Last Updated on Thursday, 5 November 2015, 14:26 by GxMedia
Guyana’s Institute of Private Enterprise Development (IPED) will consider introducing a quick-payment system to rice farmers but a top banker in Suriname is cautious about having such a system without the necessary safeguards.
Chief Executive Officer of IPED, Ramesh Persaud said he learnt of the service known as factoring while participating in an agri-business financing session at the Caribbean-Pacific Agri-Business Forum being held in Barbados.
“I believe factoring is a model that we will need to consider as a development with regards to supporting rice farmers and other agricultural producers,” said Persaud who is also Chairman of the Caribbean Micro-Finance Alliance.
He said IPED would first have to conduct a study to determine the feasibility of introducing a factoring service in Guyana. “We will need to do a study in Guyana with regards to how to apply the model because a lot of this depends on the reliability of the person that the goods are being sold to,” he said.
Persaud explained that much would depend on mobilizing initial funds from the Caribbean Development Bank (CDB), European Investment Bank (EIB), European Union (EU) or the Inter American Development Bank (IDB).
Persaud said the idea is a good one, but IPED would first have to take into consideration the fact that the institution already provides pre-harvest financing to rice farmers. He said IPED would also have to conduct its own due-diligence of rice millers to ascertain whether they have a good payment record.
Millers have been repeatedly accused of paying farmers late, resulting in severe personal hardships such as the inability to repay loans and prepare for the next crop.
While Surinamese rice farmers experience almost identical problems like their Guyanese counterparts, General Manager of the Suriname Development Bank, Wonnie Boedhoe cautions against the introduction of a factoring system without first ensuring there are agreements among the seller, buyer and the factoring service. “The rules and regulations are very important plus you know when you factor, your receivables to a factoring company and there are no rules which means that the sales agreement is not with you as the factoring company so who are you to collect the money from me. I don’t have an agreement with you so if the law accepts and have rules on the factoring then it is easier for the factoring company to do it otherwise don’t start it because the person who has to pay the debtor would not be obliged to pay,” she told Demerara Waves Online News.
Ideally, the former Surinamese Finance Minister believes that a Credit Bureau should play a role in screening the sellers and buyers to ensure they are creditworthy but there can be special rules but in the absence of such a bureau “it would be the job of the factoring service to do it because you do the due-diligence on the seller which means you have extra costs as a factoring company.”
The Curacao-headquartered Factor Plus is currently exploring the possibility of expanding its service beyond the Dutch-speaking Caribbean to other countries where farmers need urgent payments to continue their businesses.