some savings, or were able to rely on family members, friends and aid, to meet their immediate needs post-Dorian. However, with many relying on pay cheque to pay cheque living, this may not be possible thereby exacerbating the storm's financial impact on the two hardest hit islands.
"It's not a lecture," Mr Bowe told Tribune Business. "Some people will say: 'I don't need you telling me'. It's not trying to be the disciplinarian, it's being the responsible counsellor, saying: 'While I understand the emotional response, let's take a deep breath, count to 10, and let's take a look at your long-term financial plans as you want them to be sustainable as opposed to non-viable."
Long-running efforts by the Central Bank and commercial banking industry to cut the non-performing loan overhang from the 2008-2009n recession are likely to take a major hit from Dorian, with recent reductions likely to be reversed due to the inability of businesses and employees to service their debts in the collapsed economy of Abaco and hard-hit Grand Bahama.
Delinquent loans had hit their lowest level for a decade in July, with the Central Bank recording: "The improvement in banks' credit quality indicators was sustained during the month of July, with total private sector arrears decreasing by $7.4m (1.1 percent) to $683.7m, and moderating by 14 basis points as a proportion of total private sector loans to 12.1 percent.
"A breakdown by length of delinquency revealed that the contraction was attributed to an $11.8m (2.4 percent) fall-off in non-performing loans - arrears in excess of 90 days, and on which banks have stopped accruing interest - to $480m, with the corresponding ratio softening by 21 basis points to 8.5 percent of total private sector loans.
"In contrast, short-term arrears - 31 to 90 days [past due] - rose by $4.3m (2.2 percent) to $203.7m, elevating the attendant ratio by seven basis points to 3.6 percent."
Meanwhile, several commercial banks have already unveiled their own hurricane relief initiatives. Scotiabank (Bahamas) is offering clients on Grand Bahama and Abaco five month's relief on their loan principal repayments until February 2020.
Interest will be added to the loan if it is unpaid, with borrowers having the option to repay this at any time during the loan or when it ends. Scotiabank is also offering modified or extended payment terms on loans, credit cards and other lines of credit, and increased credit lines on existing cards.
Bank of The Bahamas is touting several credit options for home repairs, and vehicle and furniture replacement, including low interest rate loans and repayment over 96-month (eight year) period via salary deduction. Proof of hurricane damages must be provided, and the offer lasts until October 30, while debt servicing and other guidelines must be met.