CDA loan delinquency rate in all-time high

Slowdown in business activities during the past three years had taken its toll on the loan portfolio of the Commonwealth Development Authority which reported on Monday that delinquency rate has gone up to record-high.

Although she did not disclose the specific percentage for delinquent loans, Executive Director Marylou S. Ada said the number of remiss borrowers in the last calendar year has surpassed the 20-percent mark.

“It is very high. Delinquency rate was a big problem and we recognized even before that it’s going to be a problem because a lot of businesses have closed down and there’s too little money circulating around,” Ms. Ada told reporters in an interview.

She pointed out that financial uncertainties have forced consumers to tighten their belts that eventually resulted to marginal profit generated by surviving businesses, while driving weaker investments to closure.

“A lot of businesses have suffered a lot and a big number have closed down since most of them are service providers that cater to tourists who, in turn, are no longer spending as much as they used to before the crisis,” she added.

A strong indication of the growing number of problem loans, the government-controlled financial institution’s monthly collections fell by more than 40 percent from the average $700,000 in 1999 to only $400,000 last year.

However, a big slice of overdue loan payment receivable are actually a product of a payment scheme which gives borrowers longer grace period to settle their outstanding credit.

The new measure also restructures debts provided by CDA in what seems to be a major step taken to help businesses keep afloat in light of the CNMI’s contracting economy.

CDA has been working out with borrowers on an agreeable reduced amount to prevent any setback in the payment of their loans, as he remains confident the new payment scheme will work to the advantage of both the agency and the borrowers.

The flexible payment scheme was instituted to prevent more foreclosures, especially by businesses who have existing loans from the development authority.

Loans issued to borrowers who ventured into apartment-type businesses are the major contributor to the high delinquency rate reported by the development authority. Only about 40 percent of loans approved by the agency for apartment-type businesses have been paid so far.

Records disclosed an increasing trend in the amount of loan agreements sealed by the government-owned lending agency with its clients in a four-year period covering 1996 to 1999, reaching over $26 million.

According to a report obtained from the CNMI Department of Commerce, 1999 marked the first time when total amount of loan packages okayed by CDA dropped in three years.

This figure fell by about 22 percent to $6.5 million from the year ago’s $8.3 million.