By Roderick A. Simms II

Advocate for sustainable Family Islands growth and development

E-mail: RASII@ME.com

An assessment of the banking system in the southern Bahamas needs to be performed in an effort to accommodate the financial needs of pensioners, business owners, investors and consumers living in this region. In the past five years, international banks have ended the provision of physical services on certain Family Islands as part of the transition to digital/electronic services. This trend is not unique to The Bahamas, as banks and other financial institutions are seeking ways to modernise their services. The channels and means of banking are ever-changing, so the difficulty lies in measuring and increasing the readiness of Family Island residents to adapt to such changes. The government should put in place measures to help residents transition into the digital banking era. One key aspect is education. Another important aspect is finding different avenues for residents to continue to use commercial services.

Progression

While it is unsettling that certain international banks have left behind the “bricks and mortar” side of their banking operations, it should be noted that they are not obligated to provide services in The Bahamas despite being here for a number of years. International banks are faced with fierce competition and strict guidelines as the financial market becomes more saturated. However, this does not change the fact that banking services need to be a part of the economy of the southern islands and, by extension, The Bahamas. In order to achieve this, residents need to be educated on the various banking options that exist today. What may be a difficult task is learning to adapt to these new options that are a part digital banking. All of this highlights a need to be more progressive.

Out with the Old

Given the geographic proximity of The Bahamas to the US, many historic events of the early 19th century impacted the Bahamian economy at the time. The investment tycoon, Henry Flagler, helped trigger economic growth by acquiring the British Colonial Hotel, formerly known as the Royal Victorian, which was originally built in 1898. The impact of this development can be seen in the actions of the Royal Bank of Canada (RBC), which became the first foreign (Canadian) bank in The Bahamas as of 1908. Notably, in 1836, the Public Bank of The Bahamas was the first bank to open that offered commercial services. It was run by the Post Office and closed in 1886. Shortly after, the Bank of Nassau offered similar services and was open from 1889 to 1916. As history would tell it, banking has always been embedded in the economic blueprint of The Bahamas, showing it is a vital part of the country. But times have changed, and there is a need to modernise banking systems in order for the economies of Family Islands to thrive.

For instance, there are currently no physical banks on the island of Mayaguana. Residents use a money transmission business (MTB) and/or the Post Office. However, these ventures tend to be costlier to transfer monies. Also, there is limited access to the main Post Office in New Providence since it is currently in the process of relocating. In addition, some residents take a risk by transporting funds with persons travelling to different islands via air or sea. In 2018, residents of Mayaguana should not have to go through archaic measures such as the latter in order to perform banking activities. These residents should at least have an Automated Teller Machine (ATM) to accommodate business transactions. The current banking situation on the island does not accommodate investors, and nor does it capture the government’s efforts to improve the ease of doing business.

Ease of Doing Business

One of the government’s objectives is to improve the country’s overall ease of doing business ranking. The country’s ranking in the World Bank’s ease of doing business index now stands at 119. There are many factors that determine how this ranking could be improved. Generally, effective processes and control systems, along with proper infrastructure, are all variables that tcontribute to a successful business. But if banking processes are not in place or isolated, it makes it difficult for a business owner to transfer monies, track expenses and maintain a proper payroll.

In addition, the lack of bank presence could also deter investors from wanting to do business on an island. It may also discourage local and international entrepreneurs by being the missing link that is needed to conduct business.

Tech Drive

In today’s banking environment, technology is used to improve or replace outdated systems that can help these institutions cut back on costs. According to the Central Bank of The Bahamas’ 2017 financial sector review, employment levels at banks and trust companies contracted by three percent. This followed a decrease of two-and-a-half percent in the previous year. The regulator attributed the decline to branch closures and business consolidations. With that being said, The Bahamas’ unique geography puts banks, particularly international ones, in a difficult situation of sustaining expenses while offering their services to a small percentage of the population that is spread out across the southern Family Islands. Therefore, banks are more in favour of setting up ATMs or a mobile team to help accommodate residents on those islands. It further aligns with the digital agenda to reduce costs and the greater use of technology. The Bahamas can help by becoming more technology developed and, in return, strengthen trust in our financial system from international bodies.

Conclusion

Banking systems in the southern Family Islands are not an overnight fix, but the situation calls for a solution that includes participation in education awareness from residents and the support of the Government to examine processes that will work for them. Residents should not have to take risks with monies, and nor should they be charged excessive transfer fees since consumer goods and services are already priced higher on these islands compared to Nassau. The economies of the southern Family Islands are equally important to the overall economic growth of The Bahamas and should be treated as such. This is an effort where both parties should come together to develop a plan that will address any grey areas as it relates to banking.