When is a 'loan' not a loan?

At the beginning of this week, the Progressives-led government demonstrated their lack of political will to make substantial reforms to the Cayman Islands civil service for the betterment of the entire country, announcing they would not be pursuing recommendations from Ernst & Young consultants that would lead to painful, but financially necessary, significant government downsizing.

Later in the week, the Progressives followed up with a demonstration that sufficient political will does exist, however, to resurrect the temporarily defunct Cayman Islands Development Bank to provide “loans” to those same civil servants whose taxpayer-funded jobs our leaders have just ring-fenced.

(Shall we mention that the May 2017 general election is closer than one might think?)

Note that in the paragraph above, we took care to demarcate the word “loans” with quotation marks. There is a purpose to our punctuation. Specifically, such offerings made by Cayman’s government are of a particular category, in that they are “loans” that are rarely paid back.

Perhaps, instead, we should call them “grants.”

To our readers who may take umbrage at our diction, consider last week’s assessment by the Office of the Auditor General of the previous United Democratic Party government’s “Save the Mortgage” program (announced just about four years ago to date, coincidentally at about this time during the last election cycle), in which distressed homeowners received “loans” (There’s that word again!) of up to $20,000. The results of that effort are as follows: About 84 percent of the “loans” given out were “delinquent in some degree” in 2013/14, and 82 percent of those who received loans ended up in foreclosure proceedings anyway.

“The reality is that the loans were closer to grants,” the auditor general said.

Consider, also, the overall state of the Development Bank that led to its short-lived shuttering at the start of the Progressives administration. The bank had accrued a total bond debt of $30.5 million. (Sounds to us less like a “bank” and more like a “sieve.”)

In August of this year, lawmakers shunted off the repayment of that bond for another 10 years, through a loan (of the actual, must-be-paid-back sort) from FirstCaribbean International Bank.

With the ink barely dry on that refinancing agreement, lawmakers have delved back into the banking business, not only with the aforementioned “loan” program for civil servants (who can borrow up to $20,000 to pay off existing debts), but with a new “loan” program for small- and medium-sized businesses (which can borrow up to $100,000 in new capital). The Development Bank’s new business loan program sounds eerily similar to its old business loan program, which resulted in, as we reported in June 2014, a delinquency rate of between 60 percent and 70 percent.

Of course, can anyone really trust in the repayment of “loans” extended to already indebted individuals or to struggling commercial entities? Look at how well government-funded capital injection has worked for the Cayman Turtle Farm.

It is easy to foresee the probable conclusion of the reinvigorated Development Bank programs: missed payments, delinquencies and eventual re-re-financing.

Maybe, instead of “grants,” we should call the Development Bank offerings what they really resemble: “gifts.”



  1. Now that’s a loan I would sign up for ! I guess with this loan I could pay off my medical bills to HSA, but why? That’s free too. Throw in the largesse of Nation Building Funds, driveway paving and other vote buying goodies and I’m sold. Heck, at some point the Cayman Gov’t may actually pay you to live/vote here. This sense of entitlement and superiority would then allow me to belittle foreigners as job stealers and "driftwood".