- OECS Warns Caribbean States Against Fast-Cash Debt Traps
A recent survey found that over-half of individuals in the East Caribbean region were not able to meet their daily costs-of-living in the previous 12 months.
A key regional authority has raised a red flag, advising Caribbean governments and indigenous commercial banks to be wary of entrapping individuals into debt through cheap money supplied at exorbitant interest rates.
Didacus Jules, the director of the Organisation of Eastern Caribbean States (OECS), is warning financial institutions in the Eastern Caribbean Currency Union (ECCU) to be wary of luring nationals into extra-regional “fast-cash traps” at a time when the sub-region’s citizens are most financially vulnerable.
Jules first raised the issue during a speech to a local commercial bank’s educational event on November 4 – and is reiterating this weekend that his remarks were partly based on the findings of a recent survey on ‘Financial Literacy and Financial Inclusion in the OECS,’ co-commissioned by the OECS and the Eastern Caribbean Central Bank (ECCB), with World Bank support through its ‘Digital Transformation Project’.
The poll interviewed 7,037 people aged 18 and above from around the sub-region, and Dr Jules described it as having “some worrying elements, in this Pot-COVID period.” First, he stated that “over half of individuals in the OECS and ECCU region indicated they were unable to meet their daily costs of living in the previous 12 months,” according to the poll.
Furthermore, 43.9 percent stated that they “would not be able to undertake a major expense today without borrowing from a financial institution or asking family or friends for help.”
In some situations, the poll discovered people who had to sell property or other possessions and make do by “cutting back on spending, doing without, or deferring the expense.” According to the poll, 24.4 percent of respondents (almost one-quarter) in the sub-region indicated they “had to turn to parents or family for assistance to save or borrow.”
Noting that the top three OECS and ECCU member-nations affected were Dominica, Grenada, and Saint Lucia (in that order), Jules urged financial institutions, including Saint Lucia 1st National Bank, to continue building “trust and confidence” among their customers, as well as “customer satisfaction and motivation,” to help prevent them from being cash-trapped by external commercial and financial agencies.
According to the report, “70 percent of business in the OECS/ECCU sub-region is generated by Small and Medium Enterprises (SMEs),” According to Jules, it is also incumbent on indigenous national banks and commercial enterprises with national interests to begin considering that “tomorrow will be as challenging as yesterday,” especially given the current global crises.
He warned against externally generated fast-cash traps that entice already cash-strapped OECS citizens into “financial servitude,” many of which use language and propaganda to entice innocent customers to sign up for items they can’t afford or are unable to pay after the “no deposit” grace periods expire.
The OECS director was shocked to be approached recently by “an entity” claiming to have a “brilliant idea” to “ease regional farmers’ burdens in light of the problems of regional Food Insecurity.”
However, he stated that once the undisclosed organisation revealed the projected interest rate, it was more probable that the farmers would be forced into bankruptcy, “at the worst time, when they are already most vulnerable…”
Jules accused the unidentified group of “seeking to transfer wealth from farmers to themselves,” and that he would “publicly oppose” the proposed scheme “if it is launched…”
The OECS director raised the issue for the first time during the 1st National Bank’s Stanley French Educational Forum on November 4, and it comes against the backdrop of growing concern in the smaller Eastern Caribbean islands about increased encroachment by rapacious international commercial entities operating within the sub-region through supposedly easy-credit and fast-cash offers that prey on their financial vulnerability.
The OECS, ECCB, and ECCU, which use the Eastern Caribbean (EC) dollar across six independent states and several non-independent former British colonies in the region, have been warning local commercial banks and related entities in the small-island chain to be wary of such cleverly-advertised invitations to dive deeper into debt, with real risks of eventually losing collateral or paying deadly penalties for failing to repay on time and in full.
The OECS and the Caribbean Community (CARICOM) are both attempting to strengthen their economies by establishing Single Markets with common tariffs guided by intra-regional legislation and trade conventions, but success has been largely elusive – and getting worse as regional financial institutions are increasingly required to adhere to extra-regional regulations that become more stringent over time.
Local entities with ties to international branding houses have become experts at using creative and appealing advertising techniques to lure innocent citizens into debt repayments beyond their ability across the islands, particularly in those identified as most vulnerable (Dominica, Grenada, and Saint Lucia).
Because the region is also part of a larger world in which more people allow wants to trump needs, it will take a significant amount of financial education and literacy to get Caribbean citizens to adjust to reversing their priorities, with the host bank (1st National Saint Lucia Limited) also announcing at the November 4 event that it had opened 25 new accounts for students from three Castries schools invited to attend.
The bank says it aims to take its financial literacy lessons to all of the island’s secondary schools, and the student accounts are only the first step.
Another topic discussed at the 1st National Bank’s November 4 education event was ‘Doing Business in the OECS Banking Space,’ with regional Chartered Accountant Andrea St Rose pointing to several external regulatory impositions that make Doing Business rather unsettling.
Both Jules and St. Rose believed that financial literacy among Caribbean inhabitants was critical for the near future, and that the public and private sectors needed to turn the pages to reflect the times. At the same time, Jules believes that, “We cannot establish a strong financial base in the OECS or CARICOM under such conditions, only to be dominated by foreign financial interests!.”
