Trinidad and Tobago’s central bank governor Jwala Rambarran discusses the population’s low financial literacy, movement in the country’s financial sector and the plans to stimulate the country’s stock exchange. 

Trinidad and Tobago is by far the largest Caribbean financial centre in terms of its banking sector. The size and profitability of its lenders make up about 45% of the regional total, with its Tier 1 capital representing an even higher proportion, at almost 50%. The gas-rich country's financial sector contributes 10% to its non-energy gross domestic product (GDP), according to the central bank.

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It therefore came as a surprise that a survey to test the country's population’s understanding of financial products five years ago indicated that only a small proportion of respondents could be described as financially literate. “Questions were about financial practices, how you save, how you invest, plans for retirement,” says Jwala Rambarran, governor of the Central Bank of Trinidad and Tobago. “We got a better sense of the level of financial literacy and it was pretty low; about one-third of the population had a low level of financial literacy. In a country where the financial sector is a major player, a key part of our non-energy sector, there is a lot of work that needs to be done.”

A little knowledge

The central bank is undertaking a follow-up survey in 2013 to see if some initial programmes have helped to improve the country's knowledge in this area, such as working with universities to include courses on basic financial literacy in a number of degrees.

Had the level of literacy been higher, the country’s own financial crisis of 2009 might have not been as severe or might not have happened at all, according to Mr Rambarran. That year, the government had to intervene in Clico, a local insurance business arm of CL Financial – one of the region’s largest financial groups – as well as in other insurance and investment banking businesses of the conglomerate. The International Monetary Fund estimates that the cost, net of assets, of government intervention in these businesses amounted to 10% of Trinidad and Tobago's GDP. The troubles at CL Financial were felt across the whole region too.

“When you look at [the Clico case], you find people attracted to interest rates far higher than what the rest of the market was offering. If they had understood those high interest rates meant a higher level of risk and the risk-reward relationship in respect of financial products, then they would have been in a better position to make decisions around their financial future,” says Mr Rambarran.

Shaping up

Despite being hit by the CL Financial case and an economic recession in 2011, Trinidad and Tobago's economy is in relatively good shape. GDP estimates for 2012 and this year indicate some growth – the 2.5% forecast for 2013 compares particularly favourably compared with other countries in the region. And the country’s financial sector has become more active of late.

“[Some] banks have plans to expand in size, and not just inside Trinidad and Tobago. We have banks that have expanded recently into the Caribbean. We have one that is expanding in Africa – Republic Bank – and we have entities coming from Suriname now purchasing insurance companies locally. We also have companies from Jamaica expressing interest in entering our financial sector,” says Mr Rambarran.

“I had one expression of interest from the UK. None has come yet from the US or Canada, but Royal Bank of Canada [and other Canadian banks] are already here. Even as economic circumstances seem a bit uncertain, the financial sector is starting to display a lot more vibrancy.” 

Trinidad and Tobago’s financial centre has also reactivated its expansion programme, which had been suspended until last year, with an agency seeking to attract new investors to the country. Mr Rambarran says that quick solutions can be implemented to improve the local capital markets and help attract further investors. “Here at the central bank we have a bond trading platform that is used primarily for government issues and that could be extended to the private sector – a very easy win,” he says.

There are also plans for initial public offerings (IPOs) that would list selected government assets, and others that would help to get the country's stock exchange active again. “[The equity] market has been very quiet for a long time,” says Mr Rambarran. “There are some IPOs planned on the government side, the First Citizens’ IPO is on the drawing board, as well as the merger of a mortgage finance company and a home mortgage bank and eventual IPO. Hopefully, when others see such activity, they’ll be enthused to come to the exchange too.”

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