The Office of the Auditor General’s report ‘Financial Reporting of the Cayman Islands Government: General Report 31 December 2018’, which summarises the results of the financial audits for the year 2018 for Cayman’s 40 Government entities, has found that high delinquency rates in the loan portfolio of the Cayman Islands Development Bank still exist and have barely changed from its previously audited accounts.
Delinquent loans stood at $16,338,612 as at 31st December 2017 representing 56 per cent of the entire loan portfolio and $13,542,381 as at 31st December 2018, representing 54 percent of the total loan portfolio. The total amount of performing loans remained similar, year-on-year, at $12,756,383 as at 2016-2017 and $12,168,473 as at 2018.
Management at the CIDB said in response to this issue was that the delinquency rate had not risen despite the decrease in the loan portfolio from principal payments and limited loan growth. The Board approved the write down of $1.7 million in old, fully provisioned debt, it said, and the net effect was a decrease in delinquencies. The management assured that there would be more write downs that would reflect the current portfolio performance from newer loans written under a revised policy. The management also said that pursuing these loans through the Courts did not always produce better collection results and could often lead to increased provisioning to absorb legal costs.
“The bank will increase collection efforts and enter standstill agreements if applicable to manage problem accounts prior to a final sale scenario,” it stated.
The Auditor General also worried that the ability of the bank to meet its obligations and capacity to sustain its operational expenditures were significantly reliant on continued government support from the proceeds of capital injection and services provided to government.
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24 Sep, 2019
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Roger J Webster19 Feb, 2020
Since Government is the Bank's ultimate guarantor, the more than 50% delinquency on the Bank's loan book means, in effect, that Government is an unremunerated equity investor in the delinquent (presumably private sector) enterprises.
Some enterprises fail however they are financed, but an analysis of the delinquents and/or of the true requirements of Cayman's small businesses might indicate that the Bank should be offering equity as well as loan finance, particularly since it would seem that whether intended or not, it is - in effect - doing so.
If an analysis is attempted, try to get someone with experience of small business equity investment, not just an accountant.