By Osmel Ramirez Alvarez
HAVANA TIMES – When I think about BANDEC (Cuba’s Credit and Commerce Bank), the first adjective that comes to mind is “hurdles”. Sure enough, this banking institution is synonymous with obstacles, negativity, delays in loan disbursements and little customer satisfaction. At least when it comes to agricultural customers.
It is the Cuban bank responsible for financial transactions and loans in the agriculture system, which was supposed to be replaced at some point by the already announced Bank of Agricultural Development. However, it remains unknown when it will open its doors, and how disconnected it will be from BANDEC.
I have been a member of a cooperative for 12 years, and in all of this time, I’ve never seen agricultural loans disbursed on time and properly. Never! Without exaggerating. For example, most loans are for tobacco farming, which should be paid out in August so that farmers can use this money to begin to pay for plowing the land that month, as the sowing season begins on October 10th.
It’s also rare to find a farmer who manages to pay for their seedlings in October with money from these loans. They find themselves forced to ask for another loan from third parties which they will then pay off with the bank loan when it does finally become available, or to become indebted to the seedlings’ farmer or the cooperative.
During member assemblies at the cooperative in October, November, December and even in January, one of the most heated points on the agenda is the problem with late tobacco loans. This happens year after year. We can’t even switch over to a less incompetent bank because in a centrally planned economy this is all there is, there is no choice.
Why does this happen? What excuses do they muster?
Normally, the excuse is that “the loans committee hasn’t met yet.” But this committee is made up of people working at the very same bank, and they should be meeting every week. From what I’ve been seeing after all of these years, I believe this happens as a result of:
- Excessive regulations that become an obstacle.
- There is very little room for tailored decisions to be made for customers. They don’t work with consumer trust, because if they are trustworthy, they should be handling their business without obstacles; however, everyone ends up suffering because of the suspicions that defaulters bring upon us.
- Excessive caution in the face of small risks: the vast majority of agricultural loans, at the official dollar rate and even more so with the informal rate, could be considered microcredits, which are managed with a lot more flexibility and speed in other parts of the world, but here they are managed with more rigor as if they were million-dollar bonds belonging to the national treasury.
Other problems linked to agricultural bank loans that also hinder production, are:
- Farmers can’t solicit the loan directly, only the cooperative can do so in their name, which forces them to become members.
- Farmers don’t receive cash payments, except for a very few exceptions when it is to pay manual labor. They even divide this payment, and you only manage to have all of the money a month after the work has been carried out.
- The greatest sum is to pay for goods and services with legal state entities that the bank has registered beforehand, without room to improvise. If you find yourself forced to negotiate with others, you can’t use the loan.
Some personal examples might paint you a clearer picture. This year, I managed to register to work on a small plot of tobacco for export, 0.5 hectares (in the end I only managed to get the resources needed to plant 0.25 hectares). Knowing that loans with BANDEC are a headache, I searched for “friendly” private funding for the production side of things.
However, as the state-led company is the one selling supplies, I decided that it would be more feasible to get a loan for “the covering”, which is the protection we use for crops with mosquito nets hanging from a wire and wooden frame. Just 18,000 pesos, some 750 USD at the official exchange rate, and only 300 USD on the street.
My loan still hadn’t been approved in October! I went to see the bank clerk and I gave him a headful of well-founded arguments. I told him that if I had never had problems paying bank loans before, why was it taking them so long and where was their exporting mindset, when they are sabotaging tobacco production by delaying loan payouts.
Dozens of farmers were in the same position, but the pressure I put on the bank had a positive result and I was able to get the payout in less than a week. However, when I went to buy my supplies, there was no more wood or wire available because of the shortages crisis this year. Therefore, the damage was already done and the fault belongs to BANDEC.
So, I had to figure out something with other farmers who were no longer planting and had this protection material lying around. I used some of the money I received to plant, and part to buy the netting from those farmers. When I asked for a cash payment for my loan at the bank, they told me that they didn’t have a way of paying it to me in cash, that I could only take it out in the established way.
After several weeks of coming and going to the bank, and asking whether this was the way to be “proactive” and cooperate with the national economy etc., and asking for documents at the tobacco company and from farmers who sold me resources, to cosign my application, they decided to give me my loan. All of this amid the planting season, dealing with excessive work and many more problems, with no other choice but to delegate planting responsibilities to others and compromising effectiveness and efficiency.
But incredibly! at the last minute, the bank clerk met with his superior and decided that they had to put the cooperative as a formal intermediary among those who sold me the materials, which delayed the disbursement another whole week and it cost me a 10% commission for the fictitious sale they gave me. So the calm me exploded! That was my limit, I told them no, that I would look for a loan shark before negotiating with BANDEC.
If only the promised bank of agricultural development comes without BANDEC’s obstacle-making, “hurdle-creating” mindset. But there’s no reason to have great expectations because, while the government says it’s trying to tackle the hurdles in our path, the system seems to create them out of habit, as if it were an inevitable consequence of the state centered and planned model.