High expectations
In July 2016, the Government of Dominica offered the local tourism industry a $15M slice of the Citizenship by Investment (CBI) money-pie in the form of a special Tourism Loan Facility.
Prime Minister Roosevelt Skerrit made the announcement in the 2016/2017 Budget, stating that the facility was being made available at a mere 3% interest rate with a one-year grace period on the interest and principal and other incentives.
This low-interest loan facility was intended to help existing hotels and restaurants upgrade and expand.
Industry insiders hailed this move as a prudent and timely intervention by Government because Dominica’s tourism industry was still reeling from the devastation of Tropical Storm Erika less than a year before.
What made the offer even more tempting was the fact that Government also adjusted Dominica’s fiscal incentives regime to make it even easier to reinvest in upgrading or expanding hotels and restaurants.
Expectations were high. Prime Minister (PM) Roosevelt Skerrit envisioned the $15M “going towards hotels. . . improving rooms. . . new beds, buying air condition units, improving the kitchen. . .washrooms. . . restaurant areas”.
Referring to the exceptional terms and conditions, he stated emphatically, “There is nowhere in the world, the Caribbean included, where a lender would ask the borrower: “What terms do you want?””
This intriguing statement crystallised the PM’s confidence in an innovative process that created the terms and conditions– a consultative collaboration between representatives of the lenders and those of the intended beneficiaries.
The planning involved five powerhouses: Government; the AID Bank; the Invest Dominica Authority (IDA); the Discover Dominica Authority (DDA) and the Dominica Hotel and Tourism Association (DHTA).
The PM was almost certainly alluding to the DHTA when he referred to a borrower being asked to set the terms and conditions of a loan. Indeed, DHTA’s key role was to advise its co-planners on the best lending terms for its members.
Then DHTA president, Gregor Nassief declared that the soft loan facility and other measures proved Government’s “commitment to tourism as a key driver of the country’s economic development”.
All seemed well. Tourism industry stalwarts looked forward to investors eagerly and quickly taking advantage of the deal to upgrade and expand their properties and secure the continued viability of their investments.
Stakeholders needed all the help they could get and the money in the loan facility was there for the taking. Wasn’t it only a matter of time until the tourism industry would see meaningful benefits? What could possibly go wrong?
Rumblings of discontent
On July 14, 2016 the Ministry of Tourism & Urban Renewal and the DHTA hosted a meeting between the Prime Minister and hotel owners to discuss the low-interest facility.
Sources told Dominica News Online that the attendees’ interaction with the PM raised eyebrows because, despite being receptive, many persons were wary and seemed to be mystified by the terms and conditions of the loan facility.
They said the PM and other panelists were able to smooth things out and the meeting ended on a positive note. But it was hard not to notice that something wasn’t right. The first rumblings of discontent just wouldn’t go away.
Perhaps with this in mind, the main collaborators who planned the special loan facility held a follow-up seminar at Fort Young Hotel on September 6, 2016 to explain the terms and conditions to the intended beneficiaries.
There was a large turnout and DNO’s sources deemed it as a defining event. There was a strong undercurrent of dissatisfaction; one after another, members of the audience expressed strong disapproval of the terms and conditions.
Panelists from Aid Bank, DDA, IDA and DHTA did their utmost to explain and defend the process by which the terms and conditions of the loan were established. But their efforts did little to assuage the concerns of the intended borrowers.
Strident protests about the terms and conditions of the loan facility permeated the gathering, particularly the prohibition stating: “Loans shall not be granted for the purpose of refinancing existing debt”.
The DHTA, in an earlier correspondence dated May 27, 2016, had said that hotels indicated that the option to refinance existing debt and an interest rate of three percent or under are critical loan terms affecting their decision to upgrade.
On April 19, 2016 the DHTA had sent emails to members and non-members asking them to participate in an electronic survey via ‘surveymonkey.com’ to identify the terms and conditions they wanted for the proposed special loan facility.
The survey remained open for 19 days and 16 hotels responded. On May 27, 2016, DHTA did a follow-up asking members and non members via surveymonkey.com about the most desirable eligibility criteria; 12 responded.
Seeking a way forward, the audience asked DHTA to renegotiate the loan facility. They specifically asked the association to advocate strongly for the prohibition of refinancing to be reconsidered.
So it was that on September 23, 2016, DHTA again sent an email asking recipients to do a survey to explore “the refinancing need in the tourism industry, with the objective of effectively communicating the issues and advancing a solution”.
Wall of Silence
Today, approximately one year after Prime Minister Roosevelt Skerrit announced a $15M special loan facility, most officials have gone mum about how many businesses have actually benefitted from this initiative.
While presenting the 2016-17 Budget, the Prime Minister said the loan facility was based on feedback from stakeholders in the industry.
Since the money came from the CBI programme and was deposited with the AID Bank for ‘on-lending’ to the tourism sector, the precise number of beneficiaries from this facility is certainly a matter of compelling public interest.
Last year the PM stated that the DHTA had pointed to the need for low cost financing for its members to fund the expansion of hotels and restaurants. But it has proved to be extraordinarily difficult to assess the facility put in place to service this need.
The AID Bank did not respond to correspondence seeking information and neither has the Minister for Tourism. IDA redirected DNO to AID Bank, and the bank’s Board Chairman advised waiting on the 2017-18 Budget.
And it seems that the DHTA is seeking that same information and has encountered the same wall of silence.
DHTA’s recently appointed Executive Vice President, Kevin Francis has acknowledged that tourism industry stakeholders are pushing for the loan facility to be revamped to include refinancing existing debts or they will not be able to make use of it.
They contend that the inclusion of refinancing is essential to make the special loan facility widely accessible by hoteliers and restaurateurs and, at the end of the day this will make the industry more viable.
Francis reported that DHTA has been trying to identify the roadblocks preventing access to the loan. Feedback suggests that few persons have been approved,“…Which is why some of our members have called for refinancing,” he explained.
“But in the absence of actual data to confirm whether or not that is the best course of action, we don’t have that information. What we are doing is calling on our members to help us understand what is going on.
“If refinancing is something that the members are seriously considering, as an association we are bound to listen to that. Until we get that, we are not sure exactly what the next course of action is,” Francis said.
“We had several conversations with AID Bank concerning the number of persons that are taking advantage of this loan facility, but they cannot release that information…
“The kind of information we are looking for is not any specific information. It’s information as a bulk; so you don’t have to tell me who has taken a loan for what amount…”
Francis disclosed that the DHTA requested this information from the AID Bank via telephone and in writing. He added that the association has contacted senior bank officials for information, to no avail.
He is not sure about the reason for the bank’s reluctance to share the information with DHTA, but general indications suggest that the loan facility is significantly underused.
“In the absence of more information to determine why, we have to hold off,” Francis said, noting that many hotels have capital tied up in the bank as collateral. “The bank is doing its due diligence. . .
“I can’t fault Aid Bank . . .but at the end of the day, it needs to be more accessible,” he said, adding the proviso that, “With the availability of that amount of money and interest rate you have to do your due diligence.”
DNO understands from a separate source that in the period between July 2016 and the end of June 2017 only two applicants were approved for loans under the Special Tourism Loan Facility.
However, as the strange saga continues, a wall of silence has blocked all attempts to verify this information with various authorities.
DNO awaits the Budget announcement to determine whether the issue of the loan facility will be re-visited as indicated by the AID Bank Chairman.
UPDATE:
While presenting Dominica’s 2017-2018 National Budget, Prime Minister Roosevelt Skerrit stated in Parliament on July 27, 2017: “The AID Bank reports that the funds provided have been on-lent as follows: One hundred and twenty-four (124) loans totalling $2.1 million have been granted under the special facility for agriculture. Three loans (3) totalling $2.6 million have been granted under the special tourism facility.”
why don’t you give the hoteliers the money at zero percent interest? they will pay you back and create more employment, instead of giving it to lazy people who refuse to work and don’t have to pay back anything.
DNO, I trust that you, through the contributor of this commentary, will follow up with a comprehensive, objective analysis of Prime Minister Skerrit’s 2017 – 2018 Budget Address.
Excellent article ! But, for some reason , I still smell a dead rat in the fine print of this agreement …………. I could be wrong….
It is clear that Gregor Nassief and others who met with the other stakeholders represented their interests and not that of their membership.Had they represented the real issues and needs of the smaller, struggling hotels the hotel sector would have gotten a deal from government which would have helped them where they hurt most.One thing which can be done is for the members of the DHTA to vote the selfish bums out.The Nassiefs are selling passports under the CBI program so the issue of cash is different from the small hoteliers who are not in bed with the government
Good news article. Keep up this high level of work. CONGRATULATIONS!! But please keep it up.
I might be wrong because I am not a financial expert. If this facility is used to refinance very few people will benifit as a handful of hoteliers depending on what their debt level is could quickly exhaust this fund. For what the hoteliers want a 50 million fund would be more practical.
Assertive like the rod of Moses!
I’ve been eagerly looking for informative articles like this from DNO bravo editor… Great job. Hopefully you will have an update for us soon.
Government should not be in the business of lending money; let the banks do this. What government can do is to create incentives in the tax code as well as duty-free incentives on equipment used to upgrade facilities. As for debt refinancing, let banks create attractive refinance programs to compete with each other and steal each other’s customers. You would see interest rates fall dramatically. In an extended low interest rate environment, the banks have never, or significantly, reduce interest rates in Dominica, although being able to borrower in financial markets at historically low rates. It is time to pass some savings to the customers.
Obviously you have no idea what goes on in the banks. Do you even have a bank account or maybe you save only? Either that or you pay no attention to your business because interest at the banks have been the lowest in our history. Stop trying to play smart and research
Sounds to me like existing borrowers are disadvantaged when compared with new borrowers. This should not be the case with a government driven initiative. Divide & rule again.
This is an excellent article! Look forward to reading more of these in the future.
One may ask, is the $10 million Loan facility for farmers being used as well? And also y not offer the option of refinancing? Most people/ hotels are already in debt- it doesn’t take a rocket scientist to know that it would make no economic sense for them to take on even more debt no matter what the loan conditions. Offer refinancning!
I guess there will always be disagreements since some getting the monies free and while others have to take it as a loan. Why some and not all?
The way forward, unless I’m not reading this correctly …It is meant to assist with upgrades, not for wiping out past depts. I don’t know, maybe it will be unfair to ‘other’ tourism related businesses big and small?
exactly, it is not and was not intended to be a refinancing mechanism.
But apparently it is alleged that some have gotten it for refinancing….ssssshhhhhhh! I await the ever astute Greg to apprise the industry and public by extension. Boy everything in Dca stinks these days. If you are RED you will surely eat BREAD.
Assertive like the rod of Moses!
Using a loan to wipe out your depts.? That would be madness indeed!
hahaha…. is there ain’t thing that these fellas do, which don’t stink foul?????!!!
They always say they are helping and put xxxxxx amount to help…. BUT IN TRUTH AND IN FACT ONLY xxx amount goes to truly helping!!!!!
We need something similar on the MILLIONS placed at the bank for agriculture.
Where there is no vision the people perish!!!!!!!
Where the WICKED rule, the people MOURN!!!!!
SKERRIT MUST GO
SKERRIT MUST GO
SKERRIT MUST GO NOW
himmmmmm interesting read….wish dno does more of this type of joirnalism….