The planned Guyana Development Bank will see the Finance Minister making key appointments and this provision among others are likely to be challenged when the bill comes up for its second and third readings in Parliament.
On June 5th, the bill had its first reading and it has already attracted a torrent of criticism from the political and civil society benches.
Tabled by Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh, the bill stipulates the bank’s capital at some $40 billion.
The first announcement of the bank was made by President Irfaan Ali in July last year at the launch of the People’s Progressive Party/Civic campaign rally in Kitty. Ali had said at the time that, to stimulate economic growth and support small businesses, the bank would be established to offer “zero-interest-rate” financing specifically for small and medium-sized enterprises.
According to the new bill, the capital of the bank shall be subscribed to and paid up by the Government in such amounts and at such times as the Finance Minister may determine.
The Minister may also, by Order and subject to a negative resolution of the National Assembly, amend the amount specified.
The bank will be exempt from the payment of taxes on its profits and income, with its funds and resources comprising sums appropriated by Parliament and money it receives while carrying out its objects and performing its functions.
These functions will include repayments of loans, interest and other charges in respect of loans provided, and all other sums or property that may, in any manner, become payable to or vested in the bank in respect of any matter incidental to its functions.
No person or enterprise shall receive more than $3 million in loans, and when applying for financial assistance, small and medium-sized enterprises will have to provide information, documents and statutory declarations as may be prescribed or required.
However, the section establishing the loan ceiling can be amended by the Minister by Order, subject to a negative resolution of the National Assembly.
Recover money
Meanwhile, the bill makes provisions for the bank to take all measures necessary to recover any money due to it. These measures may include enforcing any security or guarantee given in respect of loans provided by the bank and doing all such things as are incidental or conducive to the attainment of its objects.
However, the bank shall not accept deposits from the general public, engage in speculative trading, or carry on business inconsistent with its development mandate, as stipulated by the new bill.
Under the new Act, a person commits an offence if they provide false or misleading information; obstruct or hinder the bank in the exercise of its functions; falsify, conceal, alter or destroy any record or document relating to the affairs of the bank; improperly disclose confidential information obtained under the Act; or wilfully misapply or misuse the funds, property or assets of the bank.
A person who commits an offence is liable on summary conviction to a fine of not less than $5 million and not more than $10 million.
Further, where an offence under the Act is committed by a body corporate, the body corporate is liable on summary conviction to a fine of not less than $5 million and not more than $10 million.
If an offence committed by a body corporate occurs with the consent or connivance of, or is attributable to neglect on the part of, a director, manager, secretary or other similar officer of the body corporate, that person also commits the offence and is liable to the prescribed penalty.
Governing body
Explaining the governance of the bank, the bill states that it shall be governed by a Board of Directors consisting of not fewer than five and not more than nine directors.
It is the Minister who shall appoint the Chairperson, Deputy Chairperson and other directors based on their qualifications and experience in finance, economics, banking and law.
The bank shall not be subject to the Financial Institutions Act but shall instead be governed by the new Act and any orders and regulations made under it.
Hours after the bill was tabled, the Finance Ministry, in a release, stated that the development of Guyana’s financial sector is crucial as the Government works to empower citizens to benefit from the economic transformation taking place across the country.
“Access to financing is a central pillar for the establishment, growth, and success of both small- and large-scale businesses, and for the economic empowerment of individuals and households. Under the stewardship of the PPP/C Government, Guyana’s financial sector has shown significant improvement across key performance indicators in recent years, reflecting a strengthened economy and robust regulatory oversight,” the release said.
Commentator Christopher Ram and politician Terrence Campbell have raised serious concerns about the architecture for the institution and have warned about political influence and absence of financial safeguards.
Ram described the bank’s exemption from the Financial Institutions Act as one of its most troubling features, while Campbell expressed concern that excessive authority has been assigned to the Finance Minister.
“I support the re-establishment of a Development Bank,” Campbell, the leader of the A Partnership for National Unity (APNU) parliamentary team, said.
“It will fill a financing gap by providing loans with or without collateral. This has been a major stumbling block for young entrepreneurs. Loans with or without interest will also help to stimulate growth in entrepreneurship”, he said.
While endorsing the concept, Campbell, who once operated a number of fastfood franchises here, said he was concerned that the Finance Minister would appoint the entire Board of Directors.
“I am concerned about this as it will likely lead to politicisation of the bank. The Opposition should also have been represented on the Board,” he said.
Ram expressed similar concerns.
“It is fundamental,” he said when asked about the importance of insulating a development bank from political influence.
“A development bank should allocate capital based on economic merit and developmental impact, not political considerations. Once lending becomes politicised, a development bank ceases to be a bank and risks becoming a slush fund”, he said.
Ram, a chartered accountant and attorney, argued that a $40 billion institution required a greater degree of independence than is currently contemplated by the bill.
According to him, representation from the banking, business, accounting, manufacturing, agriculture and risk-management sectors would improve governance and public confidence while helping to safeguard public funds.
Both men also questioned whether the legislation contains sufficient protections against political interference in lending decisions.
“No. Too much control resides in the Minister,” Campbell told Kiskadee Watch
Discussion