Development banking in the Eastern Caribbean: the case of Saint Lucia and Grenada

Abstract

Abstract Development Banks are part of the financial landscape of the Eastern Caribbean. In one form or another they have been in existence since the late 1960s and have played a not too insignificant role in the financing of small and medium size enterprises in the economies.[1] Development Banks emerged in the Eastern Caribbean as a post-colonial financial institution with an emphasis on agricultural development. Indeed, related pre-development bank financial institutions were referred to as Agricultural Development Banks. In the case of Grenada there was initially the Grenada Agricultural Bank, which evolved into the Grenada Agricultural and Industrial Development Corporation which finally gave way to the Grenada Development Bank. Similarly, the St. Lucia Development Bank was preceded by the Agricultural and Industrial Bank, the Housing Development Bank and the Further Education Loan Fund. Despite such a history not much has been done by way of an analysis of these institutions. This is not to say that no analyses have been done on the Development Banks. However, it would appear that analyses conducted on the Development Banks were primarily for internal institutional use and/or for the use of fund providers of the Development Bank. Most of the analyses done were therefore not always in the public domain. Hopefully, this study would make its way to a wider audience than those before. This study will examine the St. Lucia Development Bank and the Grenada Development Bank. In an attempt to place the examination of the Development Banks in some context, the examination will begin with a discussion of the origins of development banking in general. It will then proceed to look specifically at the emergence of development banking in St. Lucia and Grenada. Discussions of some stylize facts related to the St. Lucia Development Bank and the Grenada Development Bank will be undertaken. Here, the statutory basis of the Development Banks, their mandate, ownership, and sources of funds, among others will be discussed. The study will then move on to discuss the structure of the Banks which will be followed by an examination of their governance and the nature of government control./p> Three other crucial issues will be addressed. The instruments and associated policies of the Development Banks will be looked at. This will be followed by an analysis of the performance of the Development Banks. The study will then close with some suggestions as to possible new directions for the Development Banks. While the study is restricted to the St. Lucia Development Bank and the Grenada Development Bank the suggested new direction could have some applicability to the rest of the Eastern Caribbean. Indeed, some suggested new directions may require approaches which may have to transcend the individual countries. This is more so in a context where the Eastern Caribbean share, in some sense, a common financial space; and there is the stated policy objective of deepening the integration process in the Eastern Caribbean. The conduct of the study encountered some limitation with respect to data. Data for Identical periodic dates were not available for both Development Banks; with a shorter period for the Grenada Development Bank relative to the St. Lucia Development Bank. Accounting data from the annual accounts of the Development Banks were not always identical and over the different periods accounting formats and standards were evidently changed. Thus, some amount of data mining had to be done. In addition, in 2001 the St. Lucia Development Bank merged with the then National Commercial Bank of St. Lucia to form the National Bank of St. Lucia. The St. Lucia development Bank as was known before the merger became a division, the division of development banking, of the National Bank of St. Lucia. There would therefore be some shortcomings in the analysis presented.