Small bank bets on growth, Getting ready for a brighter future
Suriname may be the smallest republic with the smallest population and one of the smallest economies in South America. But that last descriptor might soon change dramatically.
Thanks to the recent discovery of large oil and gas deposits off its Atlantic coast, the Dutch-speaking nation may be on the verge of a surge in growth, hopefully one that will lift many if not all boats, especially after the contraction caused by the COVID-19 pandemic in 2020.
An economic boom would boost the prospects of the Surinamese private sector, where 98% of companies are small or medium-size enterprises. Businesses will need access to loans and other financial services, but at present half of them have trouble getting any funding.
Finabank wants to change that situation. While the 30-year-old private financial institution may be the smallest of the four banks that dominate Suriname’s small financial sector, it has big plans.
Over the past few years, Finabank has aggressively modernized its digital platform to offer better online banking services and is now betting to grow by acquiring SME clients overlooked by larger competitors.
But one of the hurdles it faces in expanding its lending operations is getting access to US-dollar funding. The pandemic is partly to blame for depressing economic activity, but Finabank shares with other Surinamese banks a problem common throughout the Caribbean: “de-risking.”
De-risking is the term used for the practice of global banks severing business relationships with smaller financial institutions, money transfer companies, and even humanitarian organizations in developing regions citing concerns about money laundering and other potential financial crimes.
De-risking hardly makes a dent in international banks’ bottom lines, but it can severely hamper the operations of local financial institutions, which can suddenly find themselves excluded from hard currency-generating lines of business such as trade financing or distributing remittances.
One potential way to overcome this problem is to strengthen local banks’ anti-money laundering rules by bringing them up to international standards. That is exactly what Finabank intends to do under a deal it struck with IDB Invest in 2020. The Surinamese bank will also develop and adopt a more sophisticated environmental and social management system.
Those critical advisory services will complement a US$3 million loan that Finabank will use to fund SME credit. In addition, IDB Invest expanded the Surinamese bank’s line of trade finance from US$2 million to US$5 million.
“Partnering with Finabank was the right thing to do. We needed to recognize the steps they are taking in a very challenging environment in order to get ready for a brighter future,” said IDB Invest team leader Michael Apel.
For his part, Finabank CEO Eblein Frangie said: “We are honored with this new and stronger commitment to IDB Invest. This agreement will allow us to further strengthen Finabank’s governance according to international standards in order to meet our strategic objectives.”