Tonga Development Bank and the International Finance Corporation (IFC) signed a Bank Guarantee Agreement in Nuku’alofa yesterday, 9 December. The agreement is designed to help SME, Commercial and Corporate segments including women owned businesses with annual turnover of no more than USD 15m, employs maximum 300 employees or total asset of less than USD$15m.
Normally, when a business wants a loan, the bank asks for security or collaterals like land or a building that the bank can take if the money is not paid back.
However, many small businesses in Tonga do not have enough collateral to get the loan they need.
The Chairwoman of the Board of TDB, ' Aloma Johansson said that under this new agreement, the IFC has agreed to cover 50 per cent or half of the collateral required for these loans.
“You have to have collateral assets to secure your loan, but this time IFC will cover 50 per cent of your loan security,” she said.
The IFC’s goal is to expand the portfolio of lenders and open an opportunity for more businesses to borrow money from the bank and encourage the bank to lend.
While this plan benefits small businesses, it also acts as a guarantee for the bank, making it safer for them to lend money out.
The CEO of TDB, Mr. Kaho O Vailahi ‘Ofa said that the IFC is offering up to USD$6 million ($14 million TOP) for collateral, and a loan for a lender range from USD$5,000 to ranges up to USD$1 million.
The IFC and TDB’s agreement will focus on helping women-lead businesses and small to medium enterprises.
The agreement was signed by the IFC Country Manager for Australia, New Zealand, PNG and the Pacific Islands, Miss Judith Green and the CEO for TDB, Mr. Kaho O. Vailahi ‘Ofa.
