Industry and farming only receive 10.8% of bank credit
The low percentage of bank credits that industry and agriculture receives contrasts notably with its important contribution to the Gross Domestic Product, and with its capacity to generate jobs. This contribution, although it has been falling over the years, in 2013 was 7.6% for farming, and 25.8% for local manufacturing. All told, together they represented 33.4% of the GDP. In addition, both sectors contributed 21.2% of the formal jobs and the 23.9% which were generated by the entire Dominican economy which includes formal and informal.
In her statement before the General Senate Commission for DR-CAFTA, Ligia Bonetti, the president of the Industrial Association of the Dominican Republic (AIRD), reported that the industrial sector contributed 35% of the tax income, which represented more than a quarter of the Dominican economy, but that it “hardly” receives 7% of the total credit portfolio of the country’s banks. “Thanks to our banking regulations, it is a thousand times easier to obtain a loan for a vehicle than to acquire machinery,” she lamented.
In fact, the credit destined to local manufacturing, as a proportion of the consolidated credit portfolio of the financial sector, has been declining since November 2013, when it represented 6.7%. Since that month, and until 17 June 2014, it has fallen 1.3%.
The opposite is happening with credit aimed at consumption, which since January 2012 has been increasing its importance as it went from 23.1% to 25.5%. Through this credit portfolio of credit for consumption, the banks are financing all types of acquisitions of personal goods and services, the majority bought with hard currency overseas, which included the “vehicle” to which the president of the AIRD referred.
Other activities that were favored by banks for the placement of their clients’ deposits are the acquisition of housing, which so far this year of 2014 represents17.9% of the total credit portfolio of the financial system. Likewise, the loans aimed at wholesale and retail commerce absorbed 22.1% of the loans, which is the result of a slight growth tendency seen since the beginning of the year.
Investments in bonds
What use is the banking system of the country? It is also to invest in bonds and certificates from the Ministry of Hacienda and the Central Bank. As of May 2014, the financial institutions showed in their balance sheets RD$190.7 billion in marketable securities and net due notes. Just in Central Bank certificates, the multi-banks and the savings and loan associations have invested RD$103.4 billion.
Category: DR News |