Report: Bank failed to review applications
THE Reserve Bank of Fiji (RBF) failed to identify and carry out a detailed review and verification process for applications to the Micro, Small and Medium Enterprises Credit Guarantee Scheme (MSMECGS).
According to the Auditor-General’s report on compliance audits relating to COVID-19 response, the RBF relied heavily on lending institutions for the correct submission of data and information.
The MSMECGS was established by the Government in 2012 to help develop the local business industry, improve private sector lending by alleviating the requirement for high collateral, and stimulate economic growth.
The MSME scheme was expanded after the COVID-19 pandemic to include micro-enterprises and Government provided a funding of $6 million to be administered by Reserve Bank of Fiji.
“Majority of the loans that had been registered since the inception of the scheme were not eligible to be covered, and therefore, have not complied with all the requirements of the SMECGS Guidelines 2016,” the report said.
The OAG found a loan guarantee of $36,066.57 was approved and paid by Government in 2018 even though the effective interest rate of loan was 14.13 per cent, exceeding the interest rate threshold of 10 per cent. Businesses with a turnover of $500,000 also had loans registered for cover under the scheme, said the OAG.
After a review, 1223 active loans valued at $67.5 million were deregistered in June/ July, 2020 as the effective interest rate was above the 10 per cent threshold.
“These loans related to LCI 1 (Licensed Credit Institution) and LCI 2 that were reporting the flat rate to the RBF instead of the effective interest rate charged which was higher than the interest rate threshold set for the scheme, hence were deregistered from the scheme.”