Caribbean Financial Services Market on the Rise
Often associated with sandy beaches and clear blue seawater, the Caribbean has been a hot spot for tourism, accounting for as much as 30% of GDP in some territories. Yet over the past 10 years, improvements in Caribbean infrastructure to support local businesses and communities has led to increased investment across the region. Additionally, following the advent of the COVID-19 pandemic, the Caribbean has become less reliant on a still-recovering tourism sector, promoting growth in other sectors of the economy including services and industrials. With the industrialization of the Caribbean, the services sector in particular has accounted for an increasing proportion of GDP, increasing from 56% to 68% of GDP between 2010 and 2020.
Financial services has been one of the key driving forces behind the shift in the Caribbean economy over the past 10 years. With the increase in demand for infrastructure investment in the region, there has been an increase in the domestic supply of capital to the private sector. Where businesses in the Caribbean had previously sought to raise capital from key North American sources, including the US and Mexico, there has been a growing shift towards local sources of capital. Between 2000 and 2020, domestic credit to the private sector by local banks grew from 24% to 55%, with the pent in demand being met by emerging alternative investment firms.
Alternative investment firms, encompassing private equity, private credit and venture capital and hedge funds, have a significant opportunity for growth as a result of strong economic indicators and a boost in infrastructure investment in the region. The Caribbean has a GDP of approximately US$80 billion, with US$720 million (~1% of GDP) of that representing alternative investments. Although this represents a small proportion of GDP, credit funds in the Caribbean are expected to experience significant growth of over 9% YoY. This creates an ideal environment for domestic Caribbean players in the region to raise capital and deploy locally in a market with significant growth prospects.
Do you have an interest in learning more about potential opportunities in the Caribbean region? Please contact us for additional information.