Development bank offers loans to SMEs and public servants

| 04/11/2015 | 14 Comments

CNS Business(CNS Business): The Cayman Islands Development Bank (CIDB) has introduced two loan programmes, one designed for small- and medium-sized enterprises (SMEs) with proven track records for at least two years, and the other for public sector workers who want to consolidate their high-interest rate debt. Wayne Panton, the minister responsible for financial services and commerce, said the bank was now in a position to lend and fuel development due to government’s support for the bank in addressing the bad loans and poor decision-making of the past.

CEO and General Manager of CIDB, Tracy Ebanks, said the role of the bank was to provide financing that facilitates local economic and social development. “This means that CIDB’s lending guidelines are geared toward clients such as SME owners, who need the capital but may have some difficulty in obtaining it, as well as to civil and public servants, as a segment of the population that CIDB wants to reach,” she explained.

Ebanks said the programme complements those offered by commercial banks, as SME loans can provide bridge financing that could lead to increased business for commercial banks.

Panton said the government’s commitment and support to CIDB has resulted in it being able to return to its core function of a development bank, paving the way for the new loan products.

“These programmes have been structured in such a way as to maximise the assistance we can give, while not imperilling the bank’s financial stability through bad decision making, as had been the case under the previous administration,” Panton said. “CIDB’s management team, supported by a new board and the bank’s credit committee, have done excellent work to enable these new loan programmes, which enhance government’s already strong initiatives.”

For business owners, these initiatives include reductions in licensing fees, duty costs, and the benefit of CUC duty reductions, among others, the minister noted. For individuals, the ability to refinance high interest loans enhances initiatives that support and encourage personal financial stability, such as the Managing Personal Finances sessions that he and Finance Minister Marco Archer launched in August.

“It is wonderful to be able to help our small-business community succeed and prosper, but it is perhaps more gratifying to be able to help at least some individuals who are struggling with heavy debts,” Panton said. “We have heard many people tell their stories about how they landed in hardships, and they are as difficult to hear as they are to tell. What these stories very clearly point out is the need for lending institutions to offer affordable rates where possible, and the need to teach and encourage prudent money management across socioeconomic and age levels.”

Ebanks encouraged people who are interested in either of these loans programmes to call 949-7511 and book appointments with bank staff, as walk-ins will not be accepted. Regulated by the Cayman Islands Monetary Authority, CIDB’s mandate includes managing lending risks, so prospective clients must still meet the bank’s terms and conditions.

Specific terms and conditions of the programmes are as follows:

SME Loan Programme: Maximum loan amount CI$100,000 with interest rate 10% (during interest only, if applicable). Loan term 1-year term, interest only; thereafter, repayable via bullet payment at the end of the year (refinancing) OR blended monthly payments, with maximum 7-year amortisation on loan amounts more than $85,000 loans under 5 year amortization @ 8%. Debt-service coverage EBITDA 1.25% cover and Loan application fee 1.5% of loan amount. Security requirements are dependent on type and loan usage (e.g., real estate 85% LTV; margins against receivables/inventory/stock).

Eligibility: 2 years in operation, with proven track record; business must be 100% Caymanian owned. Depending on the type of business, special covenants may apply.

Civil and Public Servants Loan Programme: Maximum loan amount CI$20,000 with interest rate 10%. Loan term maximum 6 years (Example: $20K @ 10% for 6 years = $370 monthly payment). Debt-service coverage not to exceed 50% and loan application fee of CI$200. Direct loan deposit the employer remits monthly loan payment directly to CIDB. Security requirements — in the event the existing loan for payout is secured, the CIDB reserves the right to hold the security.

Eligibility requirements: full-time pensionable employee; loan term cannot exceed retirement age. Basic application requirements include current job letter with pay slip attached, 2 forms of valid identification, 1 utility bill confirming address. No money down.

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Category: Local Business, Small Business

Comments (14)

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  1. C'Mon Now! says:

    We have seen this movie before and there was a wery bad ending!

  2. Anonymous says:

    This looks like vote buying to me.

  3. Anonymous says:

    So persons in private sector can’t borrow the money to clear off balances but the special civil servants get to borrow Xmas shopping money?

    Can we just admit the UDP and PPM administrations have the same mandate? Please!

    • Anonymous says:

      After our experiences with the UDP Government I suppose we cant be blamed for being cynical but my understanding of this is that civil servants are not getting additional money (to go shop with) but rather just have an opportunity to refinance some existing high cost debt at a substantially lower cost. The savings should be used to make sure their home mortgages are kept up to date for example. I think it is a good program and I thank the CIDB.

  4. Anonymous says:

    If you are a small business in need of raising capital, you have to have two years of trading history before you can apply….what about the start ups? Does the money come with guidance (or at least direction to DCI for guidance) on how to actually run a business? Also, please do not hand more money to the people we see you on the cause lists every day suing them for old debts and no favours for friends.

    • Tipping off says:

      it might be better if it doesn’t come with guidance from the development bank on how to run a business?

  5. Anonymous says:

    those terms are a disgrace
    Personal loans that have no security are running 5% 20 years with no pre payment
    but being it is a free money hand out its not going to be repaid anyways

  6. Anonymous says:

    Not sure 10% is going to consolidate any ‘high-interest rate debt’, that’s not far off credit card rates! First thing they need to do is make sure they beef up the collections department.

    • Anonymous says:

      Actually it is almost exactly half the interest cost of a typical credit card. I would call that far off.

  7. Fred the Piemaker says:

    Someone want to explain why a development bank is now tasked with lending to civil servants so they can reduce the interest rate burden on their personal loans? How does that begin to meet its mandate in relation to financing development, and what conceivable basis is there for offering that service to civil servants exclusively?

    • Anonymous says:

      Quite simple. These employees have the ability to instruct their employer to make their loan payments directly to the bank. They have been targeted for high interest loans by other lenders in the past and this new program allows them to significantly reduce their cost of borrowing while providing a revenue earning opportunity to CIDB. They are not being given free money. It is just good business for the bank. Who said the banks mandate was exclusively development?

      • Anonymous says:

        So wote buying. Same crap, different way of doing it. Maybe CIDB can be renamed “Cayman Slush Fund For Political Leverage Bank”.

  8. Anonymous says:

    Why is government money being used to subsidise the lifestyles financial profligate civil servants?

    • Diogenes says:

      After a recent legal case it appears that you cannot use your government credit card for personal expenditure without having to repay it, so they need to borrow th money from somewhere else.

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