St. Kitts and Nevis (WINN); Governments of the region will be financing the recently approved Eastern Caribbean Partial Credit Guarantee Corporation which was designed to encourage commercial banks to increase lending to the private sector.
According to the Eastern Caribbean Currency Union’s Monetary Council at its recent meeting in St. Kitts, credit conditions across member countries remained relatively tight with a continued decline in banking sector credit to the private sector, including businesses and households.
Timothy Antoine, Governor of the Eastern Caribbean Central Bank (ECCB) says it is for that reason the Council approved and signed the Agreement for the establishment of the Partial Credit Guarantee Corporation, to minimize lending risk so that financial institutions would be more inclined to approve loans for ECCU citizens, especially to micro, small and medium-sized enterprises.
“What the Partial Credit Guarantee scheme will do is that once established the banks can get a guarantee of up to 75% of that sum. So the Eastern Caribbean Partial Credit Guarantee Corporation would guarantee up to 75% so for the bank or credit union and the risk would not be 100%, it would be jus t 25%. That makes the loan more attractive for them in a good sense because they have reduced the risk of the loan because they know if there’s a default they know there’s some entity behind to guarantee it.”
He explained that the neither the governments nor the Partial Credit Guarantee Corporation would be granting loans, that would still be the role of the banks or credit unions.
“Loans are going to be made by financial institutions that are partnering with the guarantee scheme, not the Partial Credit Guarantee Corporation itself; that’s behind, that’s the guarantor. The loans will be made by the financial institutions, the banks and credit unions- eligible loans.
“Remember right now there’s liquidity in the banking system, a lot of liquidity, the issue is how can you get those funds loaned out so you help create growth, jobs and ultimately help the GDP to debt ratio for example.
“So the Guarantee Corporation will be used to support financial institutions who right now are not so willing to lend, but with that infrastructure in place, will be more willing to lend.”
The ECCU governments will provide the initial start up funds and be the shareholders of this entity.
“Governments will own it, essentially, they are the shareholders and each government will be asked to put in a specific sum to start it up and of course it will be able to raise additional monies. The World Bank is going to assist some of our governments with access to funding so that they can put in their contributions and other countries like St. Kitts and Nevis have already made budgetary provisions; so the governments will lead.”
The Council is expected to give an update on this development at the 88th meeting in Dominica in July.