By NLR Johnson, Contributor
Davies
DESPITE THE crisis that beset the local financial sector between 1996 and 2000, data from the Central Bank show that there was massive growth in its total operations over the last six years, and an incredible surge between June 2001 and June 2002.
Total assets in the sector increased from $197.8 billion in 1996 to $322 billion in 2001, an increase of 62.8 per cent, while total savings increased $83 billion $138.7 billion over the same period or by 67.1 per cent, while growing by 20.9 per cent over the last twelve months, which has exceeded the projected figure of 10 per cent projected by some financial and economic analysts in 2000.
Data compiled by the Financial Gleaner from the Bank of Jamaica's Statistical Digest publication, March 2002, show that commercial banks, merchant banks, building societies, trust companies, and credit unions assets and savings continue to demonstrate strong growth, taking into consideration the precarious position the economy found itself between 1996 and 2000.
The crisis in the financial sector has seen the number of financial entities being reduced from almost 60 in 1996 to 21 at the moment, as a result of mergers and closures. Those financial entities that remain in the sector have been described as the most profitable and efficient- in other words the fittest have survived.
A closer examination of the figures reveal just how well the financial sector has rebounded from a close encounter of the meltdown kind. Between 1993 and 1996 the financial sector grew from $92.4 billion to $197.8 billion, an increase of 114 per cent. Between 1996 and 1999, the years of the crisis in the financial sector, the sector grew by just 32.3 per cent in real terms. Between 1999 and 2001, the sector grew by 23 per cent in real terms, and grew by 20.9 per cent between June 2001 and June 2002 or from $294.4 billion to $355.8 billion.
Table I shows the assets and savings of financial institutions between 1996-1999 and June 2000 to June 2002.
It is clear from the data that the assets of commercial banks grew by little over 40 per cent between 1996 and 1999, while savings grew by almost 50 per cent over the same period. Put another way, on an average the assets of commercial banks grew by 153 percentage points while growing by over 25 percentage points between June 2000 and June 2002.
On the other hand, the assets of merchant banks decreased by 47.8, while the assets of building societies grew by just 12.5 over the three-year period or by an average of 4.2 per cent.
Between June 2000 and June 2002, the assets of merchant banks grew by 217.2 per cent, while savings grew by 102.4 per cent. Credit unions assets and savings had not been affected to any great extent during the crisis in the financial sector.
Also worth considering is the percentage rate of asset growth which moved from 9.2 per cent in June 2000 to 20.1 per cent in June of 2002. Also the rate of deposit growth increased from 9.2 per cent to 14 per cent. The rate of capital base growth, also increased from 8.1 per cent to 13.1 per cent.
"I remember how our policies were criticised during the period when the financial sector was undergoing hard times. It is as a result of our prudent policies why the sector can realise this level of growth within such a short period of time," said The Minister of Finance and Planning, Dr. Omar Davies.
A spokesman at the Bankers Association of Jamaica (BAJ), said the Government should be commended for the policies which it had implemented to deal with the problems in the financial sector.
"We have seen the sector grew over the past 18 months at an incredible rate, and I think it has reach its glory days. The sector is awash with money but managers are now more prudent in their lending, carefully considering ventures before they give the go ahead," said the spokesman.
