By Svetlana Marshall
Guyanese Businessman Terrence Campbell believes there is need for greater competitiveness in the Banking Sector.
Guyana’s Banking Sector consists of six commercial banks of which three are owned by a foreign parent. Campbell believes that due to the lack of competitiveness within the Banking Sector, commercial banks here are less responsive to the economic challenges facing Guyanese, Small and Medium-sized Enterprises (SMEs) and even macro businesses .
“Right now in the United States, I just saw one of the news wires, [reporting] mortgage rates down to 2.65 per cent. Not so long ago, about four-five years ago, 4.45 per cent was a good rate. But in response to the economic activities, and economic threats and recession and the pandemic, it is down to 2.65 per cent; that never happens in Guyana,” Campbell told Village Voice News during a recent interview.
He said just before demitting office, former President Donald Ramotar had signaled his intention to issue additional banking licences, but the Banking Sector remains the same since then.
“There is need for greater competition. We have got to break apart this cartel that’s going on in banking,” he emphasized.
The Inter-American Development Bank (IDB), in a Review of Financial Development and Inclusion for Guyana: Assessment and Options for Reform Report published in June 2020, said while physical access to the retail banking system in Guyana has improved over the past decade, the number of commercial banks has remained unchanged.
It said the lack of competitiveness within the sector has undoubtedly resulted in high banking fees. “The high costs of financial services and weak competition for at least some categories of lending appear to be barriers to inclusion in Guyana. The World Bank [2014] survey found the high cost of services to be the third most significant barrier to financial access and inclusion throughout the world,” the IDB reasoned.
It was keen on pointing out the spread between deposit and lending rates, is an indication that there is a high cost of accessing credit in Guyana.
“High spreads make borrowing less attractive and or feasible for consumers and businesses alike, and tend to dampen incentives to both save (e.g., low returns) and invest,” the IDB explained.
It said too that banks in Guyana display high levels of profitability, suggesting that the cost of services to consumers remains too high. In 2016, Guyana ranked in the 90th percentile of the 121 countries for which information is available in terms of deposit spreads.
“This was considerably higher than the average for all other middle or low-income countries (6 percent and 8 percent, respectively), and LAC countries (8 percent). One factor contributing to high interest rate spreads in Guyana could be the limited number of banks, leading to limited competition in the sector,” the IDB further explained.
In that 2020 Report, the IDB had recommended that there be more competition within the sector.
“Strong bank profitability may be an indication of a lack of competition in the sector, which would tend to drive down profits as 28 competitors attempt to attract customers. In this context, authorities might consider fostering competition in the sector via regulatory or policy measures (e.g., barriers to bank entry or establishment), to the extent that these would not compromise system integrity and stability,” the IDB said.
Campbell believes that should the dynamics of the Banking Sector change, there would not only be better competition, but fewer reports of discrimination against Afro-Guyanese and minority groups such as Amerindian Guyanese, women and persons with disability.
