A Tonga Micro Finance Program that would give direct support to low income earners through the provision of micro loans to be administered by the Tonga Development Bank, is to start in early February 2013, for two years.

From left, Hasiloni Fungavai, Tufui Faletau and Malakai Kaufusi. Nuku'alofa, 23 November 2012.

An agreement was signed today by the Acting Secretary of Finance Tufui Faletau and the Deputy Managing Director of the Tonga Development Bank Hasiloni Fungavai, at the Ministry of Finance office in Nuku'alofa.

Malakai Kaufusi, the Project Manager for ADB said an allocated fund of US$200,000 would be transferred from the Japan Fund for Poverty Reduction administered by ADB to the Tonga Development Bank, to use for the micro loans.

He said the signing of the agreement opens the door for ADB to process the funding and the loan should start sometime in early February 2013.

The loan targets low income individuals and groups in any sector whether it be farming, fishing or making handicrafts. A minimum of $1,000 and $3,000 maximum can be loaned out to be repaid at a low interest rate of 10 percent, he said.

Malakai said they had negotiated with the TDB to give customers a grace period of three months so they had enough time to start their products before they begin paying the loan off.

In addition to the loan amount, another US$80,000 would also be provided to the TDB, to provide training and marketing of products for those who take part in the loan.

He said this amount would be split up in two, with one half used to set up a strong training program for customers. The remaining amount was to be used for marketing activities and how to market their products, administered by TDB.

"We want to give people with low income the opportunity to set up some kind of income generated activities, by providing them with the start up capital, training and to help to market their products," he said.

Support

Tufui Faletau said that for several months the Government of Tonga, the ADB and TDB had worked together to create a micro loan product that would benefit the vulnerable and disadvantaged citizens of Tonga.

"The goal was to create a micro loan product that would give direct support to low income individuals and groups, support their entrepreneurial efforts with marketing activities, and mitigating risks through ongoing financial skills training and business support programs."

She thanked the Japan Fund Fund for Poverty Reduction, and the Government of Japan for providing the grant, with the TDB for undertaking the task to manage and administer the program , for the next two years.

Also present at the event was Sunhwa Lee, the Principle Social Development Specialist from ADB in Manila and Leta Kami of the Tonga Development Bank.