Prospects & Projections — T&T’s Financial Forecast

January 22nd, 2025

Since financial liberalisation in the 1990s, Trinidad and Tobago’s (T&T’s) financial services sector has grown in complexity to be one of the more developed sectors in the Caribbean region. It comprises a mix of banks, insurance companies, pension funds, mortgage companies, credit unions, other non-bank lending institutions, mutual fund companies, foreign exchange dealers and capital market participants.

As the Executive Director of the Trinidad and Tobago Unit Trust Corporation (UTC) – the country’s largest mutual fund service provider with investments in not only the country’s banks and other major listed enterprises but also in the region – Nigel Edwards is well-positioned to offer insights into T&T’s formidable financial sector.

Digital Revolution in T&T’s Financial Landscape

He identified digitalisation as the key trend having the most impact on T&T’s financial and investment landscape. “Advancements in communications technology are allowing financial institutions to serve their customers better, faster, and in a more cost-effective manner,” he said.

In this regard, in September 2023, the Central Bank of Trinidad and Tobago (CBTT) formally registered three local entities to conduct business as e-Money issuers: PayWise Limited, the Telecommunications Services of Trinidad and Tobago (TSTT), and PESH Money Limited (PESH). These entities are authorised to issue e-Money accounts, provide payment services, and conduct money transfers/remittances.

“We have to be attentive to what happens in the electronic payments sphere… moving towards frictionless ways of settling financial obligations locally, regionally and internationally… I think that’s going to be a game changer,” Edwards said.

Driving Growth – Key Factors in Finance

Optimistic about the continued growth and development of T&T’s financial sector, Edwards identified the primary drivers of growth over the next two years as:

• T&T commercial banks have excess liquidity (TT$3.9 billion as at 24th May 2024), which means market players have some access to relatively inexpensive funding.
• Low and contained inflationary pressures (headline inflation rate was 0.8% as at 31st March 2024).
• CBTT’s accommodative monetary policy stance (repo rate unchanged at 3.5% since March 2020).
• T&T’s investment grade is BBB – S&P Global sovereign credit ratings.
• Conservative business model adopted by most T&T financial institutions, which “continues to serve these institutions well as they remain profitable and sustainable.”
• Technological advancements across service delivery platforms have enhanced customers’ value propositions and promoted increased sales and brand loyalty.

Edwards said the key challenges facing T&T’s financial institutions as they seek continued growth include heightened cybersecurity risks, larger liquidity buffers required by the CBTT, and earnings pressure as global central banks lower interest rates.

Innovations and Opportunities for 2025 and Beyond

The subsector with the most significant expansion opportunities is the commercial banking sector, as banks are typically larger in size and have the required financial resources to undertake expansion activities. Additionally, a recent census report revealed that roughly 19% of the local population is currently unbanked or under-banked, a significant untapped portion of the market, Edwards said.

He noted that in recent years, local financial institutions have acquired assets, launched new products and entered partnerships regionally and internationally to increase their customer base. For example, in the banking sector, Republic Financial Holdings Limited acquired banking operations in the British Virgin Islands, Cayman Islands, Eastern Caribbean and Ghana.

In the mutual fund space, UTC launched the first mutual fund in the Eastern Caribbean in 2023 and partnered with GK Capital Management Limited to offer three funds to Jamaican investors.

In 2025, companies may be looking at Guyana to expand, Edwards said, as the Guyanese market potentially represents the most lucrative regional market given the country’s recent discovery of oil and gas assets.

Noting that financial services was an industry of scale, Edwards said the challenges to scaling quickly in a foreign market were very high. He, therefore, expects the expansion to take the form of partnerships and points out that expansion does not have to focus on a physical presence. “It is how you look and what you look for.”

He noted that improving the customer’s experience at every touchpoint with a financial institution will be a fundamental driver of change in the future.

“In the next five years, we will be looking at a far more integrated financial services sector in the Caribbean region. We will be looking at entities that are serving the Caribbean region as opposed to individual populations and… that are driven by what the customers are demanding rather than their own internal considerations.”

Article by: Kay Baldeosingh-Arjune