Government Expands Access to Foreign Currency Financing for Domestic Businesses

The Government has approved the relaxation of certain Exchange Control measures to provide access by certain categories of Bahamian-owned businesses to investment financing in foreign currency. The Government has also agreed to allow international banks present in our jurisdiction to have more flexibility in providing financing for residential real estate investments for non-Bahamians. 

Businesses with either broad foreign exchange earning potential or that are in engaged in activities that promote national development goals, will be able to obtain foreign currency funding either from local commercial banks or from external sources.

Where local commercial banks are able to provide credit funding, the commercial banks will have increased delegated authority to do so, against Central Bank issued guidelines, requiring no prior case-by-case approval from the Central Bank. All other financing sources would require prior approval from the Central Bank.

The sectors or categories of businesses that would be eligible for consideration under these relaxed measures are:

(1) Agriculture & fisheries;
(2) Manufacturing;
(3) Transportation (that is land, sea and air);
(4) Tourism (including hotels & restaurants);
(5) Construction and real estate targeting residential tourism;
(6) Energy & energy conservation activities;
(7) Education;
(8) Health sector activities;
(9) Telecommunications;
(10) Information and communications technology or ICT ;and
(11) Infrastructure

Funding from Commercial Banks or from Private Sources Outside The Bahamas

The categories of businesses above, when owned by Bahamians would be permitted to obtain funding of up to $5 million every 5 years as follows:

• If they obtain these resources from local commercial banks in the form of loans
  then no other condition would be imposed.
• If the funding is unsecured and from non-resident sources, again no other
  condition would apply.
• In the case of a sector or activity that is reserved exclusively for Bahamians,
  funding from non-residents or non-commercial bank sources through, either
  through secured debt or through equity participation would not be allowed to
  exceed 40 percent of the exposed capital of the business. Otherwise, the venture
  would have to revert to the NEC for approval.
• Also with the $5 million ceiling, secured funding would not be subject to any
  other restriction if the activity is not in a reserved sector of the economy.

Funding from International Banks located inside The Bahamas

In giving consideration to financing obtained from international banks that are licensed to operate from inside The Bahamas, only non-residents would be permitted to use this option, and only for resort or residential developments. Where such lending is not for commercial purposes, however, the borrowers would be expected to service their obligations from resources obtained from outside The Bahamas.

Funding from Multilateral Lending Agencies

The other category of lending which the Government now facilitates, is resources channeled through the private sector lending arms of multilateral agencies like the IDB and the World Bank. The Government will impose no restriction on the amounts of such lending to resident entities. This in recognition of the fact that these lenders apply rigorous due diligence in their lending decisions and they are essentially development focused in their activities.

Administrative Details

The Central Bank should be contacted for details on how Exchange Control approvals is to be processed in each of the above cases.

Where commercial banks are involved, however, businesses will have the option of having all of the due diligence and vetting done by the commercial banks, with the Central Bank receiving the notification on the back end.

Except for non-residents who finance upscale housing investments, the eligibility to borrow in foreign currency or to joint venture with foreign partners will also allow the eligible businesses to obtain foreign currency at the official rate to service their obligations.

Finally, these relaxations are only in respect of access to financing. Business should continue to expect current rules to apply as it concerns restriction on holding foreign currency deposit accounts.

Click Here for More Information: Relaxation of Exchange Controls to Expand Access to Foreign Currency Financing for Domestic Businesses