Promise of interest subsidy for Tongan businesses hit by riots [1]
Monday, March 19, 2007 - 18:59. Updated on Friday, May 16, 2014 - 20:16.
An interest subsidy scheme to assist Nuku'alofa businesses hurt by the November 16 riots, will roll out on May 4, with funds from aid donors New Zealand and Australia.
The Chairman of Tonga's Business Recovery Committee, Hon. Lisiate 'Akolo today announced that a grant of TOP$4 million has been provided for the establishment of a Business Recovery Facility "and it will begin payments to banks on May 4."
Lisiate said that the scheme is funded by NZD$2 million through NZAID and AUD$1.5 million through the AusAID, making up to TOP$4million pa'anga to finance three components: the interest rates subsidy, a credit guarantee scheme and business advisory service. The donors are aiming to finalise their negotiations with the local banks on May 1.
He said the interest rates subsidy will subsidise the interest on loans of the 157 businesses directly affected by November as identified by Government up to a maximum of $20,000 pa'anga or 50 percent of the value of the outstanding loan. Interest rates will be reduced by 8 per cent In the first year of the loan and 4 per cent in the second year based on the existing commercial rates.
In the Credit Guarantee scheme, the Minister said that this applied to businesses that could not provide the necessary guarantees when seeking loans up to $50,000. The scheme will help by depositing a trust of only up to $20,000 with the Reserve Bank of Tonga as a support for the guarantee of the loan.
And thirdly, the Business Advisory will provide affected businesses with an amount of $500 pa'anga for business advisory services of their choice, with the first preference to use local based ones, which includes the existing services provided by the bank, he added.
The $4million grant will be deposited in a trust account at the National Reserve Bank of Tonga and the NZAID and AusAID will provide funds in parts on an agreed basis to the trust account.
In its administration, once the loans are approved by commercial banks, they are further checked by an independent administrator to ensure it meets the BRF criteria and conditions, and once approved the administrator will instruct the Reserve Bank to release funds from the Business Recovery Facility. The Reserve Bank will distribute funds to commercial banks on a monthly basis to cover the agreed interest subsidy or any losses to credit guarantees.
Additional Assistance
Lisiate also said that in regards to other additional assistance, the Government of Tonga Emergency Relief Fund will also contribute TOP$150,000 for smaller businesses both directly and indirectly affected by the riots and who are unable to access the Business Recovery Facility.
Grants could be provided to assist those business owners to meet emergency needs such as outstanding bills with a limit not exceeding $1,000 pa'anga so as to distribute the benefits as widely as possible.
Others
He also revealed that the Government is also seeking an USD$60 million from China to assist with the physical reconstruction of Nuku'alofa and to help with the recovery of local businesses, and a team from China would arrive in Tonga next week to conduct further talks with the Government on the issue, he said.
"But to our estimation this amount will still not be enough to what Government needs, so the Government will continue to seek other aid donors as well," he added.
This amount sought from China is understood to be in a form of a soft loan.