The Port of Spain-based Caribbean Information and Credit Rating Services (CariCRIS) has reaffirmed its ratings assigned to the Dominica Agricultural, Industrial and Development Bank of CariB (foreign and local currency ratings) on the regional rating scale.

These ratings indicate that the level of creditworthiness of this issuer, adjudged concerning other issuers in the Caribbean is weak.

CariCRIS has also maintained a stable outlook on the ratings. The stable outlook is based on CariCRIS’ expectation that Dominica AID Bank’s business risk profile would continue to improve over the next 12 to 15 months. This improvement is underpinned by the bank’s ongoing efforts to improve asset quality and risk management.

The improvement in Dominica’s economic activity is bolstered by the ongoing recovery of the tourism sector and expansion of the agriculture sector, as well as increased public sector investment programmes, which also support the stable outlook.

Dominica AID Bank continues to benefit from tax-exempt status, government-guaranteed loans and waiver of annual dividend payments from the Roosevelt Skerrit-led Dominican Government. The bank’s ratings largely reflect its weak asset quality and financial performance which continue to constrain its ratings.

Additionally, Dominica Aid Bank’s enterprise risk management (ERM) and policy updates continue to progress, but at a slow rate and lag behind regional peers.

Furthermore, the bank’s operations in a small, open economy with material financial system risks continue to constrain its rating.

According to CariCRIS, factors that could lead to an improvement in the ratings or outlook include:

• An upgrade to the sovereign credit rating of the Commonwealth of Dominica government

• Improvement in the non-performing loan (NPL) ratio to less than 16 per cent

• Adherence to the European Investment Bank’s (EIB) revised financial covenants

•  Sustained profitable operations for more than two 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 Commonwealth of Dominica government

• Sustained NPL ratio of 45% or more over for the next 12 – 15 months

•  Further delay in the full implementation of the bank’s ERM framework

•  Any loss of major funding lines without the identification of a suitable alternative

• A decline in tangible net worth (TNW) coverage of net NPLs to less than once over the next 12 to 15 months

• A fall in the bank’s capital adequacy ratio to less than 25 per cent over the next 12 to 15 months

The Dominica AID Bank, established by an act of Parliament on July 8, 1971, as per its legal mandate, is primarily concerned with promoting and influencing economic development in the Commonwealth of Dominica and mobilising funds for 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 Dominica (89.6 per cent) and Dominica Social Security (10.4 per cent).