Where Does the Average Bajan Invest Today?
A member of the BU community posed the question to the blogmaster via private message – “Where does the average Bajan INVEST today- now?”.
There is a quick answer. There is a complex answer. The blogmaster is not qualified to address the complex answer, however, members of the BU family are free to fill the gap.
The question was influenced against the backdrop of government’s retrenchment exercise and should include private sector employees where similar retrenchment programs have been occurring in the post 2008 period.
Before the question posed can be answered it is important to understand how savings and investment differ. In simple terms individual savings is the difference between income earned – a salary – minus CONSUMPTION expenditure e.g. car, food, entertainment etc. To clarify, if the individual purchases an Aquaponics system (to produce food) we should define this as an INVESTMENT expenditure. The investment expenditure reduces household cost and creates a revenue opportunity.
The most recent Financial Stability Report page 20 produced by the Central Bank confirmed what we know, Barbadian individuals and other entities continue to save in the financial system. Some dismiss the high level of savings to Barbadians being risk averse others will counter by suggesting that we should consider other determinants. The blogmaster will leave this part of the debate to the BU intelligentsia except to say. Traditional investment opportunities are limited in Barbados and BLACK Barbadians especially have confused saving with the bank or credit union as an investment.
This blog is not meant to denigrate Barbadians. However, it is accurate to say that the financial IQ of Barbadians combined with a passive entrepreneurial disposition has defined our investment outlook. Some members of the BU family will point to how the education system has been designed in a post colonial period that has led to our state of mind.
To answer the question posed by the member (he is free to expose himself). Even in the so called ‘good times’ the investment market in Barbados can be accurately described as closed. Bear in mind the blogmaster does not consider individual savings in financial institutions as investment. Where are locals – those being displaced by government – able to invest money to generate meaningful income that is not illiguid? There is no active equity market. There is Fortress Fund and a couple other mutual funds that show moderate ROIs. You get the picture!
Earlier in the blog BLACK was capitalized for a reason. It was not meant to be an incendiary verbal, simply to differentiate how Blacks and minority groups approach investing in the same local market. For years minority groups have established Pooled Investment Funds. In a simple definition, an opportunity is identified and a group of individuals come together based on a shared position to invest in the idea and agree to share the risk. The idea maybe to buy property to rent or flip, acquire an equity stake in an under capitalized business, transport an emerging business concept from offshore to local market … you get the picture. The more sophisticated investment is that a few pension funds managers act as loan sharks. Is this activity regulated? A blog for another day. However it must be said that all investments bear risk!
The upside to what is happening to displaced workers in Barbados it that it may serve to disrupt a passive state of mind. This is where the national conversation needs to be anchored instead of the old way thinking. It is time to change the thinking.