The regulatory framework of the Barbados financial services sector revolves around the Central Bank of Barbados, the Ministry of Finance and the Barbados Securities Commission.
Affected by a deepening international financial crisis, growth in the Barbados economy slowed substantially in 2008. Real output increased by 0.7%, a lot lower than the 3.3% of 2007 and 2006. In fact it was the first time in six years that Gross Domestic Product (GDP) in Barbados rose by less than 1%.
Six years ago, an International Monetary Fund (IMF) team examined the Barbados financial sector and reported:
“Indicators of the health of the banking system and sensitivity analysis suggest that the system is resilient and fundamentally sound.“
Since then the financial sector has become sounder. Latest Barbados Central Bank data for 2008 show that despite the international financial uncertainty, “most indicators of the banking system continued to suggest that commercial banks operating in Barbados performed fairly well.”
The 6 banks have all been reporting substantial profits; the offshore sector has been pruned down to weed out undesirables and the credit unions in Barbados are reporting significant expansion.
In 2008 credit to the non-financial private sector grew by a substantial 11.8%, compared to 5.1% the year before. Personal loans in 2008, fueled largely by a rise in new mortgages, increased by $190.2 million or 7.8%. Loans to the distribution sector rose by $14.4 million or 3.6%.
Consistent with the world economic slowdown, growth in domestic deposits slowed to 3.5% in 2008, compared with 16.2% in 2007.
The 2008 Index of Economic Freedom of the US-based Heritage Foundation and the Wall Street Journal describes Barbados as the world’s 21st freest economy, based on a survey of 161 countries.
This is the highest ranking of any country in the Caribbean and ahead of developed countries like Germany.
Barbados’ revised guidelines of 2006 have refined controls against money laundering. The insurance sector has been vibrant. The Securities Exchange of Barbados lists just over two dozen local and foreign Caribbean companies.
Barbados has made the most of the international expansion in offshore financial activities and has developed this sector. It is now the 2nd major foreign exchange earner after tourism.
Offshore banks, international business companies, captive insurance and foreign sales corporations are now important features of the Barbados financial landscape.
Preliminary data for the first three quarters of 2008 indicate that Barbados issued 371 new licenses for international business companies, 37 more than for the corresponding period of 2007. One new offshore banking license was added, compared with five in the first nine months of 2007.
Adequate telecommunications infrastructure, a well-trained and English-speaking workforce, and a stable political environment give Barbados an additional advantage over other, similar destinations.
Barbados has also done well from the increased scrutiny and regulation of financial services by international organizations such as the Organization of Economic Cooperation and Development (OECD).
One characteristic that makes the Barbados financial sector attractive to U.S. investors in particular, is the fixed exchange vis a vis the U.S. dollar.
This, plus the island’s relatively close proximity to the US and continued strong stable economic development, have helped to direct North American capital into the island.
Author: Brett Callaghan