Bahamas Development Bank (BDB) Managing Director Arinthia Komolafe has decried an "absence of clear policy direction for the institution" and called on the government to renew its commitments to the bank and the country's struggling small and medium-sized enterprises (SME) sector.
Komolafe told Guardian Business that the BDB is "ripe" for financial restructuring and a boost in capital as the bank continues its collection reforms. However, she stated that it is becoming "difficult and challenging" to keep staff morale high, given the uncertainty surrounding the government's plans for the struggling institution, especially plans for any recapitalization.
"As far I am concerned, the next step following the cleaning up of the portfolio, alignment of duties, enhancement of the risk management framework and operational restructuring is the determination of the future of the bank from the government's perspective. In my discussions with institutional heads and representatives from multilateral agencies, we have been given commitments to provide technical assistance and guidance with respect to any potential restructure plans, but it must be stressed that this can only be achieved with government support," stated Komolafe.
"We all know that SMEs drive the economy of nations and our current economic condition makes it even more important that the framework that fosters the success of this sector is given urgent attention" she added.
While Komolafe recently stated that the bank has made progress in addressing its portfolio of non-performing loans, she warned against "unnecessary interference" as the bank continues its restructuring efforts. Komolafe also stressed that though the bank's collection strategies have improved, its financial position is still threatened by liquidity concerns threatening the institution's ability to carry on its main mandate of lending to prospective SME operators.
"We note the current administration's commitment in its charter for governance to reposition and restructure the BDB to meet the demands of the 21st century. The bank's 2014-2018 strategic plan was written upon that premise. This commitment makes me hopeful that the government will place more focus on the bank as well as relevant agencies to bring about the necessary stimulation for the SME sector," she stated, noting that demand for SME financing remains high despite the BDB's inability to entertain all applications.
As of December 31, 2013, the BDB's performing loans accounted for only $11.6 million worth of credit in a near $40 million portfolio. The government has yet to publish the BDB's 2014 financial statements, yet Komolafe has predicted a downward trend in the bank's bad loan ratio. The BDB adopted a "no scared cow" policy in 2013 designed to clean up its troubled portfolio across the board, which Komolafe stated had encouraged the bank's staff to function "without any fear of intimidation or political interference".
"It is amazing how empowered and motivated employees can be when they know that they have a leader that supports them and creates an environment for them to do their jobs without unnecessary interventions. At the same time, unnecessary interference can exude the exact opposite," she said.
The BDB has recently placed greater emphasis on restructuring qualifying loans and liquidating certain assets, though Komolafe does not expect the BDB to fully benefit from its liquidation efforts until the upcoming financial year.
"Unfortunately, active litigation accounts for a significant portion of the non-performing portfolio, more than 80 percent. However, this course of action was necessary in an attempt to clean up the bank's ailing portfolio of legacy accounts and to separate the 'good bank' from the 'bad bank,' so to speak," she said.
Komolafe stated that the BDB still experiences shrinkage due to loan payoffs, either because of maturity or financial reorganization by several of the bank's clients, though the bank's performing portfolio has been stabilized.
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