Dear Editor,
Early in the new millennium a much-debated topic was: does a Modern Financial System drives Economic Growth or vice versa? During the global financial crises nearly a decade and half ago, popular financial columnist Martin Wolff writing in the Financial Times stated that “finance is the web of intermediation binding economic agents to one another across both space and time without it no modern economy can survive.” Therefore, the PPP/C recent Manifesto (2025) ‘Forward Together For A Better Guyana’ attention to broaden, deepening and upgrading of the current financial system in the Guyana’s Economy is most welcomed as the financial sector seemed to lag behind current economic growth .
Since Ross Lenine ground breaking researches in the 90’s the nexus between finance and growth has been well established. Financial development in Guyana has the potential to unleash new sources of economic growth by facilitating diversification in the non-oil sector and make the transition to higher income levels. An efficient financial system helps channel funds to productive uses, provide insurance against shocks, reduce information asymmetries and can alleviate poverty and inequality (Beck, Kunt and Levine 2004). It is therefore incumbent on the PPP to focus on the development of the financial system that can support a modern diversified economy.
The PPP/C Manifesto (2025) identified the challenge “to make financing more easily and affordably available to Guyanese business community especially Small and Medium Sized Enterprise (SME’s) and households”. Once elected, the PPP pro-mised to establish a SME Develop-ment Bank with zero interest rate. Historical experience has shown that in countries where stock markets were fairly underdeveloped, for example in South East Asia, development banks were able to fill gaps and facilitate the rise of the manufacturing sector. Guyana’s stock market is very underdeveloped with some 15 companies registered and a market capitalization of just over US 1.5 million with trading and revenue limited. Jamaica has shown a gateway to a more vibrant stock market with the creation of a junior stock exchange. Currently, institutional investors pension funds; NIS insurance companies and mutual funds have limited avenues to invest their money despite being excessively liquid.
The development of local capital market will provide the avenue for longer term investments and improve access to local currency financing. For instance, a local currency bond market will be an incentive to both savers and investors. This will increase the availability of longer-term financing and allow household and firms to better manage interest and maturity risk. The PPP manifesto promised to address this issue by reviewing the legal and regulatory framework governing capital markets and the creation of structured investment vehicles.
The financial system consists of six commercial banks in Guyana that are relatively concentrated and not deep enough to support a modernized economy. The banks are well capitalized with low level of nonperforming loans. However, the level of participation at banks can be improved with the removal of red tapes and documentation -requirements. One indi-genous commercial bank that I will not name has led the way by crossing the digital frontier and made significant progress with online activities with the simple click of a mouse that will take hours in-person. Moreover, a reputable international bank Citibank has shown a keen interest in setting up a branch in Guyana. This will help to remove the hurdle of the corresponding banking relations (CRB) that affected banks in many developing countries.
The manifesto promised comprehensive National Financial Literacy and Financial Inclusion Strategy, promotion of the use of agent banking networks and broaden the digital payments system these are necessary steps in the creation of a modern financial system. The unprecedented economic growth since oil production came on stream demands a more advanced and user friendly financial system.