The government’s primary lending institution and commercial banks were flooded with loan applications last fiscal year (1998) as businessmen struggle to come up with fresh capital to cope up with the deepening economic crisis, Commonwealth Development Authority Board Chairman Juan S. Tenorio said yesterday.
He said direct loans disbursed by CDA is estimated at about $6 million. Commercial banks for their part, have released about $15 million in loans during the same period through the CDA-bank guarantee partnership agreement.
In FY 1997, CDA’s combined direct and guaranteed loans totaled some $8.23 million.
“Right now, we cannot finance all loans 100 percent. I don’t think we can meet the demand given our limited resources,” Tenorio said.
The bulk of the loans were granted to businessmen engaged in the retail industry who were hard hit by the sudden drop in the number of tourist-arrivals.
Tenorio said although he expects the Northern Marianas’ economy to make a rebound next year, he will continue coaxing private commercial banks to continue supporting local entrepreneurs.
He said CDA’s moratorium on direct loans, except for farming and fishing purposes, hasn’t been lifted yet. Thus, the agency will continue referring local businessmen to commercial banks.
He said under the federal government’s program called community reinvestment, banks are supposed to help CDA finance local businessmen who need cash.
It was under this guideline that enabled CDA to prod banks to prioritize local businessmen’s loan applications.
“There’s a federal program that says every bank must help the community. We discuss this with individual banks. We say, ‘This is a good loan but we don’t have funds. Can you provide the funds then we’ll provide the guarantee?'” Tenorio said.
The Northern Marianas started feeling the pinch of the economic crisis late last year during the height of the Asian currency crisis.
That’s when Japanese and Korean tourists—two of its biggest markets—began to come in in trickles.
The continued decline in the number of tourist arrivals forced many foreign and local investors to close shop for lack of customers. Still, those who manage to survive have sought for more capital to carry through the bad times.