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The banking culture in Jamaica must change
Raulston Nembhard
Wednesday, May 27, 2009
I attended the first townhall meeting that was put on by the prime minister's office in Mandeville. I was impressed by the large crowd that was in attendance and at the high level of participation by those attending. The prime minister gave a cogent presentation on the state of the Jamaican economy as he saw it, focusing on the woes of the bauxite industry and the difficulties being faced by the residents in the central part of the island.
Raulston Nembhard
What I found interesting in the question and answer session is that among the many questions that were asked only one was related to the problem of crime.
There were just a few that had any bearing on the subject such as the state of the justice system. People seemed preoccupied with education and health care and how government could provide ways to strengthen their earning power in agriculture and non-traditional areas of employment.
Although one meeting of this kind is not sufficient to gauge a trend as to the national sentiment on crime, I got the distinct impression that people by and large have become resigned to the problem. Crime seems to have now become so interwoven into the social fabric that a fatalistic attitude has set in. People seem to have become so inured to the problem that it no longer seems to occupy the centre stage of their concerns. The idea seems to be that crime is something one has to live with and one might as well just get on with one's life irrespective of the social chaos in which this has to be done.
If my assessment is correct that people have become resigned to the problem of crime, especially brutal murders, then this is indeed very sad. If this is the case the new Minister of National Security, Senator Dwight Nelson, has his work cut out for him. For an essential plank in the fight against crime is an alert and engaged citizenry that recognises its important role in the effort. A resigned citizenry is not easily motivated and this certainly does not augur well for society. No civilised society can survive the kind of criminal assault that we have in Jamaica. For it to be accepted as a way of life is indeed tragic. We cannot let up on the fight against this monster.
Another important matter that the prime minister touched on relates to the banks and the high interest rate spreads they charge on loans. There can be no doubt that banking is one of the cushiest jobs anywhere in the world. It certainly is in Jamaica.
Prime Minister Golding greeting participants in Mandeville at his first town hall meeting on May 19. (Photo: Gregory Bennett)
Present-day Jamaican bankers have been raised on the teat of easy returns. You take money in to them and all they have to do is salt it away in risk-free treasury bills and other Government of Jamaica instruments and wait for pay day. Knowing that the money is safe and secure (since the government is under constitutional constraints to repay its debts) they can now lend it to the public at an astronomical spread. A cursory glance at some rates will reveal a spread of almost 9 percentage points on almost any category of loan. Gone are the days when bankers would slug it out in the field, hunting every project they could put a loan on. Nowadays they sit in their air-conditioned offices waiting for the business and the dough to pour in. And they know it will come because there is a lot of money sloshing around in Jamaica waiting for a place to take refuge.
The truth is that banks in Jamaica are not driven by a development culture. They seem not to understand the relationship between banking and economic development and that they have to be prepared to take risks in order to spur national development. I remember accusing the banks of this in articles I wrote in the 1980s. Very little has changed. If anything, things have become worse as the lure of easy money to be made siphons off the creative energy that is needed to mobilise capital and bend it to the will of development.
One is not suggesting that we can return to the kind of banking that occasioned the collapse of the financial sector in the 1990s. But the "safe" banking strategies that are being employed by bankers today just will not cut it. The large spreads on loans stymie production. I recently inquired about the possibility of getting a loan at one of our banking institutions. I really did not intend to take the loan, but wanted to get an idea of the conditionalities that govern certain loan products.
The only thing that I was not asked is to account for all the holes in my underpants. I know that since the banking collapse and the onset of new regulations lending institutions have had to tighten up on their lending policies. This has been exacerbated by the present global economic crisis. But I felt raped of my privacy when I considered the hoops that I would have to jump through to even begin the loan process.
The banking culture has to change in Jamaica. It has to get in line with the new realities facing the country. Creative ways must be found to assist those who want to get on seriously with the business of production. It is true that the government has encouraged the "easy money" culture among our financial institutions by its voracious appetite for debt, but the banks cannot continue to rely on this, as some seem to do, as the main source of their survival. There is much in the traditional ways of banking to be celebrated, one of these being respect for the customer. The customer is still king whether the banks want to believe it or not. The truth is that the customer does not always recognise this and often behaves like a serf to banking interests. This must change.
[email protected]
www.drraulston.com
Raulston Nembhard
Wednesday, May 27, 2009
I attended the first townhall meeting that was put on by the prime minister's office in Mandeville. I was impressed by the large crowd that was in attendance and at the high level of participation by those attending. The prime minister gave a cogent presentation on the state of the Jamaican economy as he saw it, focusing on the woes of the bauxite industry and the difficulties being faced by the residents in the central part of the island.
Raulston Nembhard
What I found interesting in the question and answer session is that among the many questions that were asked only one was related to the problem of crime.
There were just a few that had any bearing on the subject such as the state of the justice system. People seemed preoccupied with education and health care and how government could provide ways to strengthen their earning power in agriculture and non-traditional areas of employment.
Although one meeting of this kind is not sufficient to gauge a trend as to the national sentiment on crime, I got the distinct impression that people by and large have become resigned to the problem. Crime seems to have now become so interwoven into the social fabric that a fatalistic attitude has set in. People seem to have become so inured to the problem that it no longer seems to occupy the centre stage of their concerns. The idea seems to be that crime is something one has to live with and one might as well just get on with one's life irrespective of the social chaos in which this has to be done.
If my assessment is correct that people have become resigned to the problem of crime, especially brutal murders, then this is indeed very sad. If this is the case the new Minister of National Security, Senator Dwight Nelson, has his work cut out for him. For an essential plank in the fight against crime is an alert and engaged citizenry that recognises its important role in the effort. A resigned citizenry is not easily motivated and this certainly does not augur well for society. No civilised society can survive the kind of criminal assault that we have in Jamaica. For it to be accepted as a way of life is indeed tragic. We cannot let up on the fight against this monster.
Another important matter that the prime minister touched on relates to the banks and the high interest rate spreads they charge on loans. There can be no doubt that banking is one of the cushiest jobs anywhere in the world. It certainly is in Jamaica.
Prime Minister Golding greeting participants in Mandeville at his first town hall meeting on May 19. (Photo: Gregory Bennett)
Present-day Jamaican bankers have been raised on the teat of easy returns. You take money in to them and all they have to do is salt it away in risk-free treasury bills and other Government of Jamaica instruments and wait for pay day. Knowing that the money is safe and secure (since the government is under constitutional constraints to repay its debts) they can now lend it to the public at an astronomical spread. A cursory glance at some rates will reveal a spread of almost 9 percentage points on almost any category of loan. Gone are the days when bankers would slug it out in the field, hunting every project they could put a loan on. Nowadays they sit in their air-conditioned offices waiting for the business and the dough to pour in. And they know it will come because there is a lot of money sloshing around in Jamaica waiting for a place to take refuge.
The truth is that banks in Jamaica are not driven by a development culture. They seem not to understand the relationship between banking and economic development and that they have to be prepared to take risks in order to spur national development. I remember accusing the banks of this in articles I wrote in the 1980s. Very little has changed. If anything, things have become worse as the lure of easy money to be made siphons off the creative energy that is needed to mobilise capital and bend it to the will of development.
One is not suggesting that we can return to the kind of banking that occasioned the collapse of the financial sector in the 1990s. But the "safe" banking strategies that are being employed by bankers today just will not cut it. The large spreads on loans stymie production. I recently inquired about the possibility of getting a loan at one of our banking institutions. I really did not intend to take the loan, but wanted to get an idea of the conditionalities that govern certain loan products.
The only thing that I was not asked is to account for all the holes in my underpants. I know that since the banking collapse and the onset of new regulations lending institutions have had to tighten up on their lending policies. This has been exacerbated by the present global economic crisis. But I felt raped of my privacy when I considered the hoops that I would have to jump through to even begin the loan process.
The banking culture has to change in Jamaica. It has to get in line with the new realities facing the country. Creative ways must be found to assist those who want to get on seriously with the business of production. It is true that the government has encouraged the "easy money" culture among our financial institutions by its voracious appetite for debt, but the banks cannot continue to rely on this, as some seem to do, as the main source of their survival. There is much in the traditional ways of banking to be celebrated, one of these being respect for the customer. The customer is still king whether the banks want to believe it or not. The truth is that the customer does not always recognise this and often behaves like a serf to banking interests. This must change.
[email protected]
www.drraulston.com
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