ECCU non-performing loan ratio highest in region

The non-performing loans ratio in the Eastern Caribbean Currency Union (ECCU) stands at 18 percent, the highest in the entire Caribbean and well over the recommended 5 percent mark for the sub-region.

The International Monetary Fund (IMF) is advancing several reasons for this.

IMF’s regional resident representative in the ECCU, Wayne Mitchell, gave a snapshot of the health of the financial sector in the Caribbean, and looked at the aspect of non-performing loans across the region.

“In the Eastern Caribbean, the standard is 5 percent (non-performing loans)… with the exception of Haiti and Trinidad and Tobago, all countries are way above the 5 percent with the Eastern Caribbean showing the highest non-performing loans ratio as of 2013/2014 at 18 percent. So that’s extremely high and of great concern,” Mitchell said.

WINN asked Mitchell if a lack of adequate supervision of banks and lending agencies could be blamed for the high percentage of non-performing loans in the Eastern Caribbean.

“The global recession, has had tremendous adverse impact on our economies and that has fed through to the banking systems,” Mitchell noted.

He explained that a decline in tourist arrivals, leading to a decline in revenue for both government and private sector, impacts borrowers’ ability to service loans.

The IMF said that despite the high liquidity of banks in St Kitts and Nevis and the stability of the financial sector, private sector credit remains weak.

Mitchell offered an explanation as to why this is so.

“The issue banks are facing is one of concern in terms of the riskiness of lending and so in an environment (which is) naturally risk averse, there is a tendency for them to be even more cautious in lending and jeopardizing their loans portfolios,” he said.