Dear Editor,
I wish to respond to a letter by C Kenrick Hunte, appearing in the Stabroek News and Kaieteur News of January 5 under the caption in SN, “Where is Minister Persaud’s evidence of GAIBANK mismanagement and misuse of funds?” The alleged inaccuracy was carried in a Kaieteur News article dated January 4, captioned ‘$220M small farmers credit programme kick started,’ where it was reported that Minister Persaud referred to, “…the defunct Guyana Agricultural and Industrial Development Bank (GAIBANK) which was established to lend to the farming community of Guyana but the funds were misused forcing the institution to now close.”
I submit the following in support of Minister Persaud’s contention, the details of which can be provided, if necessary, by the Guyana National Cooperative Bank which is in possession of the original documents.
I wish to first refer to the loans given to cooperative societies during the 1970s and early 1980s which were never repaid. In an effort to promote cooperatives during the early days of the Cooperative Republic the bank was ordered to open its coffers to party hacks and opportunistic adventurers who formed cooperatives with the single mindedness of obtaining monies for hastily formed cooperatives. The story is well known in Guyana, where over 100 of these shams obtained moneys for their principals – with nothing ever being repaid.
I recall, also, the small fanners’ credit of the early 1980s. US$4 million was made available by the IDB for persons whose net worth was less than $25,000. We are actually speaking of the poorest category of persons. After 3 years only US$l million had been disbursed. Since the government of the day was more interested in obtaining US dollars rather than disbursing good loans, it became necessary to disburse US$3 million in the final year. Can you imagine what actually took place? Those disbursed monies were never recoverable.
In the mid 1980s the IDB 154 loan for the rice milling industry became available. This loan became synonymous with rampant corruption; every rice miller seemed to be interested in borrowing because scarce items could have been obtained at very low prices. Cement, for example, was obtained at US$l per sack, whereas it would have cost several times more on what was then the blackmarket. A substantial amount of the available monies were therefore not appropriated to legitimate purposes.
Dr Hunte is correct in stating that GAIBANK reports were laid in Parliament every year since 1973. He must explain, therefore, why it was that, despite the provisions of Section 50(2) of the Cooperative Financial Institutions Act. Chapter 75:01, it was never found necessary for GAIBANK to approach the government to make good the foreign exchange losses. The currency had been devalued against the US dollar to $4, then $10, then $40, then $60 and finally $125 by 1992. All through these years GAIBANK’s bottom line progressively got worse since it was necessary to find more G dollars to repay US dollars borrowed.
By 1993, despite the Auditor General’s recommendations, GAIBANK had lost all credibility with international donors, which was expressed in a report by the World Bank and the only option at the time was to close.
The foregoing was only a microcosm of what was certainly a more complex series of events that may be instructive to a group of students intent on learning how not to run a development bank.
We need to stop fooling ourselves.
Yours faithfully,
Justin Mc Kenzie
Project Coordinator
Ministry of Agriculture
