The Financial System in Barbados 50 Years after Independence

Abstract

The financial system plays a crucial role in transferring funds from savers to investors and consumers, facilitating payments and allowing individuals and institutions to manage a range of financial risks. Imagine life in Barbados as a family with no access to consumer credit or a home mortgage. Imagine operating a business without access to financing. Imagine the limits in the services which government could provide if it was limited to the amount and timing of tax revenues. Imagine the vulnerability of families and institutions if there was no life, fire or motor insurance, or if there was no National Insurance Scheme. In fact, some would argue that the financial system is one of the unsung heroes of the high quality of life we enjoy in Barbados, as we approach 50 years of independence. As the end of 2015 approaches, and the year 2016 and 50 years of independence beckons, Barbados boasts a modern, sophisticated and well-regulated financial system. At independence in 1966, commercial banks from Canada and the United Kingdom dominated the financial landscape, alongside the locally owned Mutual Assurance Company. 50 years later, the financial system is still dominated by commercial banks, and Barbados possesses what is often termed a “Bank based” financial system. However, the banking system is now regulated by a local central bank, banks from the United Kingdom have disappeared, and Canadian and Trinidadian owned banks dominate the landscape. Alongside the commercial banks, there is an emerging non-bank financial sector where the Mutual Assurance Company has morphed into a global financial corporation together with international and regional Insurance companies. Credit Unions are now major players; Finance Houses provide a range of modern sophisticated retail financial services; there is a thriving mutual fund industry and the National Insurance Scheme is the largest domestic financial institution. The emergence and importance of the roles played by the Barbados Central Bank and Financial Services Commission, the emergence and growth of Credit unions and the National Insurance Scheme, and the emergence of the Barbados Stock Exchange and Mutual Funds are probably the most significant developments in the financial services sector since independence in 1966. Over the next 50 years I expect the major developments in the financial system to be, a greater variety of corporate debt instruments, venture capital investments, greater use of online services and an increase in personal financial planning services.