Poor and low-income earners are excluded from the banking system
DEAR EDITOR,
The popular saying “It is what it is”, fits neatly with the struggles and the plight of the poor and low-income earners in Guyana. The minority PPP regime is forever guilty of the exclusion of the vast majority of the population, the poor and low income earners from the business economy and the banking system. It is disgusting!
For one reason, the imposed 5 percent annual wage/salary increase on the workers is far below the annual inflation rate of roughly 16 percent. And two, more than 60 percent of Guyanese depend on remittances from relatives and friends to survive, because their wages are so low that after paying their electricity bill, rent and transportation, not a penny is left to put food on the table for their children. It is estimated that 48 percent of the children in Guyana are malnourished and 54 percent go to bed half-hungry.
It is appalling to know that about 47 per cent of the adult population in Guyana do not have a bank account and about 80 per cent of those who have access to banks only have checking accounts, they cannot afford a savings account, mainly because the minimum balance required by the banks is very high.
This severe form of financial exclusion of the poor and low income families is what the St. Lucia-born Nobel Laureate, the late Sir Arthur Lewis characterized as “unbanked.” In comparison, only 13 percent of Trinidadians, 18 percent of Jamaicans and 11 percent of Barbadians do not have bank accounts. Why is it so high in Guyana? Blame the PPP, especially the Jagdeo regime.
In the main, commercial banks collect money from all customers, rich and poor alike, but lend it only to the better-off people who can pledge collateral based on their assets. Poor and low-income families do not have acceptable collateral and therefore cannot borrow from the commercial banks, some of which make super-profits.
The poor and low-income earners are usually forced to turn to building societies for mortgages and for short-term personal financing and still many are refused. Small businesses suffer from this system because they cannot get money to borrow to start or operate a business and the few that do qualify to get a loan cannot afford to pay the high interest rates which are charged by the financial institutions.
Effectively, the poor people and small businesses are excluded from the financial intermediation which the commercial banks provide. The financial exclusion of the poor and low-income earners and small businesses goes even further, because they often cannot meet the excessive requirements for opening and operating an account in a commercial bank.
An additional disadvantage is that the poor and low-income earners in the rural areas do not have convenient access to commercial banks; indeed they do not have access to any kind of financial institution. It usually requires several hours of costly travel to get to a financial institution.
During the colonial era, the poor and the low-income earners could deposit and withdraw their money through the post office in their districts. This rudimentary banking by the post offices was operated through what was at the time the Government Savings Bank. One of the late President Burnham’s most valuable ideas was the conversion of the Government Savings Bank into the Cooperative Bank of Guyana in 1969. When the PPP took office in 1992, they immediately got rid of the institutions created by the PNC, so in less than three years in office, they closed the Coop Bank. Today, the results are glaring for all to see, the PPP has disenfranchised the poor and low-income earners from the banking system.
The Cooperative Bank was an important mechanism for the financial inclusion of the poor, low-income families and small businesses into the banking system. It was a real bad idea by the PPP to disperse of the Coop Bank, but their goal was to exclude the poor and low-income earners from the Banking system. We believe that they still need much greater financial inclusion in the banking system. It does not have to be what it is.
Derrick Arjune
Asha Balbachan
Rohit Misir
Harish Singh
Chandra Deolall
Asquith Rose
Vincent Nauth
Sase Singh
Allison Rutherford
Devita Khan
Dr. Reginald Watkins
Donna Mathoo
Noel Moses
Vicki Rampersaud
Dr. Merle Spenser-Marks