TO ESTABLISH NEW LOAN PROGRAM CDA eyes partnership with federal agency

The Commonwealth Development Authority is seriously exploring the possibility of forging a partnership with an affiliate agency of the United States Department of Agriculture to provide CNMI businesses new loan packages.

This was learned from CDA Executive Director Mary Lou S. Ada who disclosed that the CNMI government-controlled lending agency is currently holding initial discussions with U.S. DA’s Rural Development Program.

The negotiation is aimed at bringing Business and Industry Loan Program into the Northern Marianas to virtually expand the development authority’s lending base in light of economic hardships.

Ms. Ada pointed out that the several loan applications by local businessmen that are now pending before the CDA office in Gualo Rai necessitate the agency’s tapping of other available financing institutions.

“We would like to serve more people who are in need of fresh money for start-up or expansion of their businesses but could not obtain loans from private institutions due to economic contraction,” she told an interview.

She explained that under the Business and Industry Loan Program, businesses can secure fresh money from the Rural Development through credit packages guaranteed by CDA.

Ms. Ada revealed CDA and Rural Development officials are currently laying the ground work for a possible Memorandum of Understanding which will clear the road for the enforcement of the new loan program in the Northern Marianas.

Under the proposed loan program, CDA will guarantee at least two-thirds of the total amount of credit obtained from private financing institutions like commercial banks.

“When the loan turns sour, the Rural Development will come in to pay which will be reimbursed by the CDA. The development authority will be the one that will collect from the delinquent client. It’s more of a three-way system,” Ms. Ada said.

She added that the development authority will soon enter into partnerships with private banking institutions identified by the Small Business Administration.

However, Ms. Ada stressed that approval of packages under the Business and Industry Loan Program will be determined or will largely depend on the client’s repayment ability which will be established during a series of credit investigations.

CDA recently launched the Microloan Program in partnership with the SBA to help stimulate the Commonwealth’s slumping economy by assisting small businessmen obtain fresh and additional capital for either new or existing businesses.

The Microloan Program was established to help small businesses cope with economic difficulties. SBA loaned some $330,000 to CDA for the program.

Under the program, small businesses can obtain as much as $25,000 in fresh loans. CDA is the first microlender in the Western Pacific although talks are already underway for the SBA to extend the program in other Micronesian islands.

The Microloan Program is expected to offshoot the slowdown in lending activities undertaken by private commercial banks due to economic downturn which virtually dampened capabilities by borrowers to repay loans.