Economist Winston Brassington recently told the banking sector that consideration should be given to increasing loans to the private sector while simultaneously lowering interest rates.
With an average of only 33% of assets from local commercial banks loaned out to the private sector over the past ten years, Brassington said that increases in loans by banks to that sector is necessary to avoid “leakage from the economy and a drag on investment and economic growth”. Last year, according to Bank of Guyana data, the loans-to-assets ratio percentage was even lower at some 27%.
“Banking sector returns are lopsided at the expense of the private sector borrowers. Too much of the nation’s savings are not being injected back into economy and serving as a drag on growth. Growth of economy will reflect similar growth of banks deposits and assets and the private sector can benefit from lower interest rates that can approach North American Standards,” Brassington told a banking forum last week. “More lent at a lower rate can compensate for less lent at a higher rate, due to variances in interest rates,” he also posited.
