Regional and international experts meet in the Turks and Caicos Islands on November 23-24 to discuss the impact of development banking in the Caribbean and to examine a regional approach to the role such institutions should play.

Development banks are important financial intermediaries in nearly all Caribbean economies. They are either wholly owned by the State or private interests or a combination of the two.

An important objective of these institutions is the stimulation of private enterprise development.  This has been largely achieved through the provision of medium- to long-term loan capital and technical assistance to private sector projects that contribute to the national development priority areas.

The meeting is being jointly organized by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the Caribbean Development Bank (CDB) and the Turks and Caicos Investment Agency (TC Invest).

More than 70 participants from financial institutions and international organizations from the Caribbean and Latin America will attend the meeting.

A paper prepared for the occasion by Dr Vanus James of the Mona Campus of the University of the West Indies (UWI) on the Caribbean case suggests the need for development banks to become subjects of reform “to be part of the wider agenda of development of the financial sector in the Caribbean region.”

This, James suggests, includes “the market for commercial paper and bonds and the equity market.”

James argues that development banking in the Caribbean, both at the national and regional levels, was developed essentially “to facilitate exploitation of the development resources of the region, at the time thought to be cheap labor, by providing direct credit and related services to selected priority sectors and by operating in a manner that promoted the development of the financial sector.”

Daniel Titelman, Chief of the Unit of Development Studies (ECLAC), which focuses mainly on financing for development and social issues, will deliver a presentation on Development Banking in Latin America (Recent development and Perspectives).

Titelman argues that the financial reforms of the 1990’s decade increased the volume of financial intermediation. However, Latin America still lacks a flexible long-term credit market to finance productive investment.

Moreover, the benefits from financial intermediation have not reached small and medium sized firms, agricultural producers and in general productive sectors that have relatively higher risks. The domestic development banks can help fill this gap and contribute to the development of the region. Development banks can play an important role in the development and promotion of new financial instruments.

In a similar way, James also urges a change in the traditional approach of development banks in the case of the Caribbean. He recommends the need to focus on corporate interest and to develop new financial instruments.

He says the past experience of the region has been that “these institutions cannot efficiently allocate credit to the modern priority sectors at optimal prices.” He says in the past development banks, under government ownership and control, were “forced to function in a manner that converted them into social-sector transfer mechanisms, transferring public funds to address the needs of many sectors in a way that offered little prospects of viability.”

James adds that “apart from being highly inefficient and financially and socially unprofitable … the development banks were not able, unilaterally, to promote development by building up the domestic capital forms critical to raising the asset turnover and hence the asset value and viability of the target sectors.”

Titelman also said in an interview the history of the performance of development banking over the years has been a mix of “good and bad”, but there is a key role for such institutions as “a good instrument to develop financial sectors and to finance investment.”

 He however said there are new challenges to the sector including the emergence of globalization and issues such as governance and the broader goals of development banks.

“The world has changed and we need to think about development banking in a new way,” he said.

Titelman and James will present on the Caribbean and Latin American experience respectively. A case study for Trinidad and Tobago will be presented by Anthony Birchwood of the Caribbean Centre for Monetary Studies of Trinidad and Tobago.

A similar paper on the Jamaican experience will be presented by Keith Collister of Orbus Consulting of Jamaica while Wayne Sandiford of St George’s University in Grenada will present address the Jamaican and Organisation of Eastern Caribbean States (OECS) experiences.

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