THE LIBERIA BANK for Development and Investment finds itself in a rather precarious position, just days after its Chief Executive Officer/President Deo Z. Delaney was forced to step down over alleged inaccuracies in his education credentials.
PRIOR TO HIS RESIGNATION, Delaney was reportedly on to something, at least as far at the International Monetary Fund is concerned.
THE WORLD monetary body, which supports economic policies that promote financial stability and cooperation amongst its 190 members, issued a word of caution late last week, in a letter to both the Governor of the Central Bank, Aloysious Tarlue and Minister of Finance, Samuel D. Tweah.
IN THAT COMMUNICATION, obtained and published by FrontPageAfrica Monday, the IMF, through its Mission Chief for Liberia, Mr. Christoph Klingen, averred that Delaney's resignation put the brakes on major reforms Delaney was undertaking, particularly regarding delinquencies on loans.
MR. KLINGEN EXPLAINED that the reform of the LBDI has been a key plank of the IMF program and that IMF resources were channeled toward LBDI's US$31 million recapitalization, and the Executive Board of the IMF concluded program reviews based on the completion of critical reform steps, including the appointment of a new management team to turn the bank around.
ACCORDING TO MR. KLINGEN, the recent resignation of Delaney hurt the gains that were being made. "That the only recently-appointed CEO was asked to tender his resignation is therefore a major setback, especially as it comes just as when he embarked on a high-profile program to recover non-performing loans (NPLs) and was about to arrange a fresh audit of LBDI's books."
CREATED BY AN ACT of the National Legislature in 1961, it was not until 1965 that the Bank began full operations as a Development Finance Institution (DFI). Under an amendment in 1974, the name of the Bank was changed to LBDI to reflect the increasing national emphasis on the agricultural sector and other drivers of national economic growth.
SINCE 1988, LBDI has also acted as a commercial bank, owned by both public and private shareholders, comprising Institutions and individuals;some being Liberians andothers, foreign nationals, and companies.
THE ULTIMATE GOAL was that in a free enterprise economy such as Liberia, there is always a compelling need to provide incentives to stimulate the flow of private investment capital and fuel the engine of national and international trade.
FOREMOST AMONG THE incentives which the Government of Liberia considered to be imperative in pursuance of this goal was the creation of a financial institution (LBDI) that would:
THE BANK IS ALSO tasked with facilitating the creation and expansion of small, medium, and large scale productive businesses in various sectors, such as: Agriculture, Industrial and the service industry including tourism ventures and provide increased goods and services for the rapidly growing consumption requirements of the economy.
OVER THE YEARS, the bank has served as an instrumental institution, facilitating loans to businesses and institutions looking to expand. However, over the past few years, the bank has also incurred losses due to millions of dollars in loans that borrowers have been unable to pay back, leading to the bank's decline.
FOR KLINGEN, GIVEN the pivotal role of financial stability, the protection of public finances and promotion of good governance in the IMF-supported program with Liberia, it would be difficult to conclude current program review without these setbacks being adequately addressed.
THE IMF'S CONCERNS put the LBDI in a very tricky position. On the one hand, the bank and its former CEO, Delaney, moved quickly to address whatever inaccuracies unearthed in his education credentials. But given the new concerns by the IMF, it begs the question, where lies the bank's most pressing priority.
THE ISSUE AT THE BANK HAS also drawn the attention of Liberia's traditional partners - the United States of America.
LAST WEEK, US Ambassador, Michael McCarthy, at a news conference also sought answers from Liberians regarding the issue at the LBDI.
JUST AS ELECTRICITY, CUSTOMERS obviously need to pay for what they consume, the US envoy said, those who take out loans must pay back what they have borrowed.
THE AMBASSADOR NOTED: "Liberia has a reputation today as a market where well-connected borrowers don't pay back their loans, while micro-finance borrowers of much more modest means have a laudable pay-back rate. Strangely, it is wealthier consumers who have stained Liberia's reputation. In some cases, rich businesspeople with valuable property and ample resources stashed away in other countries, are refusing to pay high dollar debts that they accrued in Liberia. When confronted with this fact, they even resort at times to threats against the bank officials. Let me ask you - how can the Liberia Bank for Development and Investment issue small and medium loans to start new businesses when the loan defaults by wealth borrowers have left them with few funds to lend?"
WHILE IT MAY be a bit complicated for the LBDI to ask Delaney back, as is being suggested by the IMF, the issue of the loans, is crucial to the bank's survival and may require unconventional thinking and actions to revert the course the bank was embarking on prior to Delaney's exit.
ACCORDING TO KLINGEN, With the LBDI's management team depleted, it would be important for the Central Bank of Liberia (CBL) to immediately reinstate a resident supervisor to safeguard LBDI's balance sheet.
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MR. KLINGEN IS ENCOURAGING both the CBL and the LBDI board to immediate undertake the prompt recruitment of a new CEO in line with best practices or the reinstatement of the previous one is an obvious priority, but the audit must not be held up over a change in management. "The CBL should as soon as possible commission a full and expeditious financial audit of LBDI's books by an internationally reputable audit firm, with the understanding that further in-depth investigation will follow as warranted.
WE AGREE WITH THE IMF Mission chief that an NPL recovery with a focus on largest delinquent borrowers is now more important than ever to dispel the notion that well-connected borrowers are shielded from enforcement. But all this, as Mr. Klingen suggests, needs the full backing of LBDI's board, "the publication of key information and updates on progress, and the deployment of the full range of sanctions for non-cooperating delinquents, including their exclusion from access to banking services as provided for under CBL directive."
DESPERATE TIMES CALLS for desperate measures and while the issues at the LBDI may not be at boiling point, it is at a point where rational reasonings need to be applied to a situation that warrants the attention of all well-meaning Liberians and urgent action from the Executive Branch of government, in a bid to avert the LBDI from going under, just when Liberia needs it the most.
