CDA pitched in $26M to NMI economy

The Commonwealth Development Authority has consistently provided millions of dollars in fresh capital to local entrepreneurs, making the agency one of the major factors which facilitated robust growth of the CNMI economy.

Records disclosed an increasing trend in the amount of loan agreements sealed by the government-owned lending agency with its clients in a four-year period covering 1996 to 1999, reaching over $26 million.

However, economic upheavals brought about by the financially devastating Asian currency crisis had taken its toll on the total volume of credit agreements approved by the development authority last year.

According to a report obtained from the CNMI Department of Commerce, 1999 marked the first time when total amount of loan packages okayed by CDA dropped in three years, falling by about 22 percent to $6.5 million from the year ago’s $8.3 million.

CDA officials have also projected another decline in the volume of loan agreements sealed this year, as it intensifies efforts to cut the increasing number of non-performing and problem loans due to the borrowers’ weaker re-payment ability.

In fact, CDA has not awarded a single loan in the first three months of the year, in line with its decision to slowdown on lending amid the borrowers’ crippled ability to service their outstanding credits.

Back in 1999, the development authority has consistently awarded an average of $1.625 million in each quarter which is, however, lower than the previous year’s $2.075 quarterly average or when the CNMI economy was yet to feel the pinch of the regional recession.

CDA had been approving an average of more than a million dollars in both direct and guaranteed loan in each quarter of 1996 and 1997, the Quarterly Economic Review of the commerce department disclosed.

In 1996, the economic report revealed CDA approved $4.3 million worth of direct and guaranteed loan agreements. The figure rose to $7 million the following year, then soared to $8.3 million in 1998, only to suffer a modest drop to $6.5 million last year.

CDA has tightened its existing policies on the approval of loan agreements amid increasing delinquency rate and stock-piling applications due to the turtle-paced recovery of the Northern Marianas economy.

While stressing the government-owned lending agency has been carefully scrutinizing each loan application, Board Chair John S. Tenorio said the current state of the local economy is forcing CDA to take stricter measures in approving credit packages.

However, CDA continues to provide technical and financial assistance to local clients, especially those who could not qualify for commercial loan packages from banks, despite its recent adoption of tighter policies.

The development authority has taken more careful steps at reviewing loan applications to curb further growth in the number of remiss credits, which currently account for about 19 percent of CDA’s portfolio.

Borrowers are now asked to consult with experts from CDA first where a discussion of which business types will potentially fail and which are likely to succeed before submitting their application for commercial loans.