Globe Trust can be resuscitated
Guyana Chronicle
November 1, 2006
GLOBE Trust and Investment Company Limited, the bankrupt financial institution, is being offered a lifeline by an unnamed foreign investor.
The Central Bank has given the potential investor until November 3 to transfer US$3.5M to Guyana as a prerequisite for consideration.
The dissolution of Globe Trust, a private entity, was one of the most catastrophic issues to mar the local financial landscape in recent years.
It exposed a weakness in central control which affected about 6,000-7,000 depositors.
A phenomenon of banking institutions is that while thousands of small depositors make sacrifices to save a few dollars in a savings account, a few big persons can borrow millions of dollars on the strength of their collateral.
One State entity which was originally established to help small farmers and livestock rearers, loaned most of its capital to some of the biggest industrialists in Guyana.
When the current administration, in the interest of financial prudence, decided to miniaturise its operation, the balance sheet showed that a handful of big businessmen had borrowed more than the thousands of small borrowers.
The collapse of Globe Trust was the result of a mixture of financial bungling and improper business transactions, the details of which are history.
On July, 2002 the Chief Justice ordered the reorganization of Globe Trust under Section 50 of the Financial Institution Act.
At a recent meeting at the Queen’s College auditorium in Georgetown to update depositors on the status of the bankrupt company, the administrator appointed by the Central Bank to hold the defunct company, Mr Conrad Plummer, expressed confidence in the future of the institution.
According to reports, fewer than 100 depositors attended the meeting since about half of them had migrated.
Mr Plummer did not pull any punches. He told depositors that it was a serious challenge to get Globe Trust on its feet again.
He disclosed that since 2002, more than 84 enquires were made, 55 were considered “causal” discussions and 29 were “serious”. From 29, three investors emerged -- one regional, one from the UK and another from the U.S.
The success of a resuscitation of Globe Trust is based on three pillars:
** The approval of the investor by the Central Bank
** The re-organisation plan
** Funding
Mr Plummer has sounded a cautious note: if any of these pillars fall or fail, the re-organisation will not materialize. The mistakes made by the previous entity must not be repeated. “It would be unfortunate if Globe Trust goes forward and does not learn from its mistakes,” he said.
When it gets going again, there will be immediate objectives and painful decisions viz -- debt write-offs and giving back depositors some of their monies.
But with the right decisions Globe Trust can be resuscitated.