The exchange of experts' opinion on the Central Bank's loan scheme to the Liberia Business Association and the Liberia Marketing Association showcased Liberia's best brains in the field of economics and law. The masters of money projected a display of real knowledge but failed to agree on whether or not the bank was in the right or afoul of the laws, to directly give out micro finance loans to needy Liberian businesses.
Senate Pro-Tempore Gbehzohngar Findley disclosed recently that the Senate had set up a special committee to investigate whether or not the Central Bank had violated the Act establishing it. The committee is also delving into whether the bank has the authority to give out loans; to mint and print bills and coins; and if the Bank was exercising that authority in keeping with the Act."
The hearings, according to the Senate leader is intended to make recommendations to the Plenary of the Senate on the way forward.
Members of the public and the Senate Committee on Banking and Currencies chaired by Senator Isaac Nyenabo(NDPL, Grand Gedeh) witnessed serious academic deliberations on the issue with some warning that the current trend of financial transactions in Liberia is endangering the economy. While the Senate emphasized that the hearing was not intended determine whether the Central Bank was in error or not, Senator Sumo Kupee, declared that the bank was in error.
Differing slightly with the former President of the Agricultural Cooperative Development Bank(ACDB), Professor Wilson Tarpeh, Senator Kupee declared: "On the issue of micro financing Professor Tarpeh, let me agree with you partially I could have disagreed but you said conventionally the right thing to do would have been to do these micro financing through commercial institutions".
Kupee said one of the things economists have not picked up is that economists are not asking how commercial banks surviving. "It is important because if we have established that 80% of savings are no deposit demand and only 20 percent are on long term, if the banks do not have sufficient money to sustain themselves and the Central Bank does not work through these banks so that it provides them resources, how are they surviving? In the long run we need to be careful so that most of these banks don't go underground because if this continues, they will not survive."
The lawmaker said if due care is not taken, the economy may slip back into what happened in the 1980s.
Continued Senator Kupee: "While we know the micro financing might be an immediate thing and the professor said in the wake of policy confusion, you will not create more confusion when there are confusions. When there are confusions you try to see how you navigate through the confusion and do the right thing to reduce the confusion. If we are not careful what happened in the late 80s will resuscitate."
Cllr. Wilkins Wright, former Solicitor General, another proponent of the view asserted by Senator Kupee, stated that the action of the bank is a violation of the constitution of Liberia. He asked the Legislature to propose a bill that will amend the act which establishes the CBL. The Supreme Court Justice said the clause in the act which is being used to grant loans is ambiguous and must be revisited."
Added Wright: "First of all, it has to be established by clear evidence that the Central Bank is indeed engaged in the illegal granting of loans to non-bank financial institutions, assuming it to be true that the Central Bank has engaged in such loans scheme and I am emphasizing without proper authorization that we have to conclude that the program obviously has a negative impact on the national economy and the potential of undermining the very economy the central bank has the statutory powers to regulate and protect."
In contrast, Professor Tarpeh said in would be prudent if the Central Bank of Liberia used commercial financial institutions rather than entering the market directly.
"The Central Bank is supposed to ensure balance growth and price stability and in that process an arsenal of monetary tools are developed. The preferred approach in my own view would be to use established and recognized institutions to pursue that. But in a situation where we have a remarkable show of policy confusion you do what you think is best."
International-recognized economist and Professor Dr. Byron Tarr lamented: "If the senators are saying that banks loan scheme is in keeping with the act establishing it, then the burden of proof rests on the shoulders of the accusers and as such he challenged the senators to prove that the bank had violated any laws.
Said Dr. Tarr: "Central Banks in all countries are independent. Unless there is a violation or malpractice that you can point to ... and it will have to be documented, I don't consider any limitation on the powers of the Central Bank to lend money. I don't know the details of the money they have loaned out or so, but in the laws, you have, the obligation will be yours to point out."
The CBL initiative has benefited several groups.
The CBL-SME Credit Stimulus Initiative, for example, is a policy intervention of the CBL aimed at broadening access to finance for Liberian-owned businesses. Bank executives access to finance has been a major challenge especially when borrowing cost is high. The program is intended to fire up economic activities in Liberia and has provided more than US$4.6 million in loans to 88 Liberian-owned businesses, 25 of whom are women.
The Loan Extension and Availability Facility(LEAF) is a grassroot program intended to get funds directly into the hands of Liberians who utilize the microfinance sector at a low interest rate and a longer period. According to the CBL, the goal of the program is to help ordinary Liberians who otherwise would be unable to get loans from commercial banks. The program requires no collateral and loans are provided to beneficiaries through their financial institutions including microfinance institutions, credit unions and village savings and loan associations. The LEAF program, according to the CBL has provided a total of 364 loans to financial groups of ordinary Liberians in all 15 counties since its inception to a tone of over $200 Million Liberian dollars.
The CBL Mortgage Stimulus Initiative is for the first time providing an opportunity for Liberians to obtain long term loans for home ownership. The program is being administered by the Liberians Bank for Development and Investment(LBDI) and is intended to impact Liberians in all of the political subdivisions of the country at all economic levels.
The Agricultural Stimulus Initiative recognizes that agriculture is the main driver of economic activities in rural Liberia. The program is intended to help farmers rehabilitate pre-existing farm and accelerate economic activity and employment in rural Liberia.
The CBL Credit Stimulus is the second phase of infusion of funds to Liberian-owned business and has the added intent of empowering the Liberian Business Association(LIBA).
The CBL-SME Credit Stimulus Initiative is a policy intervention of the CBL aimed at broadening access to finance for Liberian-owned businesses. Bank executives access to finance has been a major challenge especially when borrowing cost is high. The program is intended to fire up economic activities in Liberia and has provided more than US$4.6 million in loans to 88 Liberian-owned businesses, 25 of whom are women.
Since 2012, the Microfinance Unit of the CBL has among other things developed a regulatory framework for the microfinance sector, provided loans to support onward lending, provided funds to microfinance institutions, credit unions and village savings and loan associations; assisted with village saving loans in twelve counties and has pursued opportunities for advancing mobile and branchless banking.
