Development Finance Ltd of Trinidad hopes to set up business in Guyana by June, to provide, initially, financing for the micro-enterprise sector at similar rates as the Institute of Private Enterprise Development (IPED) and Scotia Enterprises.

DFL expects approval from the European Investment Bank for 30% of the total funding requirement for the project in March, Managing Director of the Trinidad operations, Gerard Pemberton, said yesterday. Another source of financing for the project would be a DFL bond issue to the Multilateral Investment Fund (MIF), the private sector arm of the Inter-American Development Bank mid-2001.

"We hope that we will be able to start the new bank in June assuming that in March, the EIB approves the proposal we have submitted," Pemberton said.

In June, the MIF approved the purchase of a 30-year floating bond from DFID worth US$2.8 million to help support the consolidation of DFL's subsidiary micro-credit operation Caribbean Micro-finance Ltd (CML). CML, which specialises in supplying credit and financial services in Trinidad and Tobago, had planned on expanding services to Guyana and Barbados in a project set to benefit 2000 micro-enterprises in the three countries.

CML's goal is to increase its micro-credit portfolio by at least the size of the bond issue within the next four years and MIF's participation is intended to promote private sector growth.

DFL intends to establish a branch of its development/industrial bank in Guyana and Pemberton said the institution remained prepared to consider equity investment in Guyanese companies. But these have to be new projects in "manufacturing, hotels and industrial services."

"We cannot refinance existing projects," Pemberton said.

He said that the bank was anxious to start its operation in Guyana, especially the micro-credit division, but it has not yet had a formal reply from the government of Guyana giving approval for the five-year waiver of taxes. However, he said, the bank understands that this will be approved.

The bonds, which will co-finance the operations of the branch in Guyana, are listed on the Trinidad and Tobago Bond Exchange and DFID pays an interest rate-- in US dollars--of 7.50% per annum.

Pemberton said that the bank would have to convert some of the US dollar funding into Guyana dollar equivalent to lend to micro-enterprises in Guyana. The returns would have to be reconverted to US dollars to allow for the servicing of the bond debt to the MIF.

DFL signed a memorandum of understanding with the Guyana Manufacturers' Association to establish an arm in Guyana some months ago and this is expected to serve as a development bank for the productive sector.

Guyanese businesses have been crying out for long-term financing on more favourable terms than what were now available in the commercial banking sector. The local manufacturing group expects that the rate to be charged by DFL will be slightly lower than commercial banking rates with a definite advantage in the terms of lending.

DFL's first equity investment in Guyana was in Mazaruni Granite Products Inc, which, in recent times, has been grappling with serious financial difficulties.