To'abaita Authority for Research & Development (TARD)

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Thursday, August 31, 2006

Cabinet approved new Credit Guarantee Scheme

A new credit guarantee scheme to cover all sectors of the economy including rural enterprise development was announced by the Prime Minister, Manasseh Sogavare yesterday.

“The scheme is one component of a strategy for financial market development,” said the Prime Minister.

“It is an important part of our Rural Development Framework which also includes plans to improve infrastructure (roads and shipping services), agriculture and provincial capacity to improve rural livelihoods.”

The Prime Minister said that commercial banks and other financial institutions based in Solomon Islands are well resourced and the money available to support rural business development. However, they often require a borrower to offer their property to help secure a loan. This means that people without the title to property may find it hard to access finance.

In the absence of property or other valuable items, a credit guarantee scheme can help to secure a loan.

“It is important that we work in partnership with the commercial financial institutions on Solomon Islands to share the risks involved in supporting enterprise development and growth,” the Prime Minister said.

“This is particularly important in new areas of business development such as shipping and civil engineering that require large investments in equipment and machinery.”

The credit guarantee scheme could also be used to help financial institutions extend services into rural areas,” said the Prime Minister.

“The scheme could be used to guarantee lending by commercial banks to institutions that provide loan for business development in rural areas.”

The Prime Minister, however, cautioned that the credit guarantee scheme should not be too generous.

“The concept is about risk sharing,” he said.

“The government will take on some of the risk but not all of it. The commercial banks will need to play their part too.”

The scheme will be designed in consultation with the commercial banks and other financial institutions and launched as soon as possible thereafter.

Source: Government Communications Unit

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