The Central Bank of Solomon Islands has endorsed recommendations made by Strongim Bisnis to the Central Bank’s Loan Guarantee Scheme to improve access to finance for small and medium-sized enterprises (SMEs).
The Central Bank was challenged to find ways to improve the uptake of the Loan Guarantee Scheme and to recommend to the Ministry of Commerce, Industry, Labour and Immigration (MICLI) ways to stimulate SME lending. The scheme allows commercial banks to access a 90 percent guarantee for loans to MSMEs with a minimum loan size of SBD20,000.
In addition to revising the guarantee scheme rules to improve access, the report Review of the MSME Loan Guarantee Scheme undertaken by Strongim Bisnis and accepted by the MSME Working Group in July 2018 also recommended strengthening local business services and revising the National SME Action Plan.
Despite limited finance being a challenge for MSMEs, the uptake of loans from commercial banks under CBSI’s Loan Guarantee Scheme has been lower than expected with only five loans extended to Solomon Islands businesses since its inception in 2016, all of which were generated from one commercial bank.
Morris Rapa’ ai, Interim Chairman of the MSME Working Group and Under Secretary Technical of MCILI, said, “Solomon Islands entrepreneurs face difficulties in accessing finance to grow or run their businesses, such as the distance and cost of reaching bank services, lending requirements which are not tailored to small business needs, and limited information about different loan facilities.”
Strongim Bisnis collaborated with the working group to analyse the underlying reasons for the low numbers of loan applicants and barriers for women- and youth-led businesses in consultation other stakeholders such as commercial banks and women’s organisations.
Mandy Whyte, Strongim Bisnis CEO, said her team will continue to support MICLI through the working group to address the report’s recommendations. “This initiative is a great example of the value of public-partnerships and a good example of the way Strongim Bisnis works with all our partnerships.”
The MSME Working Group is part of the National Financial Inclusion Task Force (NFIT) which oversees four working groups. NFIT is chaired by the CBSI Governor and the MSME Working Group is chaired by MICLI.