Only 30 businesses have defaulted under the Micro Small and Medium Enterprise Credit Guarantee Scheme undertaken by the Reserve Bank of Fiji.

This is compared to the 314 business that benefitted from the scheme which accessed loans where the interest rate was capped at 9.45 %, said Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum.

Mr Sayed-Khaiyum was responding to Opposition MP Ro Filipe Tuisawau on the update of the review of the scheme in Parliament on Monday.

“In fact, it was very few even before COVID-19 and just because of COVID-19, the amount of exposure has only been $0.32 million,” Mr Sayed-Khaiyum said.

“Because of the guarantee, the requirement for equity contribution was also lower than normal.”

“The scheme has helped establish MSMEs to access finance and at the same time enabled lending institutions to share part of the risk with Government and we encourage all the private sector banks to do so too.”

“In addition, as part of the scheme, under the COVID-19 Recovery Credit Guarantee Scheme in 2021-2022 Financial Budget, the Government by RBF has made available $200 million to the COVID-19 Recovery Credit Guarantee Scheme to help businesses meet their working capitals.”

About The Scheme
The scheme was established in 2012 and administered by the Central Bank.

The aim of the scheme was to encourage and expand private sector lending to MSMEs and complement Government’s initiative to promote MSME development, investment and local business activity.

Mr Sayed-Khaiyum said: “Under the scheme, the Government guarantees the outstanding principal amount on defaulted loans which are available to all Micro Small and Medium businesses with a turnover of up to $1.25 million per year.

“Following the last review in 2020, the risk sharing arrangement between the Government and the lenders was enhanced allowing the Government to increase its guarantee to 60% of the principal outstanding on the defaulted MSME loans up to a limit of $60,000 per businesses from 50% or $50,000.”

“In addition to encourage women participation in businesses and support the development of rural areas and traditional sectors, the Government guarantee was raised to 75% of the principal outstanding on defaulted loans up to a limit of $75,000 for businesses on all

“MSME loans to  women entrepreneurs, as well as to those involved in the agriculture, forestry and fishery sectors.”

Government pays the interest rate for the first two years and they (MSMEs) pay no more than 3.99%.

As of April 1, 2022, Mr Sayed-Khaiyum said 5,471 loan applications have been approved to a tune of roughly $114.7 million.

“Of the successful applicants, 47% or 2573 are micro businesses; 31% or 1,718 are small businesses; 13% or 703 are medium-sized businesses; and 9% or 477 are, in fact, large businesses,” Mr Sayed-Khaiyum said.

“To date, Government also paid out $203 million as interest subsidy for the loans, as I had mentioned earlier on, covered under the guarantee scheme.”

“The total interest cost to Government on the $114.7 million loan facility approved over two years would be $9.2 million.”

Feedback: ranobab@fijisun.com.fj