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.

Red flag is being raised with a warning from a top regional official that Caribbean governments and indigenous commercial banks should be on guard against entrapment of citizens into debt through easy money offered with high interest rates.

Didacus Jules, the director of the Organization of Eastern Caribbean States (OECS), is warning financial institutions in the Eastern Caribbean Currency Union (ECCU) to guard against nationals being lured into extra-regional “fast-cash traps”, at a time when most citizens of the sub-region are most financially vulnerable.

Jules first raised the issue during an address to a local commercial bank’s educational event on Nov- 4 — and is reiterating this weekend that his remarks were partly-based on findings of a recent survey on ‘Financial Literacy and Financial Inclusion in the OECS’, jointly-commissioned by the OECS and the Eastern Caribbean Central Bank (ECCB), with World Bank support through its ‘Digital Transformation Project’.

The survey interviewed 7,037 individuals 18-years-and-older, across the sub-region and Dr Jules said it featured “some worrying elements, in this Pot-COVID period.” First, he revealed, the survey found that “Over-half of individuals in the OECS and ECCU region indicated they were not able to meet their daily costs-of-living in the previous 12 months.”
In addition, 43.9 percent indicated 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 cases, the survey found individuals who also had to sell property or dispose of other valuables and to make-do by “cutting-back on spending, doing without, or postponing the expense.” The survey also found that across the sub-region, 24.4 percent of respondents (almost one quarter) said 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 included Dominica, Grenada and Saint Lucia (in that order), Jules urged financial institutions, including Saint Lucia 1st National Bank, needed to continue building their customers’ “trust and confidence”, alongside “customer satisfaction and motivation”, to help prevent them being cash-trapped by external commercial and financial agencies.

Noting that “70 percent of business in the OECS/ECCU sub-region is generated by Small and Medium Enterprises (SMEs),” Jules said it was also incumbent on indigenous national banks and commercial entities with nations at heart to start taking into consideration that “Tomorrow will be as challenging as yesterday,” especially due the current world crises.

He warned against externally generated fast-cash traps that lure already cash-strapped OECS citizens into “financial servitude”, many using language and propaganda that attract innocent customers to sign-up to purchase items they can’t afford or are unable to pay after the “no deposit” grace periods expire.

The OECS director said he was appalled when recently approached by “an entity” that claimed to have “a brilliant idea” to “ease regional farmers’ burdens in light of the problems of regional Food Insecurity.”

But, he said, when the undisclosed entity disclosed the intended interest rate, it was more likely the farmers will be rendered into ultimate financial distress, “at a worst time, when they are already most vulnerable…”

Accusing the unidentified entity of “seeking to transfer the wealth from the farmers to themselves,” Jules said he’d warned that he “will publicly oppose” the proposed scheme “if it’s launched…”

The OECS director first raised the issue during the 1st National Bank’s November 4 Stanley French Educational Forum, and it comes against the background of increasing concern in the smaller Eastern Caribbean islands about increasing encroachment by rapacious international commercial entities operating within the sub-region through supposedly easy-credit and fast-cash offers that play on their financial vulnerability.

The OECS, ECCB and ECCU, which together use the Eastern Caribbean (EC) dollar across six independent states and several non-independent former British colonies across the region, have been calling on local commercial banks and related entities in the small-island chain to guard against such smartly-advertised invitations to dive deeper into debt, with real chances of eventually losing property used as collateral or paying deadly penalties for failing to repay on time and in full.

The OECS and the Caribbean Community (CARICOM) are both seeking to build stronger economies through creation of 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 have to increasingly adhere to extra-regional regulations that become more-strict with time.

Across the islands, especially in those identified as most vulnerable (Dominica, Grenada and Saint Lucia), local entities ties to international branding houses have become experts at use of creative and appealing advertising techniques to lure innocent citizens into debt repayments beyond their ability.

The region also being part of the wider world in which more people allow wants to overcome their needs, it will take a vast amount of financial education and literacy to get Caribbean citizens to adjust to reversing their orders of priority, with the host bank (1st National Saint Lucia Limited) also announcing at the November 4 event it had opened 25 new accounts for students from three Castries schools invited to attend.

The bank says it plans to take its financial literacy classes to all the island’s secondary schools and the accounts opened for students was only a first step in that direction.

‘Doing Business in the OECS Banking Space’ was another subject covered at the 1st National Bank’s November 4 education forum, with regional Chartered Accountant Andrea St Rose pointing to many external regulatory impositions that make Doing Business quite uneasy.

Jules and St. Rose both held that Financial Literacy of Caribbean citizens is necessary for the immediate future, while public and private sectors also needed to turn the pages to suit the times. Meanwhile, Jules holds that, “We cannot establish a strong financial base in the OECS or CARICOM under such conditions, only to be dominated by foreign financial interests!.”

Comments (0)
Add Comment