The National Assembly on Monday passed the Guyana Development Bank Bill, paving the way for the creation of a new state-owned bank aimed at helping small and medium-sized businesses access financing.
For many entrepreneurs, getting a loan from a commercial bank can be difficult. Banks often require borrowers to provide collateral - something valuable, such as a house, land or vehicle, that the bank can claim if the loan is not repaid.
The new Development Bank is intended to make it easier for small businesses to obtain financing while also giving them the advice and support needed to grow.
Here's what the new law means.
Who can get a loan?
The Bank will lend only to small and medium-sized businesses operating in Guyana.
That could include a farmer looking to buy equipment, a seamstress wanting to expand her business, a shop owner hoping to stock more goods, or a young entrepreneur starting a new company, provided they meet the Bank's requirements.
What help will the Bank provide?
The Development Bank is designed to do more than simply lend money.
It will be able to:
• provide loans to eligible businesses;
• offer loans with or without collateral, meaning some borrowers may not have to use their home or other property as security;
• work together with commercial banks to finance larger projects;
• provide business advice and mentoring;
• offer training in bookkeeping, budgeting and managing money; and
• help businesses work together and learn from one another.
The aim is to help businesses succeed, not just provide them with cash.
How much can someone borrow?
Under the law, the Bank will not lend more than G$3 million to anyone or business.
The finance minister will have the power to increase that limit in the future if necessary.
Where will the money come from?
The Government will provide the Bank with an initial authorised capital. This is expected to be in the billions.
That money will come from funds approved by Parliament. As borrowers repay their loans, the money will go back into the Bank to finance other businesses.
Who will run the Bank?
The Bank will be overseen by a Board of Directors made up of between five and nine people with experience in areas such as banking, finance, economics and law.
The Board will appoint a Chief Executive Officer, who will be responsible for the Bank's day-to-day operations.
How will taxpayers' money be protected?
Because the Bank will use public funds, the law includes several safeguards.
Unlike commercial banks, it will not accept savings or deposits from members of the public. Instead, it will focus only on lending to businesses.
The Bank is also prohibited from making risky investments, must carefully assess loan applications, will be audited every year by the Auditor General and must publish annual financial reports.
Anyone who deliberately provides false information, misuses the Bank's money, destroys records or improperly releases confidential information could face fines of between G$5 million and G$10 million if convicted.
What happens next?
Now that Parliament has approved the legislation, the Government can move ahead with establishing the Guyana Development Bank.
The new institution is expected to become a dedicated source of financing and business support for small and medium-sized enterprises, with the aim of helping more Guyanese start businesses, expand existing ones and create jobs.
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