CDA notes hike in loans By ALDWIN R. FAJARDO

Reeling from the adverse impact of the economic downturn, more businesses have resorted to loans from both public and private financing companies with the government’s Commonwealth Development Authority lending over $5 million in a three-month period alone.

Government statistics for the second quarter of 1999 indicated that at the trend CDA is giving out loans, the government-controlled finance institution may have exceeded the previous year’s $8 million tally.

Records obtained from the Economic Development Division of the Department of Commerce showed that CDA approved $5.1 million in guarantee loans during the second quarter of 1999, up from the previous year’s $200,000.

The dramatic increase in CDA-approved guarantee loans offset the drop in direct loans to $200,000 during the second quarter of 1999 from the previous year’s $900,000.

Development Authority Chair John S. Tenorio said the agency released $2.2 million in direct loans for the whole of 1998, posting a significant increase of $1.7 million from the previous year’s $500,000.

In 1998, CDA also assisted investors secure $6 million in total guarantee loans. The figure dropped by half a million dollars from the 1997 tally mainly because commercial banks have slowed down in their lending due to the risks of the borrowers not being able to pay back.

From 1986 to 1997, CDA loaned out over $46 million, granting the single largest loan ever for the consolidation of various debts of a long-established company in the Northern Marianas.

At the end of 1997, CDA had a reserve for bad loans of more than $9 million, equivalent to roughly 30 percent of the outstanding loans.

This, coupled with the adverse effects of the regional economic contraction, has apparently resulted to a sharp increase in the number of delinquent borrowers. CDA registered a 15 percent delinquency rate last year, climbing up by more than half from the previous seven percent.

Mr. Tenorio has attributed the increase in the delinquency rate to the new payment scheme recently implemented by the Development Authority which gives borrowers a longer grace period.

Under existing local statutes, loans are considered non-performing if borrowers failed to service their monthly obligation within 90 days.

Mr. Tenorio said CDA has been working out with borrowers on an agreeable reduced amount to prevent any setback in the payment of their loans. Tenorio expressed confidence that the new payment scheme will work well.