Cuba’s Banks Are Different

Fernando Ravsberg

HAVANA TIMES, July 21 – Having recently arrived in Cuba, my wife began the process to permutar (“swap”) our apartment for a more centrally located one.  When everything was almost ready for the exchange, we found out that the other family didn’t have clear ownership of the apartment in its possession because the bank maintained control over the title.

I didn’t like the matter one bit and my distrust only increased when I went to the bank branch to find out that our counterparts hadn’t paid a dime on the loan they had received two years prior to buy their home.

The manager attended to us and, after a long explanation about the need to pay one’s debts, she transferred the property over to us saying that she expected that starting from that point they would start paying off their loan.

I knew that I must have been hallucinating.  I couldn’t believe that a bank was limited to “scolding” its clients who don’t pay.  I don’t know what effect the moral appeal to the debtors caused, but thanks to that we were able to make the exchange and move.

I recalled reading an interview a few days ago with Ileana Estevez, the president of Banco de Credito y Comercio (BANDEC), which is charged with granting loans to Cubans to finance operations on farm lands received in 2008.

Ms. Estevez explained that the bank analyzes each case attentively before granting a loan, because if the borrower doesn’t pay their debt, “Cuban legislation doesn’t give banks or any other institution of that nature the legal authority to dispossess a person of their property.”

Despite all this, BANDEC has extended loans to 13,000 farmers after studying the possibility of obtaining “the projected production levels that will that generate the estimated revenue.”

The managuer affirmed that the total amount of the loans is “in the millions”, following a Cuban tradition in which specific figures aren’t disclosed.  The interest that the borrowers should pay is 5 percent for the first two years, after which time this rate increases to a maximum of 9 percent.

Curiously, there are few people who don’t pay on their debts.  “I can tell you that agricultural production loans demonstrate a high payback rate.  Only one percent of them exhibit any type of nonperformance.”

I was struck that much harder by the interview because I had just gotten back from Spain, where banks — with the support of the courts and the police — are evicting thousands of families from their homes because they can’t pay their mortgages.

The worst thing is that with the bursting of the real estate bubble, property values have decreased to less than half and the banks not only keep the houses but also demand the evicted families to continue paying on their original loans.

Cuban banks are not as profitable as those in other countries, nor do they have as much power over borrowers.  Yet despite everything, with the recent national economic reforms their activity is growing quickly.  From last year to now, applications for credit have almost doubled.

This relates to the 146,000 Cubans who have received land over the last two years, half of whom are new farmers.  This means that they are just beginning to work in this area and therefore require credit to become operational.

But none of this is new.  My Cuban friends nostalgically remember the epoch when they could buy furniture or appliances thanks to bank loans whose payments were later deducted directly from their wages.

Later came the crisis of the ‘90s, when there was no money for lending or anything to buy.  Ordinary people cleaned out their savings accounts because they needed each cent and the banks focused on paying out pensions to the elderly.

Recent years’ reforms open up a new perspective for Cuban banking.  Let’s hope they opt to support the productive development of citizens and don’t fall for the temptation of involvement in activities that have brought so many problems to the world.

An authorized translation by Havana Times (from the Spanish original) published by BBC Mundo.