The Role of the Bahamas Development Bank in the Bahamian Economy Coursework

The Role of the Bahamas Development Bank in the Bahamian Economy - Coursework Example State of the Bahamian economy Before exploring the role played by the Bahamas Development Bank in the Bahamian economy, it is imperative to look at the state of the Bahamian economy: its strengths and weak points before addressing how the Bahamas Development Bank plays a role in addressing these weak points. Being among the best offshore global banking centers, Bahamas has come up with a non-simple banking structure that caters for the services of both domestic and foreign investors. Both the central bank of Bahamas and the Bahamian international banks and Trust have a complete list of about 272 financial institutions that are legally mandated to conduct business with the public (US Department of Commerce, 1992, p. 40). The states in the Caribbean went through several challenges in 2004. Examples of these include declining real sector production, a reduction in their export trade, pressure from other parties regarding the exportation of sugar and bananas, increased indebtedness and a season highly characterized by natural perils and catastrophes. Moreover, though categorized as middle – class economies, majority of these nations have a good score of their citizens who are poor. Statistics from the Caribbean Development Bank indicate that the poor form between one and twenty six percent of the population. In a bid to deal with these challenges, Bahamas has had to conserve economic stability, strengthen the tourism and fiscal financial sectors, enhance the security of citizens, and support family islands and growth of small businesses through buttressing social services and improvement of the transport sector (Commonwealth Secretariat, 2006, p. 16). The Bahamas authority plays this role through its financial institutions like the Bahamas Development Bank, among others that get their external sources of finance from other lending agencies such as the Caribbean Development Bank. In the recent years, there has been a reported rapid growth in both the financia l, Nassau and tourism sectors. In the recent years, Bahamas has become popularly known as a center for offshore banks and trusts apart from being a strategic location for carrying out international currency business (Khambata, 1996, p. 95; Bernardi, 2008, p. 107). This has been facilitated by the overall openness of the economy, proximity to the United States and The Bahamas’ tax haven state. Apart from generating income and employment for the country, financial services enhance the nation’s tax haven image. The attainment of the nation’s high-level per capita income can be attributed to the growth in the service sector that has really increased the national income of Bahamas (Karagiannis and Witter, 2004, p. 150). The major cause of the post war growth in the Bahamian economy can be attributed neither to structural reforms neither in the country’s production base nor to any changes in the functioning of its economy. The change can rather be attributed to the enlargement of the tourism and financial sectors. In fact, the pattern

Understand the Sources of Finance Available to a Business Essay

Understand the Sources of Finance Available to a Business - Essay Example Understand the Sources of Finance Available to a Business In every business, the availability of finances is an inevitable need. These are credits given by suppliers to manufacturers or traders, who pay for the goods after sales. The business, therefore, can acquire goods without paying for them instantly. Trade credits are advantageous since the business makes payment after the expiry of the period given. It is disadvantageous since there is no extension of the arrangement after the expiry period. Commercial banks may grant bank credits to a business, which act a source of business finance. The credit is useful for starting or expanding the business. The possibility of extension of bank credits’ payment period makes it advantageous as a source of business finance. The need for collateral to get bank credits forms one of its disadvantages. Bill discounting is another source of business finance. Banks deduct discounts during payments, equal to the remaining period’s interest. It is advantageous since cash is available immediate ly to the business. It, however, turns disadvantageous when the business is not credit worthy. It uses the business’ credit-worthiness to grant finance to the business. Customer advances are sources of business finance. These are advance payments made by the customer, mainly on large orders. It is advantageous since it does not need tangible security. ... It involves paying a small portion of the cost of purchase and settling the balance on installments. This is advantageous because there is delivery of the asset after paying the down payment. Other payments, therefore, comer later and the business has time to acquire finances. It, however, is disadvantageous because the business is under obligation to pay the installments whether it makes losses or have profits. The business constrains to pay the installments, in case of losses. Finance from co-operatives is a source of business finance. They can help in coming up with short-term finance and such loans need little security. They are advantageous because small business can avail them easily. It is disadvantageous since its availability is limited to co-operative members. Issuance of shares is a good source of business finance, mainly for long-term use. A business may issue preference or equity shares. Contrary to equity shares, preference shares have preferential rights. Shares have s everal merits. It is a reliable source of additional capital. Shareholders are also able to earn dividends from their investments. The demerits of shares may occur when equity shareholders, who have voting rights, take control of the business. This may bring the possibility of conflict of interest that may hinder a company’s smooth functioning. Debentures are loan certificates issued to the public. They are financial source if the business needs a large amount of funds. A business may have redeemable, irredeemable, convertible, or non-convertible debentures. The advantage of debentures as a source of finance for the business is the lack of control overs the business by debenture holders. It is reliable as a source of finance for business. The greatest disadvantage of