CDA identifies high delinquency contributors

The Commonwealth Development Authority has instituted a new loan base system which identifies which business ventures offer higher risk of becoming a major contributor to the agency’s high delinquency rate due to its dim promise to succeed.

Marylou S. Ada, CDA executive director, said the new system has already kicked off in order to guide the government-owned lending agency control the release of its funds to clients who may be venturing into a business area that is likely to fail.

“We are now reviewing the delinquent loans from the immediate past to the present for us to get a clearer picture which ventures or business areas from among our roster of clients are the bigger contributor to the high delinquency rate,” she said.

Ms. Ada pointed out this measure is currently being taken by the development authority to make sure whether loans that are being approved for all CDA clients will not be part of the non-performing assets.

“[Through this] we will know exactly where we should not be extending loans. Last month, we have hired a new comptroller whose priority is to categorize which business areas have the highest delinquency rate,” she explained.

According to Ms. Ada, CDA is not looking at freezing the approval of loan packages for clients who have applied for loans for a particular business that may be identified as those that are likely to fail.

She stressed CDA will only try to minimize the extension of larger amount to particular areas that have higher delinquency rate as far as loan payment to the agency is concerned.

“We will not stop but will merely pay attention to that, so we will not be granting so much loan to a particular area because of the high delinquency rate. We will however put emphasis on areas with very few remiss borrowers or loans,” she said.

Ms. Ada also mentioned CDA will work at promoting awareness among potential entrepreneurs and existing business owners or operators on which areas offer better productivity and profitability.

“Maybe we should try to concentrate and try to promote on, as well as give more loans to areas that are performing very well so that we can continue to safeguard public funds by securing that they are released to stimulate the economy,” she said.

CDA has recorded persistent increase in delinquency rate since last year, indicating a distressing growth in the number of remiss borrowers during the first three months of the year, Board Chair John S. Tenorio said.

Mr. Tenorio said if the increase in the delinquency rate of the government’s prime lending agency would continue, it may translate to more than $2 million in unpaid and overdue collectibles from its $80 million portfolio each year.

Records obtained from CDA noted that the financial institution’s monthly collections fell by more than 40 percent from the average $700,000 to only $400,000 during the first three months of the year.

However, Mr. Tenorio explained that a big chunk of overdue loan payment collectibles are actually a product of the recently-implemented payment scheme which gives borrowers longer grace period to settle their outstanding credit.

The new measure also restructures debts provided by CDA in what seems to be a step taken to help businesses keep afloat in light of the CNMI’s contracting economy.