A senior economist believes the establishment of a credit bureau here is long overdue.
In fact, Dr Justin Robinson last night stated that the failure of Minister of Finance Chris Sinckler to fulfill this promise which he made in his National Budget about two years ago had left Barbados looking “ancient [and] a little backward”, when compared to other global financial systems.
“One of the biggest challenges in terms of providing financing is having quality information,” argued Robinson, who was at the time delivering a lecture on Barbados’ Financial System since Independence: Access to Financing and Investment Opportunities”.
He pointed out that many countries around the world had either established credit bureaus or some other form of public credit registry to provide a comprehensive record of domestic financial transactions.
“So for example, if you go to a commercial bank for a loan now as an individual or a business, there is no formal database or registry where they can go and see how much you owe this credit union, whether you’re up-to-date on your revolving fund loan and those kinds of things,” he said.
Robinson, who is also a director of the Central Bank of Barbados, also acknowledged that there was some concern that such a bureau could negatively affect borrowing “as bankers find out that some of these entrepreneurs have loans all over the place that are not being serviced”.
However, he said such a move would be in keeping with global best practice, adding that “in terms of our financial system that is one of the areas we need to catch up on”.
Last night’s lecture was the latest in an ongoing series by the University of the West Indies in commemoration of this island’s 50th year of Independence.
As he dissected the island’s financial system, Robinson argued that though Barbados was said to be on par with middle income and high-income countries in providing access to financial institutions, it was “extremely close to the bottom of the class” in terms of efficiency of those operations.
“Today, 50 years after independence, we are actually doing quite well in terms the depth of the financial markets, where we actually exceed Latin America and low-income and middle-income countries,” the Dean of the Faculty of Social Sciences of the University of the West Indies Cave Hill Campus said.
“Where we have major challenges is in terms of efficiency, where Barbados is scoring below the Latin American and Caribbean average, as well as below the low, high and middle income countries,” he added.
The economist pointed to the underdevelopment of aspects of the financial architecture, the distribution of credit, the structure of the financial system itself, and ongoing challenges with equity financing and equity markets.
In terms of credit distribution, he said while the local financial system provides excellent access to personal credit and debt financing for relatively low-risk commercial projects, there remained a major gap in terms of the system’s capacity to finance riskier investments and in the provision of equity financing.
A key factor was the structure of the system itself which remains a “bank dominated” even though there has been a growth in non-banks since independence, he said.
“At independence, commercial banks would have accounted for about 82 per cent of the total assets in the financial system, and in 2016 commercial banks are still the dominant player. They account for 60 per cent,” he said, pointing out that insurance companies were next in line, accounting for 14 per cent of assets.
“The mutual funds are at nine per cent, credit unions, I think, are also at nine per cent, and the Trust and so on make up the rest,” Robinson acknowledged.
In terms of progress over the past 50 years, Robinson noted that the financial system had moved from being regulated as part of the Eastern Caribbean, to being regulated by an oversight committee comprising of the Central Bank, which regulates the banking sector, and the Financial Services Commission which regulates the non-banking sector.
A third regulatory body is the Deposit Insurance Corporation, which provides insurance for money deposited in commercial banks for up to a maximum of $25,000. As of 2015, he said 91 per cent of the assets in the banking system were guaranteed by this money.