With Barbados dollar deposits climbing to $13.8 billion at the end of September, there are calls for more of these savings at financial institutions to be channelled into investment.
Two veterans of the financial sector, Barbados Public Workers’ Co-operative Credit Union Limited group chief executive officer (CEO), Glyne Harrison and SigniaGlobe Financial Group Inc. CEO Paul Ashby, have no problem with such requests.
However, speaking in separate interviews, the duo, who both worked in the traditional banking sector, say that not only do investors need more options, but individuals in particular, need to be sensitised about alternatives to depositing their money in commercial bank accounts in exchange for sparse interest.
Speaking during the latest edition of the Central Bank of Barbados’ economic explainer series, in an episode where he is depicted as a snow cone vendor, Governor Dr. Kevin Greenidge said that with more than $13 billion in the banking system, the hope was that $2 billion of this could be channelled into investment each year.
He said such investment could be transformational, including for agriculture, roads and other infrastructure, not just hotels.
“It is good because the banks get a return because they are lending out money, the individual investors get a return and they also stimulate jobs and stimulate economic growth,” he said.
Harrison, who once headed a local commercial bank, said there was a need to “create the right instruments” for people to investment in, but added “I don’t think it’s a bad call” in relation to directing more savings into investment.
“A good portfolio has a blend of savings and investments. So, savings are there to give you that safety net, investments are there to give you a continuous flow of returns that you can get as your buffer,” he noted.
Cautiousness
Harrison, whose group held $1.7 billion in savings when its financial year ended on March 31, observed that “there are not great returns out there right now, so persons are looking for what is it they have that can beat the cost of living presently”.
“In terms of real investment grade instruments, we are really lacking those locally. People speak about Government investment but some people are averse to that. If you have the appetite for Government investments, there are some out there, but really and truly, as an individual, the choices are limited,” he said.
The credit union boss also said that generally people were cautious about investment, although mortgages were still in demand.
“I think from our perspective, we are still seeing a cautiousness in terms of borrowing. So, people are still sort of stockpiling and saving, and they are a bit weary about what is going on even as it relates to the geopolitical situations where people are looking to see what’s happening in all areas,” he explained.
“Mortgages are definitely still a big thing. We are seeing that our mortgage book is definitely outstripping consumer loans.”
The cost of living was another worry on Barbadians’ minds.
“Even though it has come under control to some extent within the last year or so, the cost of living is still a concern. Inflation has been controlled, but the cost of living, price of goods, hasn’t decreased. So it is more towards saving and maintaining a lifestyle than it is towards borrowing at this point in time,” Harrison said.
He said the key to unlocking more investment, and hence increased economic growth, was in the private sector’s hands.
“As a private sector, we do have to return to the days of old . . . to grow our businesses. That is something that we’ve been sort of stagnating on. Outside of tourism, there hasn’t been a whole lot but there is scope for that to improve.”
Ashby said SigniaGlobe was seeing an appetite for credit, but not a lot of growth in deposits. He said Barbadians needed to be sensitised about options beyond commercial banks, which were paying little to nothing for savings.
“We pay more interest for deposits than the commercial banks, the commercial banks are paying 0.05 per cent, very low interest, on average we are paying on average around two per cent,” he said.
“So, we have room and opportunities to lend more if we could attract more deposits, but a lot of the deposits, in my view, are trapped in the banks and people, either they don’t know or don’t understand, that they could earn a higher rate of return if they brought some of their funds out of the banks.”
He added: “We have people who want to borrow and we want to lend, so the only way we could lend is by acquiring more deposits. So there is opportunity in my view, commercial banks obviously have a lot more deposits, but I think that there’s opportunity for offloading some of that in some of the products that we have around.” Ashby saw a need for consumer education, and acknowledged that many Barbadians felt comfortable putting their money in the bank because of previous events when some people suffered major losses. “We have also had a historical problem. I have two solid shareholders, Cave Shepherd a hundred year old company and GraceKennedy a hundred year old company, they are not going anywhere, but people have had the challenge over time and obviously Bajans are weary and I don’t blame them,” he said. “People got burned by Trade Confirmers and then they got burned by CLICO so they have not had a warm time dealing with these types of institutions, but we have been around for 25 years.”
Ashby said while credit for the renewable energy sector has “cooled off a bit” as battery storage challenges are resolved, customers were borrowing money for various purposes including to open restaurants, and build warehouses.
“And then, of course, the major thing that we do is vehicles. So people are interested in starting rental car companies, and people are interested in operating taxis and then ultimately, everybody wants to get their first vehicle and we do a lot of those as well. So there is a lot of activity that we’re seeing monthly,” he said. (SC)
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