TDB soft loans aimed at priority business sectors [1]
Tuesday, April 19, 2016 - 20:09. Updated on Thursday, April 21, 2016 - 20:37.
The Tonga Development Bank TDB this month offered new soft loan terms for borrowers from the government’s multi millions Business Investment Incentive Fund that has been administered by TDB since 2014.
Eligible to borrow from this soft loan scheme with 1% and 4% interest, are businesses that government grouped as Priority Business Sector; Agriculture, Fisheries, Livestock, Forestry, Tourism, Manufacturing, Construction, and Retail and Wholesale. Education Loans was also eligible.
The new variation soft loans terms that Moeaki Tatafu, the Chief Executive Officer for the Ministry of Finance and Leta Kami, the Manager of the Tonga Development Bank announced on 1 April, dealt with two main issues; an extension of the time for loans repayment, and the inclusion of anybody to borrow for an Overseas Medical Cover.
According to a spokesperson from the Ministry of Finance, under this new soft loan scheme there will be no fees and charges, and there will be extended terms for agriculture and fisheries loans. Loans repayment term has been extended from nine months to more than two years.
A $100,000 agricultural or Fisheries loan at 1% interest is to be repaid in two years, but a $200,000 Agricultural loan at 4% is to be repaid in two years, and Fisheries loan for the same amount is to be repaid in three and half years.
A $50,000 Tourism Loan at 1% interest to be repaid in two years, but if it is for $100,000 it is 4% to be repaid in three years.
For a Manufacturing loan, it is 1% for $50,000 to be repaid in two years, and 4% for a $50,000 loan to be repaid in two years.
Education loan of $50,000 is 1% to be repaid in four years, and the opportunity has been extended to include the Certificate Level. Starting this year also is an opportunity to borrow for an Overseas Medical Cover loan of $20,000, with 4% to be repaid in two years.
The government’s Business Investment Incentive Fund scheme was first introduced in 2012 with an initial capital of $13 million, offering loans at 1% to 4% interest loans to Priority Sectors of the economy. It was managed by the Ministry of Finance.
The scheme has not been very attractive to the Priority Sector, and many borrowers got into trouble because they could not repay their loans, they claimed that the repayment time of nine months to a year was too short, despite the low interest rate of 1% and 4%.
The soft loan scheme was then shifted over in 2014 to be administered by the Tonga Development Bank with a new variation loan repayment scheme.
According to a spokesperson from the Ministry of Finance, as of today, 18 April 2016 only $6 million, out of the $13 million, initial capital fund has been lent, but they are hoping to attract new borrowers with new business ventures.
The spokesperson said that with their new loans scheme, they are “targeting vulnerable groups in the society such as mirofinance for women and youth.”