The Development Bank of Samoa’s (D.B.S.) earnings after tax for the financial year 2017 was $71,000.
The bank also recorded a surplus of $1.3 million.
The figures are revealed in the D.B.S. 2017 Annual Report obtained by the Samoa Observer.
The report shows that for the year in question, the bank approved 1,466 loan applications, valued at $13.4 million.
“Of this approval, 48 percent represents the agriculture and fishing sector, 40 percent to industry and 12 percent to social inclusive development,” the report reads.
“Loan collection was recorded at $25.5 million compared to $18 million in FY16.
“For financial performance, a surplus of $1.3 million was recorded from operation compared to budget of $1.1 million and $475,000 in FY16.
“Earning after tax was recorded at $71,000 compared to budget of $312,000 loss and $614,000 loss in FY16.
“This is indeed a great improvement in performance and recorded positive outcome in six years.
“The positive performance further encourages D.B.S. to endeavor in its efforts to counter the ongoing challenges of development banking and to remain as a key contributor for sustainable economic and inclusive development for Samoa.”
The D.B.S. Board Chairman is Lavea Iulai Lavea.
“It gives me great pleasure to report on the operation and performance of the D.B.S. for the year ended 30 June 2017,” he writes in the report. “The D.B.S. is mandated to provide credit financing to enable sustainable economic and social inclusive development for Samoa.
“Despite the challenges encountered during the year, D.B.S. has continued to respond positively to the development needs of stakeholders to stimulate economic growth and improve livelihoods.”
Lavea conveyed appreciation to the C.E.O, management and staff for the great work and commitment throughout the year.
The D.B.S. Executive Director, Susana Laulu, says most of the loan approvals were for small to medium applications.
“The allocation of approval is 730 valued at $8million to Upolu and 736 valued at $5.4 million to Savaii.
“Of the total number approved, 460 or $5.4million represents applications that were supported by S.B.E.C. under their guarantee scheme.
“According to S.B.E.C., 90 percent of their clients have been assisted by D.B.S. for financing and 10 percent to commercial banks.”
According to Laulu, the portfolio recorded at year ending was $156million, in which 99 percent represents projects for economic and social inclusive development.
“The decrease is due to settlement and sale of assets of some investment accounts.
“The increase in number attributes mainly to loan approvals for the S.A.C.E.P. program, S.B.E.C. guaranteed and inclusive development projects.
“In FY17, this sector recorded the highest approval at 48 percent or $6.5million. This increase was due to lending under the S.A.C.E.P. program of $1.3million and normal of $5.2million.”
The S.A.C.E.P. program was completed in April 2017. Since the facilitation of the loan component in January 2014, D.B.S. has approved 456 applications valued at $2.7million for farmers to develop cattle, piggery, poultry, sheep, honey, fruits and vegetables.
III. Financing for Developments
D.B.S. has been able to provide financing for its 1,486 applications approved through cash sourced from the remaining Central Bank of Samoa C.L.F., loan collection and sale of assets.
Loan collection is inadequate to cover the development financing need of stakeholders. Therefore D.B.S. will resort to borrow to fill in the financing gap. The nature and level of risk associated with projects D.B.S. lends to do not match the cost of borrowing and facilitation. The risk of default loans is high and will continue to impact the financial sustainability of D.B.S. and its efforts to meet the expectations of stakeholders.
The major movements in revenue were interest income rIn comparison to FY16, an increase of 9 percent is noted. The increase is due to realisation of interest suspended and progressive commencement of interest charged on loan accounts on grace period.
“Loan fees increased by 15 percent compared to FY16. The increase is consistent with increase in number of loans approved 1,486 compared to 406 in FY16.
“Other income increase is attributed to rental income and interest on short term deposits.”
According to the annual report, the major movements in expenditure were the increase in board expenses, which is due to increase in director’s fees approved by Cabinet.
And also increase in provision for doubtful loans is based on individual assessment of accounts that have defaulted and also maintaining an adequate provision will provide for potential losses in the event debt recovery is highly unlikely.
“The improved financial performance is attributed to continuous efforts and strategising by the Board and staff in managing the N.P.P. loan accounts and arrears.
“D.B.S. will continue to monitor and manage the loan portfolio to improve quality and performance in supporting income generation and cash flow.
“The risk appetite of the D.B.S. differs significantly with that of commercial banks as the credit financing is made available to high risk developments with low returns.
“In addition the nature of these developments are generally susceptible to challenges such as economic, social and environmental that not only impact their operations, but also difficult to manage.
“Ideally, the lending terms for development banking should be higher to cover the risk and cost. However, D.B.S. has allowed for terms and conditions that are affordable and accommodative than those offered by commercial banks.
“The outflow of cash is immediate whilst the return is dependent on the time period allowed for the development to be completed to enable the generation of income to meet loan repayments.
“Further D.B.S. source of funding is through term borrowings to support loan collection. “The challenge is matching the borrowing term to the lending term to provide balance in cash flow to ensure sustainability,” said Laulu.
Furthermore, the annual report indicates that occupancy rate has increased to 96 percent compared to 80 percent in FY16.
“This has improved income from rental of the main building.
“D.B.S. will continue to enhance its facilities and service delivery to retain tenants confidence and to prevent any major disruption to operation.”