Credit Access in the Maldives
Maldives is made up of over 1,100 islands with a population of 400,000 people. According to Maldives Monetary Authority (MMA), they are trying to facilitate potential credit access with measures like the Credit Information Bureau and the “Credit Guarantee Scheme for small- and medium-sized enterprise financing.”
The Credit Guarantee Scheme
Launched on August 7, 2016, the Credit Guarantee Scheme was set up to encourage banks to loan money out to small- or medium-sized businesses, so that individuals can have easier credit access in the Maldives. The program was started for businesses, under normal circumstance, that were unable to secure a loan.
The Credit Guarantee Scheme “will guarantee 90 percent of the loan granted by the participating banks to commercially viable small- and medium-sized enterprises,” according to the MMA. For the program to work, businesses have to meet the following criteria:
- The business must be registered with the Ministry of Economic Development as a small- and medium-sized business.
- All shareholders/owners must be Maldivian.
- The business should be registered with the Maldives Inland Revenue Authority.
- There should be no overdue loans at any bank or financial institution.
- The business must be financially viable.
The loan amount can either be 100,000 rufiyaa (approximately $6,450) or 1,000,000 rufiyaa (approximately $64,480). The interest rate is 9 percent and the repayment period is five years. The borrower can have a grace period of six to 12 months with zero collateral and an equity contribution of 20 percent. According to the MMA, in 2016, a total of 68 applications were submitted with a total value of 44,628,896 rufiyaa (approximately $2.9 million).
The Credit Information Bureau
The Credit Information Bureau, the first system of its kind for Maldives, holds the credit information of individuals who are requesting credit. According to Minivan News, “the creation of a formal mechanism for sharing credit information will improve access to finance for small and medium enterprises.”
Maldives’ main income is due to tourism and fishing. According to the World Bank, Maldives is considered to be an upper middle-income country because of the returns of tourism. Maldives poverty “declined from 23 percent in 2003 to 16 percent in 2010 based on the national poverty line.”
Maldives has also experienced a growth in the Gross Domestic Product (GDP). While the rate has been steady in developed countries, Maldives growth is relatively higher. According to Bangladesh Bank, the average growth in the last four years “has been approximately 6.8 percent, which is significantly higher compared to regional growth rates.”
The Maldives are attempting to establish credit for its people so that they’re able to open their small- and medium-sized businesses that were unable to apply for credit before. This not only helps the country but the individuals as well, so they have credit access in the Maldives.
– Valeria Flores