With the local economy predicted to shrink as much as 15% and the global economy projected to take nearly a decade to fully recover from the COVID-19 shutdown, one Bahamian financial expert is suggesting lowering the prime rate would be a surefire way to re-energize growth and investment.

Robert Pantry, founder and CEO of Simplified Lending, offered the prime rate reduction suggestion following one of several national appearances in virtual discussions about the economy in recent weeks.

His comments coincided with those recommended by the International Monetary Fund (IMF) the same day. IMF suggested that The Central Bank had wiggle room to lower the interest rate that now stands at 4%.

“There is always a delicate balance between adjusting the prime rate for an economic stimulus tool and maintaining a certain standard to protect necessary reserves,” said Pantry. “I understand that delicate balance but believe that if we at least start the national conversation, we can move toward taking a positive step to re-start the growth we were beginning to enjoy before the coronavirus struck.”

Timing, he said, is especially interesting now.

Robert Pantry, Simplified Lending Founder and CEO 

“I would like to see the government work with The Central Bank to evaluate the possibility of lowering the prime rate as individual mortgages and business loan waiver programs begin to expire,” Pantry said, referring to clearing banks’ exemptions providing a window of reprieve for those displaced by the economic fall-out of COVID-19. The pandemic has caused unemployment in The Bahamas to soar to nearly 50% with many in lower to middle-level jobs feeling the worst pinch and struggling to maintain rental, mortgage, car or other loan payments.

“Reducing the prime rate will allow those who have adjustable rate mortgages or loans to enjoy lower monthly payments,” Pantry said. “That’s a plus for businesses, individuals and families, especially in the middle class. It also frees up more money, allowing it to flow into the general economy, igniting long-term economic growth. That growth ultimately benefits everyone including banks which may experience a slight reduction in profits in the short term but would be expected to experience stronger profits over the long term.”

Along with the savings from a lower mortgage rate for homeowners or landlords, the reduction in prime rate would allow businesses to borrow at more attractive terms or meet obligations for existing loans at lower costs.

“It would also fuel demand for real estate and new construction. That generates more money for government in fees and taxes as well, creating a win-win for all,” he said. And it could save struggling businesses.

“For many businesses that are teetering on the edge, trying to hang on until the new reality is established, a reduction in financing costs could be the difference between surviving and closing,” said Pantry, who founded Simplified Lending less than two years ago after a long career in banking.

The firm was one of those selected to partner with government in the Small Business Accelerator Loan Program that distributed millions in grants and low-interest loans to small and medium size businesses, a life ring to assist with survival through the pandemic that has struck at the heart of economies around the world.

The economic fallout from the pandemic has been especially hard on countries like The Bahamas dependent upon visitors from abroad to survive.

Pantry’s comments about the need to encourage friendlier lending followed his virtual appearance on a Bahamas Business Outlook Webinar hosted by TCL Group on the topic “Moving the Economy Forward, Upward, Onward Together.” Moderator was Bahamas@Sunrise co-host Philip Simon and Pantry was one of four panelists.

Declaring The Bahamas was at a “turning point” in its economy, Pantry said there are key engines in place for a pathway to success, but those engines need additional fueling.

“We have to look at three major indicators – investment by the private sector, movement and pricing in real estate and liquidity in the banking sector and reserves,” he said.

“What links those three ingredients together is lending and that is why tweaking the cost of money through a reduction in the prime rate can be helpful. We have to make lending accessible to entrepreneurs.

I am encouraged by the increased level of lending activity we as a company are experiencing since the government began phased re-opening. It is time we stopped making lending out to be evil and began to appreciate that the ability to borrow at reasonable rates, terms and conditions is what fuels growth in any economy.”