NDB lending rules strict: Liu

 By Shirley Mauludu
THE National Development Bank has clarified that it has strict lending guidelines to safeguard itself against defaulting customers.
Managing director Moses Liu was responding to a claim that farmers in Morobe were unable to access funds from the bank to start small ventures.
Provincial agriculture committee chairman Michael Poane had told an agriculture field day last week that farmers were not able to access the province’s K2 million at NDB.
Poane pointed out that the bank had strict lending guidelines which resulted in farmers having difficulty in accessing the funds to venture into small businesses.
He said the Government’s plans to expand the SME sector would not work if such barriers existed.
But Liu said they had signed with the Morobe provincial government a memorandum of agreement in which the K2 million was provided as a guarantee.
“K2 million was parked at the National Development Bank under the Morobe provincial credit guarantee scheme,” Liu said.
“Under the MOA, NDB was to lend its own funds against the K2 million deposited by MPG to small businessmen/women from the province engaged especially in agriculture, poultry, retail and other types of small businesses.
“The scheme was designed not to be a handout but a handup into business to instil responsible borrowing by the people.”
He said loans under the scheme were assessed by the Morobe provincial credit guarantee scheme screening committee.
It is then referred to the bank for a full assessment to ensure the projects were viable and repayments can be demonstrated.
Liu said that the loan ceiling under the credit scheme was K20,000 for a single borrower.
The bank has funded 26 loans under the scheme totaling over K300, 000.
There is a further 40 waiting to be assessed.
“Unfortunately the reality the bank faces is a lack of commitment by some customers to repay as it is perceived as a grant handout from the Government resulting in high levels of arrears,” he said.
“NDB has had to take a closer assessment of all lending as essentially loans are secured by the scheme as any losses will reduce the ongoing effectiveness of the scheme for more people of Morobe province to benefit. With the interest rate of 6.5 per cent, neither the NDB nor the MPG can sustain losses through defaulting customers.”