There has been considerable public concern over the number of companies being put into receivership by the banks, including well known and established companies like Willems Timber and Trading Company Limited and Vinelli Industries Limited. It would appear that these companies have experienced cash flow problems or suffered losses or been unable to find joint venture partners who could invest in their businesses and relieve the crushing debt burden.

There are many reasons for these difficulties and each business would have to be looked at separately. Some of the difficulties facing businessmen in Guyana are well known such as high interest rates, short repayment periods, the devalued dollar which makes it very expensive to buy essential equipment, lack of second level managerial skills, lack of technical skills and so on. There is also an undeveloped financial sector, in particular no stock market to facilitate the raising of investment and no development bank or other financial mechanism to provide longer term funding. There is now a merchant bank and it is hoped that some of our businessmen will be able to benefit from the services of this bank in finding investors and joint venture partners who can inject funds and help to develop their businesses.

Some people have blamed the provisions of the Financial Institutions Act (FIA) for some of these closures. They say the provisions are too draconian and force banks to deal harshly with customers instead of rescheduling loans and helping them to keep going. This is not entirely correct. In the first place, in the interest of avoiding bank failure and the resulting chaos on the financial system it is desirable in principle to have tough banking laws. What may be lacking in our case is adequate monitoring of these laws by the Bank of Guyana as envisaged by the FIA. But secondly, Supervision Guideline No.5 issued by the Bank of Guyana under the FIA does not require the banks to take legal action or to appoint receivers or managers. It does require them to classify accounts in their loan portfolios ( the five categories are pass, special-mention, substandard, doubtful and loss - the criteria for each of which are laid down) and to make provisioning requirements accordingly, 20% for substandard, 50% for doubtful and 100% for loss. The banks retain a discretion as to whether to move against a customer or not and how to do so, whether by way of legal action or by appointing a receiver to close the business and sell the assets or a receiver/manager to carry on the business and perhaps sell it as a going concern or try to find a joint venture partner to inject capital and reduce the debt burden, thus making the business viable.

There can be no doubt that the global slowdown has affected businesses here directly or indirectly. The market pressures on the sugar and rice industries will also affect all other businesses here which benefit from the prosperity of those industries. So these are difficult times, and some businesses that might otherwise survive will be under pressure. In the case of the timber industry too, for example, there have been additional problems with marketing because of the Green lobby. This has made life more difficult for timber producers. The banks will presumably in each case make an effort to decide if a particular business which can't keep up its payments is viable or is just suffering from a temporary cash flow problem and whether efforts should be made to keep it going. It is in their own interest to keep a business alive if it has a future as if there are too many closures and forced sales an already sluggish property market will be flooded with properties that it will be hard to sell.

Finally, the government should certainly consider as a matter of urgency whether some form of assistance should be rendered to particular sectors or businesses as has been done in other countries, given the peculiar pressures that now prevail.