BY JOHN HOUANIHAU
The Solomon Islands Government has reaffirmed its commitment to improve access to finance for Micro, Small and Medium Enterprises (MSMEs) through the Credit Guarantee Scheme.
The scheme helps businesses secure loans despite having insufficient collateral.
It was established by the Government through the Ministry of Commerce, Industry, Labour and Immigration (MCILI) and the Ministry of Finance and Treasury (MOFT), and administered by the Central Bank of Solomon Islands (CBSI) in partnership with the Development Bank of Solomon Islands (DBSI), Credit Corporation Solomon Islands, ANZ Solomon Islands, Bank South Pacific (BSP) and Pan Oceanic Banking (POB).
The MCILI, MOFT and CBSI on Wednesday this week has signed a revised Memorandum of Understanding (MoU) of the Credit Guarantee Scheme.
The scheme provides a guarantee of up to 90 per cent of the unsecured portion of a loan caused by a collateral shortfall, allowing eligible MSMEs to access finance from participating financial institutions.
Businesses must first apply for a loan through a partner financial institution, which will assess the applicant’s creditworthiness. Where there is a collateral shortfall, the institution may nominate the application to CBSI for a guarantee assessment.
If approved, CBSI guarantees the eligible portion of the shortfall, while the partner financial institution pays an administration fee of two per cent of the guaranteed amount, or a minimum of $1,000. The fee is not charged to the borrower.
Under the scheme, guarantees range from $50,000 to a maximum of $300,000. Eligible business ventures include most goods and services sectors, although gambling, alcohol and tobacco-related businesses, logging of indigenous forests, and projects lacking required government approvals are excluded.
The scheme aims to improve access to credit for businesses seeking working capital or expansion and is also available to start-up enterprises on a case-by-case basis, subject to the lending requirements of participating financial institutions.
The initiative will strengthen the growth of MSMEs by reducing collateral barriers while ensuring lenders maintain their normal credit assessment processes before loans are approved.
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