Development bank faces trouble with serious debt
(CNS): The government-owned bank, which was created in 2002 to support entrepreneurship, economic and social development through loans, equity financing and other assistance, has a $30 million debt, which is due to be paid off in 2015. The financial services minister has raised his concern that this significant debt presents a challenge to the Cayman Islands Development Bank’s future ability to fulfill its mandate. The bank's 2012 financial statements, laid in the Legislative Assembly by Wayne Panton, who now has responsibility for the CIDB, showed that the bank had made a loan in contravention of its own law to a relative of an MLA in 2009, which was not addressed for more than 18 months.
Speaking in the House last week, Panton said that a way to address this debt problem needed to be found soon as the date for pay-back is looming and government is the bank's guarantor. In addition to the liability to CIG if the bank cannot find new funding, it will not be able to assist in financing government initiatives.
The outstanding debt owed by the bank is in three different special bonds, where the repayment comes due in one lump sum on a set date and the bulk of the bank's more than $35 million debt is due on three different dates in the middle of 2015. As a result, the bank will need to find the money to meet these payments or find a way to refinance the debt, which the minister said would be a challenge in this economic climate as the date was not so far away.
The bank's primary function is to lend money to local people for education, housing, agriculture and small businesses. At present the bank holds around $40 million worth of loans.
According to the financial statements, in September 2009 the bank granted a loan to a relative of an unnamed member of the Legislative Assembly in contravention of the development bank law for $30,000. Some 18 months after the fact, in March 2011 the board of directors ordered that the loan be moved and it was reportedly transferred to another bank in December of that year.
As he presented the bank's financial statements for the last financial year, posted below, the minister pointed to the progress the CIDB had made on the backlog of its financial statements and improvements in the human resources at the bank, as well as the documentation of procedures.
Category: Local News
First Cayman Bank, was this how the problems started there?
Easy loans to friends and family?
Not many names are mentioned here, but I would hazard a bet that there will be a few matches!
In the words of the song, "when will we ever learn"
OH come on folks it's just nation building!!
We have no need for a local development bank and CIDB should be slowly and carefully closed down and loans attempted to move to private institutions as much as possible, winding down the business with no new loans and losing staff through attrition and transfer until it is done.
We do not have the same local context where a microfinance institution or development bank is necessary. We are also so small that the administrative costs are too heavy a burden for the operation to bear.
If anything, the government should guarantee portions of loans taken out with private financial institutions where it is seen as necessary to promote entrepreneurship, economic growth and social development, and to decrease poverty, insecurity and reliance on social services. These guarantees could be managed through the Ministry of Finance or another Ministry (e.g. Financial Services under DCI), or with a cross-Ministerial committee to allow for consideration from each subject area since there may be different types of applications. This would allow greater access to credit with the Government taking on some of the risk so the private institution is willing to lend, and a certain amount could be set aside each year to guarantee with a partnership with each local bank. This would be similar to the Government Guaranteed Home Assisted Mortage programme that has been run through the NDHT to allow people to purchase their first home without the full downpayment that is usually required if they otherwise qualify for the financing.
I know I will probably get a lot of thumbs down because, in my experience, people won't understand exactly what I am saying, or people will rabidly believe Government should never be in the business of assisting people, even if it's assisting them to get out of the viscious cycle of dependence or if it's assisting them to contribute to economic and social development. So please read this comment carefully before voting.
Yes, we should close down the CIDB because it is not the right way to do this. It's unnecessary and a waste of money. But we should think about the mission of the CIDB and how we can promote those aims in other ways, and my suggestion is limited government guarantees for loans by private financial institutions where the risk is not worth it for a private bank to take on the customer,but with some government assistance (which – if there is no default – could be simply the cost of administratively processing the application, or even less than that if there is an application fee to cover that service) it would be better for the individual and also for the economy as a whole and society as a whole.
Why assist local commercial banks except for CNB and Credit Union? Show me what did the rest do for Caymanians during their years of plenty. Please don't get me started, For people like you it's all about money and not the social well being of Caymanians. You have that caste system mentality that every thing must be done to facilitate the rich but the poor must stay poor and fed the crumbs, not here not in Cayman we were a society of opportunity more so than the American dream now don't try to change that. Cayman is getting poor and crime is on the increase because of people with ideas like you and politicians who are stupid enough to listen to garbage from people that is always on the lookout for their best interest and will stop at nothing to push their agendas irrespective of the social and other cost to Caymanians.
Seriously??? Read my comment again because your response shows you completely misunderstood it.
I'm saying that it is precisely poorer Caymanians that should benefit from my proposed system that would replace CIDB because the rich can gain access to credit through the usual private channels! I'm saying that more poor Caymanians can be helped if a public-private partnership is developed between the CIG and all of the local banks (but yes, they can favour CNB and Credit Union if you want to, I have no problem with that) to guarantee loans in certain instances. I'm saying this would help more poor Caymanians than CIDB currently does because it is ill-conceived. I'm saying exactly that my "agenda" is to improve the social and economic development of Caymanians.
Seriously, read my comment again and if you don't understand it don't spew nonsense in reply.
(Also, as a side note – what did the banks do for Caymanians during their years of plenty? They loaned the money that they had on deposit from that "plenty" to other Caymanians to further develop these islands. And everyone benefited. Yes, the banks made money off of it. But Caymanians would not have otherwise had access to the money to build homes and businesses and commercial enterprises and gain the return on investment. We benefit from banks as much as banks benefit from us, you nitwit.)
I seem to recall that it was Bush that set this up, and he reasoned that we had to have a "development bank" to access a source of funds. Isnt it inevitable that a source of funds available to that man has been "used unwisely"!
Shut it down. It was been abused for years via party politics.
Another friends and family enterprise. Of the $36 million in loans, more than $1 million is made to staff. LOL.
Would it be fair to say that loans were given out to the party faithful, and their friends and family?
I understand that most of the loans to political cronies, stand about the same chance of being paid back as does a snowball's chance of staying cold in hell…
Have these financial statements been audited with a clear opinion? Is the bank a going concern?
Who is on the Board?
Read. The. Report. The AudGen's review starts on the 2nd page.
CIDB (formerly AIDB) was run properly until everything became political, we got political parties along with political interference, and now garrison politics in on it way, better stated it is here. Such a bad ending to a beautiful beginning.
"…the bank had made a loan in contravention of its own law to a relative of an MLA in 2009…"
Is this just the tip of the iceberg? Maybe we should tap McKeeva's phone to find out.
Another means by which bad politicians and their supporters are able to fleece the national treasury.
Shut it down asap.