GUYANA'S first merchant bank, Guyana Americas Merchant Bank Inc., which brings with it a vital range of new services and products, has been formally launched.

`GuyAm Bank' is at 138 Regent Street, Georgetown, on the second floor of the Guyana Bank of Trade and Industry (GBTI) building.

Secure International Finance Company Inc (SIFC), GBTI and the International Finance Corporation (IFC) are shareholders of the new financial institution which was scheduled to start its first working day yesterday.

President Bharrat Jagdeo congratulated those involved in the project which he emphasised will play an important role in expanding the range of financial instruments available here to the private sector.

The President gave the feature address at the launching ceremony Monday night at Le Meridien Pegasus Hotel in Georgetown.

Guyana, he said, has the necessary legislation and requirements in place for the diversification of its financing sector.

Over the years, focus was placed on liberalising the sector.

"We learnt from the experience of other countries, countries that pursued financial sector liberalisation without legislation in place", he said.

Mr. Jagdeo said a two-pronged approach, which involved working on the regulatory and supervisory aspects while simultaneously dealing with liberalising the sector, was used.

The task entailed moving the instruments through which the sector is managed, from credit controls to more market based instruments and toughening the laws with the introduction of the Financial Institutions Act.

The Central Bank Act was also reformed to give that institution modern tools to manage the sector, placing Guyana among the few countries, especially among Third World nations, that prohibit the Central Bank from financing government, he added.

"We have managed to exit five of seven financial institutions that the government had shares, almost controlling interest in, without much of a cost to the Treasury...today we are working on the remaining two...", the President said.

He said that 70 per cent of the financial sector's total assets are controlled by commercial banks. And that the figure will grow if one adds to that list the near bank institutions, many of which are subsidiaries or affiliated with the commercial banks.

"Today we're seeing some of the successes of that approach. We have a much more stable, a much more sound financial system than in the past", Mr. Jagdeo remarked.

The President added that Guyana's fiscal deficit has been reduced to such an extent that the Government has moved from a net borrower from the banking system to a net payer.

"This allows more room for private sector credit. It (Government) does not compete with the private sector today (for funds) and that is why we have seen a reduction in interest", he explained.

He added that the Government's fiscal and balance of payment strategies are very important because the financial sector reflects how it is managed.

"In terms of the balance of payment position, in 1990, that deficit was US$141M. Last year we had a surplus of US$17M; (and) the gross international reserve in 1990 was US$26M, last year it was about US$296M", he said.

He added: "Gross credit to the private sector grew from G$4.9B in 1990 to G$54.7B last year. Private sector deposits grew from G$7.1B in 1990 to G$64.7B last year.

"Government's deposit into the banking system grew from G$1.9B to $G9.2B over this period".

Today's world, he said, is undergoing rapid technological changes and Guyana must make sure that it is a beneficiary of these changes.

He said the country needs a better settlement system and the mode of payment.

"Today we have to move away from cash and cheques into card-based instruments and electronic based-instruments. These are all necessary for a modern banking system", the President stressed.

He added that with the implementation of the free trade market within the Americas by 2005, Guyana will be competing in the international financing arena and must be able to capitalise on opportunities.

Chairman of GuyAm Bank Inc., Mr. Geoffrey Bell said some years ago the Beharry family approached him for advice on setting up a merchant bank here.

He accepted the proposal and his role, which was very successful, was to persuade the World Bank through the IFC to also become a part of the project.

The IFC is a 20 per cent shareholder in the new bank and through that body GuyAm Bank will access the international capital market.

IFC is the largest supplier of loan and equity financing to the developing world and according to Bell, who has some 30 years experience in merchant banking, his new role is linking the local bank to markets in London and New York.

"International finance is only going to be a part of our bank. GuyAm Bank will be a fully fledged player in the domestic money and capital market", he said.

Its services will, however, be separate from those of the GBTI, Bell assured, adding that he hopes GuyAm Bank will be able to provide services to friends and clients of GBTI.

In his view, capital development is the key to economic growth and entrepreneurial spirits soar when a market can offer corporations longer term finance, flexible facilities tailored to the needs of projects.

"That is what we are all about. The financial system is indeed the engine of growth", he said, noting that bond financing and adequate supply of project capital assisted in the recent explosive growth in the United States.

Bell said merchant banking has a history which goes back about 200 years to London and stressed that GuyAm Bank will operate in the same traditions created by old banks like Rotschilds, Schroders and Morgan Grenfell and their modernised counterparts including Morgan Stanley and J.P Morgan.

"We will not be in the business of taking deposits and making loans but we will be acting as catalysts for capital raising at home and abroad like our famous fellow merchant banks", he stressed, noting that the key to success also involves people.

The GuyAm official said he was impressed with the standard of banking skills, work ethic and dedication to client relationships here.

Guyana's economy, he added, has great potential and GuyAm intends to be a small but growing part of the country's development process, he said.

Mr. Graham Scott, Managing Director, said they were fortunate that Guyana already has a number of legislative and regulatory measures to facilitate the modernisation of the financial system.

He noted that effective capital market development takes sound government policies and regulatory reforms that can provide investors with the confidence required to make informed decisions.

Guyana, he said, urgently needs to develop the "cult of equity", which is firmly established in countries worldwide.

Scott added that in the rapid changing global environment, equity finance will "underpin and determine the rate of economic development at both the national and business levels".

He noted that businesses that fail to recognise this, will be left behind and stressed that GuyAm Bank's mission is to contribute to the economic advancement of Guyana through the provision of "high-quality and creative" merchant banking services.

Another GuyAm Bank Director and IFC representative, Mr. Irving Kuczynski said his agency is eager to invest more into the local private sector.

The investment, he noted, will promote economic development while playing a part in poverty alleviation.

Other GuyAm Bank Directors are Mr. R. K. Sharma, Secretary, Mr. Rabindranauth Beharry and Mr. Inderjeet Beharry.

Political leaders, including Opposition Leader, Mr. Desmond Hoyte, members of the diplomatic corps, private sector representatives and government officials also attended the reception.