We may be forced to revert to our old rates: NDB boss

By MATTHEW VARI

Sunday, August 9, 2015 (Sunday Chronicle, PNG)

THE current low interest rate of 6.5% enjoyed by National Development Bank customers may be reverted to the previous rate (around 8% in 2012) before the 2013 drop in its interest rate in line with the government’s Small to Medium Enterprise (SME) Stimulus Package earmarked to stimulate growth in the sector.

This may be the case if the national government maintains its current position in underfunding the State owned development bank.

“On the 1st of January 2013, NDB reduced its lending interest rate to 6.5% to accommodate and implement this very important government stimulus package for the SME Sector Growth,” NDB Managing Director Moses Liu said.

“The purpose was to empower the growth of the local SME sector. At that point in time it was estimated that the local SME sector was as high as 10% of the economy and the government’s intension was that that would up to about 30 to 40% next 3 to 5 years and therefore NDB agreed to reduce lending rates and to that rate of 6.5%.”

“If the government does not provide adequate funding to NDB to implement the SME stimulus package, then the board and the management will be forced to review the lending interest rate in the view to reverting to the previous lending regime to sustain the operations of the bank,” he revealed.

NDB has continued to maintain operational outcome, with no profitable outcome for the last two years since the reduction of the interest rate despite the inadequate funding from the government, however, the bank has maintain that it cannot be sustained from the medium to long-term.