DOMINICAN REPUBLIC - Finance
Principal Director, Banco Peravia
Born in Venezuela, Gabriel Jimenez Aray has more than two decades of experience in the fields of law and consultancy, and has focused much of his career on issues related to taxation of the financial sector and commerce. He is a law graduate from the Universidad Católica Andrés Bello, and studied accountancy in the University of Central Florida before going on to complete courses in the University of Denver. In addition, he has studied banking and finance in what is now the London Metropolitan University. He has worked in the court system in Venezuela, and later worked as a private lawyer and legal advisor for major public and private clients there. He has also held positions in various other companies such as Información Aplicada Inc., International Legal Service Inc., and Ducati Miami.
Being from Venezuela, we have experienced a political transformation over the past 15 years. One of the good things about transformation is that it opens the eyes of entrepreneurs. We define a good country as one where wealth is distributed. Most people in these countries are surviving thanks to microfinance; however, in most cases the interest rates are 10% per week, sometimes, 1% a day. This creates a very harsh loan environment for ordinary people in the micro world, who are often unable to source sufficient funding for their micro business. In the Dominican Republic, 70% of internal production derives from the micro business, but less than 10% of those people are banked. The banking system therefore is overlooking the bulk of the economy generating most of the national wealth. What we bring from Venezuela is our experience of linking all sides together for better dialog.
We wanted to make a tangible impact in the micro business. Although some banks had announced providing micro business loans, because of their large size the structure was highly complicated. If you come to us for a loan of Ps2,000 ($50), you do not want to wait two weeks for that to be approved. If you came to us for an even higher loan of Ps8,000 to repair your taxi, for example, you would not want to wait for a week because your car being parked means lost revenue. The large banks have those problems because they are not flexible enough to understand the dynamic turnaround times of micro business. We, on the other hand, issue credit on the spot.
The regular form of doing business is to open branches, but branches have overheads. To cover the cost, you have to create certain businesses that will enable you to meet those costs. Therefore, what we do is acquire the efficiency of a network by accessing more than 2,000 “Colmados,” or convenience stores, which deliver us to our target community without the expense of dedicated branches. This said, we have been opening a few, as we do also need a visible presence. When we acquired the bank, it had only one branch but now has nine. Hopefully, we will close 2013 with 10 branches.
For insurance companies, their base clients are not consumers, but those that sell the insurance, such as the brokers. Ultimately, very few people call the insurance company; they call the broker. Therefore, insurers arrange new products for brokers to promote and sell. This is what we do in the micro world. We use the agents to sound out the needs of the community. Once I receive information, I try to create a forum for one product to approach and satisfy that need. It is a complete cycle, and a social approach that comes from Venezuela. Not everybody has the same standard of living, or indeed the same perception of what this means. You cannot assess a good standard of living solely in terms of owning consumer electronics, or an air-conditioned home. A good standard of living is having a secure and sustainable lifestyle.
The second most important city of the Dominican Republic, as they say, is New York, which is home to 1.8 million Dominicans. Remittances represent about a $3.8 billion per year, of which 60% comes from New York alone. We are present in New York, but not in the banking form, due to the associated high capital expenditure required, which in any case is not what the Dominican community is looking for. We have tried to pursue the business of transferring funds from New York to the Dominican Republic.
Something that I have noticed in my three-and-a-half years here is a change in the banking sector. One reason for that change is competition from abroad, which the major players are aware of. This sees the banks competing more aggressively today in response, one result of which is a wider range of products on offer at even lower interest rates.
Some of the larger banks have already started merging with one another, allowing themselves time to prepare for the competition that comes with more experience and funds, and are aggressive. The banking sector has to reduce the offer. All banks are players, but, globally speaking, they need to focus on the banking offer. With the increasing minimum capital requirements, we will see more and more banks merging or leaving the market. That is one of the events we are preparing for. Today, we are third in our niche, having risen from 17th place in less than three-and-a-half years. We have more than $40 million in assets, which ranks us above most banks engaged in multi-banking. Our paid-in capital is also among the highest and three times the threshold stipulated for the multi-banking universe. Thus, we are steadfastly progressing to the next step, which we will hopefully reach in 2014, namely entering that universe.
© The Business Year – February 2014
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