“Small business lending can be good banking” – Pres Ali tells commercial banks

President Dr Irfaan Ali has emphasised the important role that small businesses play in the Guyanese economy as he called on commercial banks to back their development.

“Small business lending can be good banking,” President Ali remarked during his feature address at the commissioning of the Bank of Baroda’s new head office building in Georgetown on Friday evening.

According to the Guyanese Leader, small businesses are not only critical to the future of the Guyanese economy but also to the future of the commercial banking sector.

“Large investments alone cannot sustain an economy indefinitely. It is the thousands of smaller enterprises, the entrepreneurs, the manufacturers, the farmers, the service providers, the contractors, and the retailers who create the economic depth and resilience that allow growth to endure… They create employment. They generate livelihoods for families. They stimulate demand for locally produced goods and services. They support larger enterprises through supply chains, subcontracting, and the provision of essential services.”

“And importantly, they help diversify an economy, reducing its dependence on a limited number of sectors and major investment. A thriving small business sector also creates a wider distribution of economic ownership. It allows more Guyanese to become producers, employers, and wealth creators, rather than remaining solely consumers of the opportunities generated by economic growth,” he posited.

President Ali says his Government understands the power that small businesses hold, hence its move to establish the Guyana Development Bank. Launched just last month, this state-backed financial institution offers zero-interest and no-collateral loans of up to $3 million to local small and medium-sized businesses (SMEs).

“We recognise that if we are to diversify our economy, and sustain long-term growth, and create employment on a wider scale, we must empower more Guyanese to establish and expand their own businesses,” the President noted.

Further recognising that access to financing is one of the major obstacles confronting small businesses, the Head of State believes commercial banks can play a major role in supporting SMEs.

In fact, the Government is already working with local banks, through the Development Bank, to unlock additional financing of up to $10 million for small businesses. This, according to Ali, creates an important opportunity for financial institutions such as the Bank of Baroda to support local businesses.

“I don’t think there was ever a time when we were working so closely together. We are trying to create an environment of trust at every level so that the local commercial banks, here we celebrate Baroda, would be fully on board in this push towards resilience and decentralisation. And this is where commercial banks have an important role to play,” he asserted.

Moreover, as Guyana’s economy continues to expand and opportunities are generated, the Head of State noted that the local banking sector must position itself to support SMEs.

According to President Ali, lending to small businesses allows financial institutions to diversify their loan portfolio across different enterprises, sectors, and geographical locations, rather than concentrating substantial exposure in a relatively small number of large borrowers. It also creates opportunities for long-term relationships with customers, who can become increasingly valuable banking clients as their businesses grow.

“The banking sector must move to an investment mode, advising and helping SMEs, working with SMEs on proofing initiatives, and collaborating with the Guyana Development Bank to allow these opportunities to pass through all levels of the economy,” he noted.

These efforts, the Guyanese Leader noted, are all geared towards ensuring financial inclusion of Guyanese – something which he believes that the India-based Bank of Baroda can support, learning from the experience in their country. 

“We cannot speak about job creation while overlooking the financing needs of the very businesses that create so many jobs for us. We cannot speak about economic diversification without ensuring that entrepreneurs have access to the capital required to enter new sectors. And we cannot speak about inclusive prosperity if access to financing remains beyond the reach of those who have the ambition and capacity to build successful enterprises. I therefore see a tremendous opportunity for the Bank of Baroda to become an important partner in this national effort. And you know what SME financing did for India – the type of financial inclusion and the depth that it allowed for the financial system architecture,” the Head of State said.

In fact, President Ali disclosed that he already had discussions with the Global Managing Director and Chief Executive Officer of the Bank of Baroda, Dr Debadatta Chand, and other visiting officials who travelled to Guyana for the new head office opening. They discussed the role the bank can play in offering a diaspora bond, which could not only unlock much-needed foreign capital but also create a new burst of patriotism and nationalistic pride while enabling greater participation of the diaspora in the development of the local economy.