Basseterre, St. Kitts, June 14, 2017 (SKNIS): During a sitting of National Assembly on June 13, Prime Minister, Dr. the Honourable Timothy Harris, said that it is imperative that St. Kitts and Nevis and the wider Caribbean implement initiatives that have the potential to further diversify and develop the financial system and support the private sector. One such initiative is the development of a regional Partial Credit Guarantee Scheme which will complement the ongoing Fresh Start Project.
The prime minister read for a first time the Eastern Caribbean Partial Credit Guarantee (Corporation) Agreement Bill, which will see the scheme come into fruition.
Over the past year, the World Bank and the Eastern Caribbean Central Bank (ECCB) have collaborated with Member Governments of the Eastern Caribbean Currency Union (ECCU) to develop the institutional framework that would facilitate the implementation of the scheme in the region, revealed the prime minister.
Prime Minister Harris said that there is a firm commitment to establish the scheme as was demonstrated on March 2, 2017, when the Monetary Council of the ECCB approved the Eastern Caribbean Partial Credit Guarantee Corporation Agreement. He said that the agreement was signed by all ECCU Member States with the exception of Montserrat and would facilitate the establishment of the Eastern Caribbean Partial Credit Guarantee Corporation. It would also provide operational guidelines for the scheme.
The ECCB will provide oversight and on site operational reviews regularly to ensure that the corporation is adhering to its established procedures.
Prime Minister Harris explained that the broad objectives of the corporation are “to assist in promoting economic growth and development in Member Territories by administering the Credit Guarantee Scheme to increase access to finance; offer credit guarantees to Participating Lenders in respect of Qualifying Enterprises; enable Qualifying Enterprises to access loans from Participating Lenders with the intention of strengthening the confidence of Participating Lenders in providing loans to Qualifying Enterprises; and increasing the ease with which loans can be accessed by Qualifying Enterprises from Participating Lenders.”
He further explained that the corporation, specifically, would encourage financial institutions in the ECCU to increase their lending to micro, small and medium sized enterprises (MSMEs) for growth and development through the provision of partial credit guarantees. A framework will be established to allow the corporation to provide partial guarantee on a loan made by a participating lender such as a commercial bank or credit union, to an MSME borrower within the ECCU Member States.
“The partial guarantee is intended to provide credit enhancement for those borrowers that do not meet typical bank credit standards,” he said. “If a borrower defaults, the corporation would pay to the lender a portion of the losses, thereby reducing the lender’s risk in the transaction. The use of a partial guarantee would also provide incentives for both the borrower and the lender to ensure success of the project.”
Prime Minister Harris said like any other business a fee will be charged for service.
“The income from fees charged to lenders to cover costs inherent with the core business of the corporation and the earnings generated from investing the capital base would provide revenues that would be used to meet the operating expenses of the corporation,” he said. “The corporation’s initial authorized capital would be approximately EC$30.0 million and will be derived mainly by contributions from Participating Member Governments and bilateral agencies or investors.”
The effective implementation of and compliance with the Eastern Caribbean Partial Credit Guarantee Corporation Agreement is “essential to advancing the process of operationalizing the corporation,” said the prime minister. “Therefore, the corporation must be established as a legal entity that is recognized by all the Participating Member States of the ECCU. Mr Speaker, the Bill that is before us here today, is to bring the Eastern Caribbean Partial Credit Guarantee Corporation Agreement that was signed by ECCU Member States in March of this year into effect.”
