TRINIDAD / DOMINICA – Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the ratings on the US $10 million debt issue (notional) of the Dominica Agricultural, Industrial and Development Bank (DAID or the Bank) of CariB (Foreign and Local Currency Ratings) on the regional rating scale. These ratings indicate that the level of creditworthiness of this notional debt obligation, adjudged in relation to other debt obligations in the Caribbean is weak.
CariCRIS has also maintained a stable outlook on the ratings. The stable outlook is based on our expectation that there will be continued improvement in DAID’s business risk profile. The improvement is underpinned by continued progress in the bank’s asset quality and the implementation of the enterprise risk management (ERM) framework which is in its early stage of implementation.
Additionally, the stable outlook is also supported by the continued improvement in economic activity in Dominica underpinned by higher tourism activity, a rise in agricultural activities and higher public sector investment programs.
DAID continues to enjoy its tax-exempt status, government-guaranteed loans and waiver of annual dividend payments from the GOCD. DAID’s ratings continue to be constrained by its weak asset quality and financial performance. Additionally, DAID’s ERM and policy updates continue to progress but at a slow rate.
Furthermore, the bank’s operations in a small, open economy with material financial system risks continue to constrain the rating.
Rating sensitivity factors:
Factors that could, individually or collectively, lead to an improvement in the ratings and /or outlook include:
- An upgrade to the sovereign credit rating of the GOCD;
- Improvement in the NPL ratio to less than 16 percent;
- Adherence to the EIB’s revised financial covenants;
- Sustained profitable operations for more than 2 financial periods;
- Progress in the implementation of the bank’s ERM framework.
Factors that could, individually or collectively, lead to a lowering of the ratings/or outlook include:
- A change in the sovereign credit rating of the GOCD;
- Sustained NPL ratio of 45 percent or more over for the next 12 – 15 months;
- Further delay in the full implementation of the bank’s Enterprise Risk Management Framework;
- Any loss of major funding lines without identification of a suitable alternative;
- A decline in TNW coverage of net NPLs to less than 1 time over the next 12–15 months;
- A fall in the bank’s capital adequacy ratio to less than 25 percent over the next 12–15 months.
* The Dominica Agricultural, Industrial and Development Bank (DAID or the Bank) was established by an Act of Parliament on July 8, 1971.
It became a subsidiary of the National Commercial and Development Bank in December 1976 when the latter was established by an Act of Parliament No. 27. It was then re-established as an autonomous institution on January 1, 1982, in accordance with the Dominica Agricultural, Industrial and Development Bank Act Chapter 74:03 of 1982. Its primary objectives, as per its legal mandate, are to promote and influence economic development in the Commonwealth of Dominica and to mobilize funds for the purpose of such development.
The bank’s core business is to provide loans for business enterprises in all major sectors of the economy including tourism, agriculture and agro-processing, telecommunications, and other services as well as mortgages and student loans. Throughout its history, and in keeping with its objectives, the bank has made a significant contribution to Dominica’s economic and social development.
The bank’s two shareholders are the government of The Commonwealth of Dominica (89.6%) and Dominica Social Security (10.4%).