REPORT #37 Feb 1999

Produced by the Belize Development Trust
There is a essentially no banking leadership in Belize! There are no Belize Privately owned competitive banks in Belize. Indeed, one could say, outside of the Credit Unions and Government Statutory style lending institutions, the absence of banks in Belize, owned by Belizeans is a serious shortfall in public entrepreneurial services.

It does not seem to be lack of markets, but rather one of structure and legislation. ( political will and central bank leadership )

There are many branch banks around the smaller communities of the nation. But all of these are subsidiarys of Universal European style banking system. Just recently, the USA Federal Chairman Greenspan was answering challenges in the USA from the Banking Committee on legislation. He pointed out, that in Europe the idea was to have Universal Banks, whereas in the USA, there was a division between a necessary Holding Finance Corp and that of individual banks. There was a lot of other legislation discussed, but when challenged, he said, that the USA has a superior banking system to that of the rest of the world, which uses the European model Universal system with subsidization. I didn't follow the legal arguments, but he pointed out that in times of financial and economic crisis, the USA banking system was resilient and able to handle and solve crises. Whereas right now, in Asia and Europe, the Recession and financial crises have overwhelmed them. Japan is a case in point. Despite six years of financial and economic troubles, the banking system in Japan, which is a Universal system like Europe has failed dramatically to deal with the problems. And while the USA is different, the system and structure of the banking methods is more resilient relying on private banks and the financial market forces to correct problems. This it has done admirably, as the situation in the world can attest.

In Belize we only have foreign banks, all using the European style Universal system. There are no private competitive small banks in Belize owned by Belizeans.

The difference seems to be in subsidies. One Universal bank can establish itself in Belize and meet the capital requirements. It is then free to open small undercapitalized bank branches throughout the country of Belize. Should a smaller bank get into trouble, the main bank will funnel cash flow to handle the problem. This is what happened in Japan. Unfortunately, when economic crisis occured and all the branch and main banks suffered from the economic crisis, there was general collapse. In six years, the banks have not yet solved either their own problems or the country of Japan problems. The same could happen in Belize.

One problem with creating small private Belizean owned banks is the question of adequate capital. It seems strange that a branch bank of a main bank in Belize City, can only deal in sums of $10,000 two or three times a week in small district towns and communities. Yet Belizeans are not allowed to capitalize a native bank with $10,000? The difference is in the larger bank having qualified with capital requirements, whereas the smaller branches have no such requirement.

This is of course, blatant exploitation and unfair commercial practices. Yet this practice is condoned by lawmakers and the Central Bank Authority. The question seems to be that a small Belizean owned community bank, would need a capitalization out of relationship to the size of business it might carry on, in the field of fair competition. Thus it cannot get going.

What might be a solution? Possibly a banking insurance scheme for small entrepreneural Belizean owned banks. A deposit insurance. If a small bank in a community were to start with $10,000, then possibly it could be required by legislation to have deposit and bankruptcy insurance in the amount of double it's capital, or $20,000? Whatever the solutions, the questions beggar the mind as to who is responsible for this sorry state of affairs? What then should be the role of Central Bank? It seems that creating a homegrown Belize banking industry is not in its lexicon. Nor, is the leadership or political will forthcoming to create such recommended legislation, to enable Belize to establish it's own banks.

In the building of a nation there are many fields. Banking is just one, as a middle man service in the financial lifeblood on how a nation runs. I lack the expertise to either outline, the problem correctly, or offer possible solutions. But the people who are paid to do this, it is obvious to this fisherman; are also lacking the same capability and yet they get paid to do just that! Where does the(buck) dollar stop? Who should be held responsible for lack of Belizean banks? Central Bank? Or the political leadership? Finding solutions is their job! Not a fisherman's.

When it comes to the modern electronic banking on a world wide basis, without physical office structures, Belize is far behind places like Anguilla in the Eastern Caribbean, or the Dollar Bank in the southern USA. Where all banking is done by encrypted secured on-line internet communications. It isn't that entrepreneurs haven't tried. It's simply no one answers, the driver of the train is absent, or asleep at the controls. The problems compounded by Belize insisting on it's own individual currency.

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