A $13 million deficit and mounting accounts receivables have plunged the Bahamas Development Bank into a financial crisis as the institution seeks to carry out its mandate to facilitate entrepreneurial pursuits of Bahamians.
The bank’s financial setbacks were revealed Monday at a press conference at BDB on West Bay Street, after Prime Minister Perry Christie announced a new board for the institution.
Headed by Attorney K. Neville Adderley, the board has a mammoth task ahead in dealing with a myriad of constraints as millions of dollars are written off annually as they are deemed uncollectible.
Former Chairman Macgregor Robertson said earlier that the situation put a serious strain on cash flow and on the bank’s ability to live up to its mission to ‘finance economically viable small and medium sized enterprises in a sustainable manner to foster economic expansion and diversification throughout the Bahamas.’
His replacement, Mr. Adderley, said he is now focused on reducing the level of delinquent loans.
But the most important thing, according to the newly-appointed chairman, is for the board to be a catalyst for economic development and diversification throughout the Family Islands.
“Not only has the board decided not to wait until projects are presented, but the board has made a decision to be proactive and seek out possible projects that can occur in Family Islands that may have a comparative advantage for those particular types of developments, for example crab meat processing in Andros, lamb processing on Long Island or mutton processing in Cat Island,” Mr. Adderley said.
“We are convinced that the government is very serious about development and diversification for New Providence and the Family Islands.”
According to Mr. Adderley, the board has “a lot of money to lend.”
“So [the board is waiting for] persons with an entrepreneurial spirit and good projects,” he said.
Other board members are Deputy Chairman Fritz Stubbs, who is also President and CEO of Orange Creek Development Company Limited; Clinton Clarke, an attorney; Robert Malone, a businessman and former banker; Peter Mitchell, an economist and banker; Caleb Outten, a businessman; George Rodgers, managing director of the Development Bank; Chandra Sands, a businesswoman; Angela Sawyer, an accountant and former banker; and Charlene Wells, an accountant.
The former chairman resigned in January, citing lack of communication with key government officials who he said did not answer his inquiries regarding his future with the organization.
Mr. Robertson told The Bahama Journal earlier that he resigned after seeing a draft Memorandum of Understanding to the bank from the Bahamas Agricultural and Industrial Corporation (BAIC) naming Elizabeth Member of Parliament, Malcolm Adderley as Chairman.
However, Prime Minister Christie had to quickly find another candidate after learning that the act governing the institution prevents sitting M.P’s from serving on the Board of Directors.
Mr. Christie expressed surprise on Monday over Mr. Robertson’s resignation.
“When I spoke to him on the telephone, it came without notice to me. He thought it was in the best interest to remove any conflict and any doubts, but it’s a new day.
I had a good relationship with the chairman where we could talk. Mr. McGregor is an important member of a committee I appointed for Clifton, so clearly there was no politics in that,” Mr. Christie said.
He added that shortly after the Progressive Liberal Party assumed office, Deputy Chairman Harold Watson, the brother of former Deputy Prime Minister Frank Watson, stopped attending board meetings.
“He was thinking – I suppose – that once a new government came in – which he is correct – there would be a change,” Mr. Christie said. “On all of the boards, I’ve kept some kind of continuity and symbolism that I didn’t want to necessarily change right away. Like for instance, Chairman of the Licensing Authority, Conrad Knowles was allowed to complete his term. I was sort of playing around with changing McGregor Robertson with one of his partners because I had another role for Mr. Neville Adderley.
“I think members who were appointed by the former administration, one by one they started to feel that the effective power of the board just wasn’t there. Two or three of them had resigned so I then realized that I better move to replace them…I really was surprised when Macgregor resigned.” The only difficulties faced by the bank in the absence of a chairman was signing off on legal documents, according to the bank’s Managing Director George Rodgers. However, he said the bank was able to be self-sustaining during the period.
Meanwhile, Prime Minister Christie encouraged the board to find budding entrepreneurs and to ensure that the bank is responsive and sensitive not only to the demands of the country, but to the aspirations of those Bahamians.
“I believe I will have the honor at this point in our history to usher in a period of unprecedented development both in scope and development from Inagua to Bimini,” Mr. Christie said. “Wherever funds are injected into the local economies of this island it necessarily means that this bank…has a tremendous role to play.”
He expressed confidence in investments in Exuma that he said will lead to extraordinary opportunities for the people there, provided the Development Bank is proactive in its understanding of the local economy in Exuma and informed on developments.
“Clearly, there is a call for young Bahamians to move to the new frontier of developments as they are emerging,” Mr. Christie said.
The Emerald Bay Resort is scheduled to come on stream by the end of the year and the government is poised to announce another major $200 million development in Exuma, he said.
“In cases like Exuma where there is this coming together of outside capital and opportunities for Bahamians, the bank will actually go down and hold town meetings as you do from time to time and get involved at the local level and talk with people. You will then redefine your relevance to our people,” Mr. Christie told the board members.
During the budget debate this June, a proposed venture capital fund is expected to be announced, according to Parliamentary Secretary in the Ministry of Finance Michael Halkits, who was also at the board announcement.
Mr. Halkitis said such venture capital would target those projects that would not meet the more traditional banking criteria.
“You’re taking an additional risk of the project, but feel that in this stage of our development, business people will be coming forth who may need small amounts of money but these projects will be more marginal. So you will be taking a chance on the venture, but you think it may be worth the investment,” Mr. Halkitis said.
“Take for example, someone who is going into new territory doing something that hasn’t been done before, you wouldn’t be able to rely on traditional forecasts etc., but the project will be studied and funding advanced. Even with the best plans, things go awry,” he explained.
As for the prime minister’s analysis of BDB’s failures over the years, he pointed to the failure of the bank to create funding for marketing assistance.
The prime minister said given the resources of the country with relation to the Development Bank and the Ministry of Tourism, there should be a more organized approach to guaranteeing the success of businesses by giving them marketing assistance.
By Hadassah Hall, The Bahama Journal
