IT APPEARS THAT HARD TIMES have virtually sucked the life out of the growth in commercial bank credit.
After growing to 8.5 per cent between 1996 and 2003 and booming to 15 per cent from 2004 to 2008, loans growth at the five commercial banks operating in Barbados has petered out to 0.1 per cent since 2009.
Additionally, new research has found that the agriculture and manufacturing sectors have been playing second fiddle to their more high profile counterpart tourism in the quest for support from commercial banks.
These are the primary findings of a study conducted by Central Bank of Barbados economists Shane Lowe and Tiffany Grosvenor, who noted that up to the end of 2013 the five foreign-owned commercial banks operating here had $5.9 billion in loans on their books.
But they also pointed to the fact that there had been a substantial decline in credit over the last two decades, especially since the recession hit.
“Three distinct phases of loan growth can be observed over the period.
“During 1996 to 2003 the annual average rate of growth was 8.5 per cent, compared to a period of robust growth (credit boom) between 2004 and 2008 estimated at approximately 15 per cent per annum.
“From 2009 onwards, credit accumulation slowed to 0.1 per cent, symptomatic of the effects of the global financial crisis on domestic demand,” they said.
The researchers also noted that ever since the 1960s through to the mid 1990s, the distribution of commercial bank credit has evolved generally in line with the needs and growth of the domestic economy, the implication being that with tourism considered the mainstay of the economy, it had accessed the most loans.
“Our findings suggest that bank lending increased significantly over the last two decades, driving primarily by lending to consumers and the tourism sector, two sectors which have driven economic growth over that period. Bank lending to the majority of the other sectors has exhibited limited growth, and has been further constrained by the onset of the 2008 recession.”
Those sectors referred to included agriculture and manufacturing.
“Credit to productive sectors such as agriculture and manufacturing mainly comprises short term loans, suggesting little to no borrowing for capital investment, thereby reflecting their reduced contribution to overall credit and to economic growth in these sectors as a whole,” the report concluded. (SC)
