Interest rates for loans consistently dropping By ALDWIN R. FAJARDO

INTERNAL market forces have been driving down interest rates for both secured and unsecured loans transacted with commercial and government-controlled financial institutions.

According to Commonwealth Development Authority Chair John S. Tenorio, interest rates for money loaned out by commercial banks operating in the CNMI have dropped at an average of two to three percent during the last two years.

Mr. Tenorio disclosed that interest rates for unsecured loans have dramatically dropped. from the previous 18-19 percent to an average of between 14-15 percent at present.

Rates for secured loans also went down by at least three percent from between 14 percent and 15 percent to a rate averaging between 11 percent and 13 percent.

“Most of the commercial banks feel that one way of helping the economy is by bringing down the interest rate. It is a good sign that there’s a strong partnership between financial institutions and the government,” Mr. Tenorio said.

Aware that the current business climate is not in a better shape, he said banks believe that lowering interest rates would be more practical because they are likely to lose more if borrowers are not able to repay due to foreclosures.

The current level of interest rates appeared very appealing to commercial and consumer borrowers as manifested by the increase in the amount of money loaned out by private banks in 1998, compared with the 1997 tally.

Government figures noted an increase in total money loaned out by private banks in the CNMI during the fourth quarter of 1998 which amounted to $304.71 million, compared with the previous year’s $279.98 million.

The 1998 fourth quarter figure registered a 44.7 million increase than the previous year’s record.

Mr. Tenorio said the reliable partnership between the government and private banks operating in the CNMI has spelled the difference in the continued survival of businesses in the Commonwealth, despite economic downturn.

In an interview, he said this strong partnership, coupled with the recently implemented reduced loan payment scheme, aimed at preventing any setback in the payment of loans, has minimized business foreclosures.

He said commercial banks have been much more receptive in helping the community. “We are using our forfeit and credit guarantee and the reception from commercial banks are very strong and most of the banks are participating in our programs not only on the commercial but also on the residential side,” he emphasized.

At present, there are about 10 banks in the Northern Marianas; nine are in operation with physical facilities and locations while two were licensed and are operating via their resident agents.

CNMI has two domestic, two savings and loan, four state, one national, one foreign and one offshore banks: Bank of Saipan and City Trust Bank; Guam Savings and Loan Association; Bank of Hawaii, Bank of Guam, First Hawaiian Bank and Citizens Security Bank; Union Bank of California; Hong Kong Bank; and the Genex Bank.

Bank assets have been going up since 1994. The increase may also be attributed to the opening of two major banks — Hong Kong and Shanghai Banking Corp. and First Hawaiian Bank — in 1998.

The strong banking infrastructure in the Northern Marianas is flourishing the financial resources of the Commonwealth to help businesses make it through the current economic upheavals.