Are they helping the national economy or are just helping themselves?
It is surprising (or it is not) how the Government and Central Bank are mute in regards the draconian interests charged by local branches of foreign banks, namely, BNU/CGS, MANDIRI, BRI AND ANZ BANK, reaching 16% or more on average.
In 2019 local branches of the above-mentioned foreign banks took deposits of almost $1 billion. A question that must be asked and must be answered... why foreign banks that lend the least and lend with killer interest are the preferred choices of BCTL (and many public institutions) for our country's dollar deposits?
Are these deposits banked in TL or they are financing and earning interests abroad for these foreign banks?
I have engaged with hundreds of global leaders calling for writing off the debt of Third World countries. We of the Third World are victims of a public health pandemic and the global economic meltdown none of which is of our making, responsibility. And are we expected to continue to pay the scandalous interests charged by moneylenders?
But in my own country, national leaders have not said a word on the scandalous high interest rates or taken steps to engage lenders in dialogue to right off or at a minimum mediate, renegotiate these outstanding debts with the banks.
***
Over several meetings with some of the best minds of Timor-Leste I tried to gather as much information as possible to understand the financial status and services provided by BNCTL and foreign banks based in TL.
I am very impressed with the quality of the senior management, Antonio Vitor, Chairman of the Board of Directors, Antonio F Abrantes, Vice-President, and Brigido de Sousa, CEO. They are all highly qualified and experienced, and like many young Timorese, they are polyglot, each speak 4 to 6 languages. All BNCTL staff, junior and senior, are Timorese.
The extremely high cost (interest) imposed on struggling Timorese borrowers by CGD/BNU, MANDIRI, ANZ BANK, BRI, are killers of Timor-Leste private sector, a real impediment of sustainable development and growth.
It is surprising (or it is not) how the Government and Central Bank are mute in regards the draconian interests charged by local branches of foreign banks, namely, BNU/CGS, MANDIRI, BRI AND ANZ BANK, reaching 16% or more on average.
Current Govt financing of BNCTL is a modest $5 million/year. This amount would make sense if it were to be allocated to microcredit institutions like Moris Rasik to enable it to expand its lending in support of family agriculture, livestock, fish farming, poultry farms, handcraft, and other small businesses, such as bicycle repair, shoe repair, taylors sawing school uniforms, etc.
In 2019 local branches of the above-mentioned foreing banks took deposits of almost $1 billion. A question that must be asked and must be answered... why foreign banks that lend the least and lend with killer interest are the preferred choices of BCTL (and many public institutions) for our country's dollar deposits?
Are these deposits parked in TL or they are overseas financing and earning interests abroad for these foreign banks?
If the Government is serious about fostering an entrepreneurial class and the private sector it must identify the handful of Timorese entrepreneurs/investors, seriously engage them in a sustained manner, not via handing out cash or politically motivated contracts, but by injecting BNCTL with substantial capital to carry out its mandate, provision of medium to long term soft loans to the struggling Timorese private sector, families and students.
For the tourism sector to strive medium to long term soft loans should be scaled up focusing on rehabilitation of the old Portuguese era pousadas, development of homestays, existing hotels to improve services, etc.
Current Govt financing of BNCTL is $5 million/year. This might be helpful for suku, aldeia level classic "microcredit" services modeled after the successful Green Bank experience. Obviously BNCTL is not a microdit facility. It is an official Bank, entirely funded by the State to perform a vital service.
What is surprising (or is it?) is how the Government and Central Bank are mute in regards to the draconian interests charged by the local branches of foreign banks, namely, BNU/CGS, MANDIRI, BRI AND ANZ BANK, reaching 16% Interest charges or more. This is a killer of Timorese economy.
I have engaged with hundreds of global leaders calling for writing off the debt of Third World countries. We of the Third World are victims of a public health pandemic and this unprecedented global economic meltdown none of which is of our making, responsibility.
And are we expected to continue to pay the scandalous interests charged by moneylenders?
No one else in this country, not the President, the Prime Minister, or the unproductive Parliamentarians, are calling for a total debt write off. What does this say about us, about them? People in Government with shopkeeper mentality (in Portuguese..."gente com mentalidade de cantineiro") refuse to inject serious capital investment into the only bank specifically created to support national development policies. $5 million is what "our" mammoth VIII "Constitutional" Government has agreed to allocate to BNCTL. $5 Million would be a reasonable yearly sum to allocate to a micro lending institution like Moris Rasik.
BNCTL disburses on average $6 Million for fresh loans but some bureaucrats with a cost cutting mind doubt the bank can disburse $25 Million in a year.
Central Bank’s own information exposes TL incompressible policies. For instance, data publicly available shows how foreign banks banked $913 million in 2019 in deposits. The above-mentioned banks fattened up by these enormous deposits only made $142 million, less than 16% available in loans.
BNCTL made 70% of the $124 million deposit it raised available in loans.
At 9.7% average interest rate, BNCTL loans were cheaper than market average of 16.3%. However, even this too is above the optimum interest rate of between 4% to 6%.
As BNCTL needs to retain funds to cover deposit obligations, its ability to offer new loans is limited. Capital injection and longer-term state deposits like social security fund would allow BNCTL to offer more loans at better interest rate. This would also enable BNCTL to update its technology, improve services and further reduce costs, already the lowest in the market.
The state deposits should go to BNCTL as it offers competitive rate, reduces capital flight risk, and has the highest rate of reinvestment in Timor-Leste, improving access to finance and private sector development.
*José Ramos-Horta
Former Prime Minister and President of Timor-Leste, Nobel Peace Prize Laureate.
