To date the accumulation loss recorded by the Development Bank of Samoa amounts to $19.37 million tala, this includes the $3.39 million tala losses for the financial year 2020-2021.
This is confirmed in the Development Bank’s annual report, which states that Covid-19 and the State of Emergency implementation from 24 March 2020 in closing off borders for international travel.
The travel ban significantly affected the tourism industry in lost revenue and employment. The loss of revenue affected loan servicing of all tourism clients which accounts for 68% of the Bank’s loan portfolio.
This has been cited by the Auditors as a going concern assumption whereas the bank recognises that may cast significant doubt upon its ability to continue as a going concern. However, as reported since FY2019 and despite the going concern issue, the Bank has consistently continued operation over the years.
As of 30 June 2021, these hotels have been closed for fifteen months. In managing the accumulation of loan balances, the Bank has granted periodic relief assistance by way of reduced interest and repayment to support these clients.
Despite the support of the local market, the level of revenue does not sustain operation and loan servicing. The government through the budget for FY2022 has appropriated funds to support tourism.
The non-performing loans (NPLs) has been a major challenge to the Bank; the high level of non-performing loans is mainly with the tourism industry and the rise in it is caused by a combination of Covid19, poor loan servicing and postponement of recovery action.
The Bank has also considered other viable options such as debt-to-equity conversion, and the purchase of prime properties in addition to market sale to recover these loans.
The three hotels foreclosed by the bank and put up on the bank’s website for sale are the Orator Hotel at Tanumapua, Vaea Hotel Samoa in Togafuafua and Le Manumea Hotel at Vailima.
Earlier this month Prime Minister Fiame Naomi Mata’afa said the hotels that have been foreclosed by the Development Bank of Samoa, have a long-standing issue of “historical” bad debts.
She said the purpose of DBS is to assist all sector’s developments, mainly agriculture however there were more loans approved for the tourism sector, yet it should have been just a portion.
“Now that they are unable to repay their loans, it’s affecting all the entities that should have been assisted by the Bank and in turn, developments are on hold,” she said.
“The degree of indebtedness cannot continue and cannot be carried any further by the Government or the bank, otherwise this would end the bank’s operations, and a hard decision had to be made,” said the Prime Minister.
Adding that Cabinet approved the request by the DBS to take action against hotels with bad debts.
