A news report said that a World Bank team was in Guyana to discuss with officials the “adopting of modern legislation that will allow customers to offer assets other than real estate as guarantees for loans.” This is welcome news. But this work has already been done.
In the mid 1990s a Canadian expert visited Guyana and examined our laws for the same purpose. He made several visits and spent several months on the project. He finally produced a report which is gathering dust on a shelf somewhere. It is not clear from the newspaper report if the authorities are aware of this report.
All that is now required to adopt “modern legislation that will allow customers to offer assets other than real estate as guarantees for loans” is to locate the report, dust it off and present the legislation. I recall that along with the report, the expert had produced draft legislation.
The only securities recognized by our laws at the current time are mortgages, debentures for companies under the Companies Act and Bills of Sale use in relation to motor vehicles. The expansion of the range of movable property which can be used as security for loans will encourage more lending by the banks and greater investment in the economy.
At the same time the laws relating to land ownership and mortgages is archaic, rooted in Roman-Dutch concepts, and has long needed to be reviewed. They are blunt instruments, imposed at the time when the Dutch ruled Guyana. Even though some ‘modern’ elements were introduced, these were all done before the motor car was invented.
Despite these problems, the steps now being taken to re-examine the issue of securities over movable property is important and urgent. Entrepreneurs, especially of small scale, are hobbled by the tightness of the credit market. I do not believe that it is the banks which do not want to lend. But many small scale investors do not own immovable property to offer as security and there are no laws by which movable property can be secured except Bills of Sale. Credit is sometimes given, secured by mortgages on movable property, but the mortgage is an unsuitable instrument for that purpose.
When necessity pressures the Government to be creative, it encounters little difficulty in doing so. Some years ago its housing drive was being adversely affected by the legal restrictions on lending by the New building Society by which the NBS could only lend on the security of a mortgage which meant that the borrower must have had a transport or would get one at the same time the mortgage is being passed. The New Building Society Act was amended to enable the NBS to lend on a letter by the Ministry of Housing allocating a house lot to the mortgagor.
The banks have huge reserves and I assume that they are anxious to put these sums at work. It improves their bottom line and benefits their shareholders. But they will only do so if their money, which is really our savings, is secure. If the variety of movable property subject to security can be expanded and the security is acceptable, then larger sums will be available for investment and the economy will grow.
But the type of property which offers the greatest security is immovable property. The biggest land owner in Guyana is the State.
The land owned by the State is the largest gold mine that exists in Guyana. If the capital locked up in these unused lands is released, Guyana would need no foreign assistance except of skills which are unavailable. As it is most of this land in the hands of the State is idle and offers no creative potential. The challenge is to put it to use and the question is how.
It is the private sector, not the Government, which is the engine of growth. The greater the amount of fuel (lands) in the engine of growth, the faster would the engine drive. The more lands that are distributed, the greater would be the property available to offer to banks as security to borrow money to invest. It would be in the interest of Guyana for the State to sell off as much land as it can with an eye on the use of the land for development and investment purposes. There is more capital than Guyana needs in its State owned, unused and idle lands.
I believe that current policy favours the granting of leasehold rather than freehold titles of Government owned land, although transports have been given of small plots not exceeding fifty acres to farmers who have occupied them for a lengthy period. The granting of leasehold titles might be justified in certain circumstances, but the owners of leasehold titles cannot acquire credit either at all or of any significant amount.
There is the question of speculation which would be encouraged by large scale land distribution. While speculation is something to be avoided, the price of land would not go beyond its value no matter how much speculation there is. No one will buy. And it would be necessary to establish the true market value of land so that the banks will have an idea of how much to lend. With land title in hand, the investor can then go to the bank and secure a loan to invest. The distribution of land will not increase, but will reduce its value, because more will be available.
Forever locking away lands in the hands of the State is locking away a resource which can help to transform Guyana. (www.conversationtree.gy)