Microloan mitigates departure of too many businesses

Without a lending program that allows local entrepreneurs obtain fresh funds to start up a small business, the Northern Marianas economy may have suffered further beatings due to the departure of too many small establishments since the onset of the Asian financial crisis in the middle of 1997.

Commonwealth Development Authority Board Chair John S. Tenorio said the implementation of the Microloan Program, through a partnership with the United States Small Business Administration, has paved the road for the birth of new businesses to replace those that have closed shop.

According to Mr. Tenorio, the Microloan Program has given a significant number of local entrepreneurs the opportunity to start up their own business through credit packages of up to $25,000.

However, there are no government records that indicate exactly how many of the new business establishments have been set up through loans from the CDA-administered, SBA-funded program.

Government figures relating to new business licenses issued in 1999 disclosed that 2,775 new business permits were issued by the Business License Section of the finance department last year, exceeding the number of establishments that did not renew licenses.

Overall, the government’s business licensing office processed and approved 3,587 business permits last year which represented a trivial growth of 0.05 percent from the year-ago’s 3,410.

Before the Asian currency crisis fanned into the Northern Marianas, CNMI was enjoying a steady growth in business and economic activities with close to 6,000 existing establishments four years ago.

The figure dropped by 32 percent to 3,800 business in 1997. It soaked deeper to 3,410 the following year only to show good signs of stability with last year’s tally reaching 3,587.

In 1998, the Northern Marianas witnessed a mass dislocation of businesses with more than 1,700 establishments confirmed to have closed shop since January of that year primarily due to the dramatic decline in the tourism sector.

Existing establishments plunged by 47 percent or a difference of 1,754 that year while new investments pale in comparison with the previous year’s figure from 922 to 877 in 1998.

The Department of Commerce reported that overall investments dropped by 39 percent to 2,854 two years ago, posting a deficit of at least 1,799 compared with the previous year’s tally.

Mr. Tenorio said CDA is currently swamped with loan applications from small-scale businessmen hoping to secure funds under the agency’s Microloan Program.

The government’s lending arm is now processing over 15 Microloan applications from local entrepreneurs, while more applications are anticipated to come in the next few weeks, amid the program’s already depleted coffers.

Mr. Tenorio said the huge turnout in the Microloan Program as well as the pile of pending applications should facilitate the approval of CDA’s request for additional funding from the United States Small Business Administration.

Over $300,000 worth of credit packages have already been approved by the government’s lone lending agency since the Microloan Program was introduced late last year.

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.