By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior Royal Bank of Canada (RBC) executive yesterday conceded that Bahamian commercial banks “shy away” from providing credit to both The Bahamas’ largest industry and even successful entrepreneurs.

Liacarla Adderley, RBC’s area vice-president for business banking in The Bahamas and Turks & Caicos, told a tourism diversification webinar organised by the Canadian-owned lender that the absence of adequate collateral against which to secure a loan was often why commercial banks declined to finance entrepreneurs with a proven track record.

“When you look at entrepreneurs in those islands who want to launch their products, get their products out there, it’s been a challenge,” she conceded. “In the case of start-ups, banks typically shy away from start-ups because they don’t have a track record to rely on.

“In the case of successful entrepreneurs, who want to add products and have been successful, and their financial statement show that they’re very profitable, but collateral is lacking.” To overcome such obstacles, Ms Adderley said RBC had partnered with the Government’s Small Business Development Centre (SBDC), which provides guarantees to underwrite financing to entrepreneurs and start-up ventures.

Bahamian commercial banks have long been criticised for being risk averse, and preferring to finance consumer debt rather than invest in the more productive sectors of the economy that have long been starved of capital. However, banks generally lack the imagination and vision to take such risks on entrepreneurs and start-ups, and there are laws and regulations that prevent them from doing so - not least the need to safeguard their depositors’ money.

Ms Adderley, meanwhile, confirmed that most Bahamian banks took a similarly risk-averse stance when it came to lending to the hotel and hospitality industry, the largest sector in the Bahamian economy. “Banks do have a reputation for shying away from providing credit to the hospitality industry, especially in the Family Islands,” she conceded.

Key deterrents were the “cyclical nature of cash flows” given the typical peaks and troughs of the Bahamian tourism calendar, and often the absence of financial records and data upon which to assess a hotel or tourism operator’s performance.

“We do provide support to this market where opportunities exist,” Ms Adderley said, pointing out that RBC had recently provided financing for an unnamed boutique hotel acquisition in the Family Islands that had “fared very well” and exhibited “strong cash flow”, in addition to a solid business plan from the purchaser.

Latia Duncombe, the Ministry of Tourism’s acting director-general, told the same webinar that The Bahamas’ had “in the last three years alone benefited from close to $2bn in foreign direct investment” inflows into major resort projects. Hotel numbers had expanded to 322, with the newer developments including the 300-room Margaritaville property with its 11 dining options, plus the upgrades at Resorts World Bimini and Sandals Royal Bahamian.