A new life for the ADB

IF AGRICULTURE is to provide both employment and food for the nation, then it must have access to special funding. In this regard, however, the performance of the Agricultural Development Bank has not been a particularly successful one, judging from the fact that over the 30 years of its existence, the ADB has lost some $220 million, a large percentage of its original capital.

The Bank became such a financial basket case, in fact, that the UNC administration, with the agreement of the Inter-American Development Bank, decided to shut it down. Their plan was to liquidate the ADB and auction off its assets to the commercial banks. The problem with that idea, however, was the reaction of the banks which made it plain to see they were not interested in assuming the ADB’s portfolio. Instead, they were prepared to provide farmers with credit cards by which they could access credit from the banks. “It was a crazy plan,” said ADB chairman Hubert Alleyne who has undertaken the assignment of placing the ADB back on a sound financial footing and refocussing the institution on its original purpose. “If the Bank closes down, where will the farmers go? To run a business you must have capital. The commercial banks do not want that business; it does not fly.” Not only is the margin of profit low, but the risks are much too great for the private banking sector.

After a year as ADB chairman, Alleyne and his new Board have achieved quite a lot in cleaning up the accounting mess they inherited from the UNC regime and in redirecting the Bank’s lending policies to its original objectives. A breakdown of the bank’s $220 million losses will show that 80 percent was attributable to loans given to big agri-businesses while 20 percent resulted from money lent to small farmers. In attempting to compete with commercial banks, the ADB had virtually lost its way. The idea of lending big money to make big profits did not pay off as the agri-businesses, having borrowed from the commercial banks and used up their security coverage, came to the ADB for additional loans offering only secondary security. When these ventures collapsed, the banks suffered no losses. “When Dr Williams converted the old Agicultural Credit Bank into the Agricultural Development Bank 30 years ago, he intended it to be a lending agency to small farmers who could not get credit from the commercial banks,” Alleyne pointed out. This is the purpose to which the ADB has returned, said the Chairman, and for which the remaining $50 million of the Bank’s original capital will now be used. The Chairman not only has greater faith in farmers to repay their loans but, he says, the Bank’s inspection system will also ensure that the money is well spent.

Cleaning up the books of the Bank was another problem. Alleyne and his board had a running dispute with the Auditor General after he refused to sign the audited accounts in which he had discovered some 18 serious discrepancies. Here, the Chairman’s experience as a former Executive Director of RBTT came in handy. As a consequence, he requisitioned the reputable firm of PriceWaterHouse-Coopers to undertake an independent audit which, in turn, unearned a $2million fraud. The result was that senior officials were fired. The country’s small farmers, then, can depend, once again, on the ADB for assistance. With the restructuring of Caroni (1975) Ltd and a number of sugar workers getting into this kind of farming, the ADB can play a significant role. Which in turn, will serve to enhance the country’s food security.