Fiji Development Bank : Speech by GMBRS, Nafitalai Cakacaka on the ocassion of the signing of the SEFP MOU with the World Bank

06 July 2011

(Salutations)
Ladies and gentlemen.

The signing today is an innovative step for Fiji Development Bank in becoming an approved Participating Financial Institution (PFI) under the Sustainable Energy Financing Programme.

We are fortunate indeed, to be given this privilege in spite of the difficulties encountered along the way. It’s taken two years and I am glad that we have finally arrived at this point today.

This facility will be provided for under Reserve Bank of Fiji’s Import Substitution and Export Finance Facility (ISEFF). Under

the ISEFF, loans of up to a million dollars per project will attract a favourable interest rate of 6% per annum. Subsidies will be limited to $50,000 maximum per project.

Loans to individual borrowers will have a five (5) year repayment period with seven (7) years for micro and small business owners provided the repayment period does not extend beyond 30 December 2018. Should the facility be extended beyond the five or seven years stipulated - the normal interest rate will apply. The facility is not a standalone product – it must have an income generating prospect.

This facility will certainly be a boost to agriculture and small medium enterprises in the rural sector particularly the maritime

region. We all know how expensive fuel is in the rural areas after you add the cost of transportation. This raises the cost of living and thus affects livelihoods.

As a development banker, we have found three main constraints when lending to SMEs and the rural sector:

Adequate security – collaterals to obtain loans;
Interest rates – the higher the risk, the higher the rate, the higher the return; and
Equity – the presence of savings.

By signing this agreement, we share the risks involved in lending to such a high risk area and by doing that, we also open the door to limitless opportunities for our rural communities.

At this juncture, I acknowledge also the guarantee provided by the World Bank under its Risk Sharing Fund (RSF). Under the Global Environment Facility Agreement that we just signed, the World Bank through its Fund Manager, the ANZ Bank, will hold the 50% guarantee cover for all loans taken.

Just the other day I received a mobile call from Oneata and I realized that to keep the mobile phone charged and the

telecommunication sector operating, we need electricity. With renewable energy as the source, we have an opportunity here to improve telecommunication services to even the remotest of locations in Fiji.

In Government’s 10-point economic plan for achievement by 2020, Fiji is “to convert up to 90 percent of all electricity generated from fossil to renewable sources.”

The nation’s fossil fuel importation bill is quite hefty and lies somewhere in the vicinity of a billion dollars annually. The outlook for this particular source of energy in the medium to long term is not favourable so as a development bank, our role in assisting government implement its national economic policies becomes all the more critical.

As a development bank, we are also keenly aware of the impact rising fuel costs have had on business and by including access to finance for renewable sources of energy as part of our product offering, we are not only doing the business community a great service, but also the plant in terms of helping reduce carbon emissions. With such initiatives, the Bank hopes to increase its participation and expand its “green portfolio”.

I once again thank the World Bank, the Department of Energy and the ANZ Bank for their support in making this programme a reality.

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