Identifier
Created
Classification
Origin
10PORTOFSPAIN40
2010-01-20 21:15:00
UNCLASSIFIED
Embassy Port Of Spain
Cable title:  

SECURED TRANSACTIONS IN TRINIDAD AND TOBAGO

Tags:  EFIN ECON ECIN TD 
pdf how-to read a cable
VZCZCXYZ0041
RR RUEHWEB

DE RUEHSP #0040 0202116
ZNR UUUUU ZZH
R 202115Z JAN 10
FM AMEMBASSY PORT OF SPAIN
TO RUEHC/SECSTATE WASHDC 0129
INFO RUEHSP/AMEMBASSY PORT OF SPAIN
UNCLAS PORT OF SPAIN 000040 

SIPDIS
STATE ALSO FOR WHA/EPSC ADELGADO, KMUSGROVE

E.O. 12958: N/A
TAGS: EFIN ECON ECIN TD
SUBJECT: SECURED TRANSACTIONS IN TRINIDAD AND TOBAGO

REF: STATE 129327

UNCLAS PORT OF SPAIN 000040

SIPDIS
STATE ALSO FOR WHA/EPSC ADELGADO, KMUSGROVE

E.O. 12958: N/A
TAGS: EFIN ECON ECIN TD
SUBJECT: SECURED TRANSACTIONS IN TRINIDAD AND TOBAGO

REF: STATE 129327


1. (U) SUMMARY: SME interest rates in Trinidad and Tobago presently
average around 13.75%. SMEs are permitted to use inventory,
machinery, and accounts receivable as collateral for loans while
maintaining use of the asset to generate income. A top banker told
us that two of the primary challenges facing efforts to democratize
credit in TT have been the implementation of modern secured
transaction laws and the improvement of risk assessment mechanisms.
END SUMMARY.



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SECURED TRANSACTIONS SYSTEM

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2. (U) Republic Bank executive director Nigel Baptiste told us
November 11 that small and medium-sized enterprises (SME) in
Trinidad and Tobago (TT) pay roughly 300-500 basis points over the
prime interest rate (currently 9.75%),or between 12.75% - 14.75%
on average. He said companies are permitted to use inventory,
machinery, and accounts receivable as collateral for loans while
maintaining use of the assets. A registry exists of collateralized
fixed assets only. Loans are typically approved within 48 hours,
however, it may take up to thirty days for the loan to be fully
processed and funds made accessible.



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NEW CREDIT BUREAU GOOD START, BUT NEEDS ENHANCEMENT

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3. (U) A fully automated credit bureau was launched in 2004,
increasing efficiency and liberalizing lending practices. Baptiste
opined that access to reliable, comprehensive, and more objective
analyses enables banks to assess individual risk more accurately.
He said that this has increased the number of small businesses
getting access to loans including those who previously would have
been denied credit based on a lack of effective credit risk
assessment. He noted also that loan costs were previously higher
because a lack of reliable information encouraged lenders to spread
the cost of individual delinquency risk to the entire pool of SME
borrowers.




4. (U) Baptiste admitted that while the new credit bureau is an
improvement, it lacks the sophisticated algorithms necessary to
provide specific credit rating scores similar to the practice of
more developed nations. Instead, TT's credit bureau lists credit
history activity and a simple pass/fail indicator only. Further
analysis is left to bankers, perpetuating some of the subjectivity
that hampered the effectiveness of the previous risk assessment
system and limiting SME access to additional credit.
Mazer