Avia Collinder, Business Writer
Central bank-supervised institutions have more than half-trillion dollars of customer savings under management, all generating returns below inflation.
New UDC boss Desmond Malcolm said such deposits should be better mobilised as capital for commercial projects.
Malcolm is suggesting that individuals, companies and group investors seek out investment opportunities for their cash instead of parking them in banks where the funds are losing value in real terms.
As at June 2012, Jamaica's commercial banks, near banks or FIA licencees, and building societies had J$554.5 billion of deposits on their balance sheets, but only J$376 billion of loans.
The banks accounted for J$423 billion of the total, but only J$288 billion of loans; building societies had J$125 billion but only J$91 billion of loans; while FIA licencees, which were the exception to the trend, had J$6.3 billion of deposits but J$6.8 billion in loans.
Essentially, the loan to deposit ratio of 69.6 per cent represents a $178 billion gap.
"Given the current low interest rate environment in Jamaica, huge sums are being held by depositors or savers at an average savings rate of two per cent on savings accounts and average high on fixed deposits below four per cent," said Malcolm.
Treasury bill yields are only at about 6.4 per cent, he added.
"We note that with annual inflation tracking around 6-7 per cent, these funds on deposit are losing real value and the need to find tangible investment opportunities to give a rate of return, at least ahead of the rate of inflation, provides an opportunity to attract capital to fund core projects of the UDC, in a manner consistent with development plan objectives," said the UDC general manager.
Malcolm's pitch for the transformation of idle savings into credit comes amid anaemic responses to the UDC's three-year push to privatise more than 30 assets on its books.
UDC is seeking partners for some of the assets, and buyers for others; and Malcolm who landed his new job in August has noted that his preference is to cobble deals with Jamaican investors.
The UDC is on the hunt for private-sector partners for attractions such as Laughing Waters and Green Grotto Caves, as well as sale or real estate investment-trust deals for the 65,000 square foot Jamintel building, the Office Centre Building, a nearby shopping centre comprising of shops/office spaces, the Oceana hotel and office complex, and Victoria Pier restaurant/attraction, and more.
"The existing view is that there is indeed billions of dollars being held in commercial banks and other financial institutions in search of investment opportunity," Malcolm told Wednesday Business, clarifying his position that capital exists locally to provide funding for some, if not all, of UDC's development projects.
The state agency is looking beyond savings, however, as sources of capital.
"We anticipate that investment can be attracted through individual or corporate investments, trust and pension funds and via capital market activities. This includes the involvement of the Jamaica Stock Exchange or the junior exchange which also provides significant tax benefits to investors," Malcolm said.
"This would facilitate the participation of not just large investors but also tap into the pool of 'small' depositors or investors," he said.
The UDC is currently finalising a list of priority projects for 2012 to 2014.