Legendary British economist John Maynard Keynes once said that if you owe your bank manager one hundred pounds you can’t pay back then you have a problem. But if you owe the bank one million pounds, then the problem is the bank’s. 

The Development Bank of Samoa has no shortage of problems.

But unfortunately we, as taxpayers, share them too. 

Analysis of the bank’s performance between 2010-2017 has shown to it to be among the worst performing Government-owned banks in all of the Pacific. That is a title with no shortage of contenders.

A review last year found that the Bank was the most reliant on cash infusions from the Government.

The story on the front page of the Samoa Observer (“D.B.S. bad debts reach $13.2 m”) yesterday made it plain that the health of the bank’s outstanding loans are continuing to degrade.  

For years, the Bank has not even come close to its Government imposed target of achieving a seven per cent return on its equity. 

In 2014 it missed this mark by a whopping 16 percentage points. 

So how can it be that the bank has, for so long, been failing to meet its performance indicators and yet apparently been allowed to sleepwalk towards financial oblivion?

The answer is shrouded in non-transparent decision making that has been all too typical of the bank’s lending decisions for several years. 

It is clear that the Bank has, for too long, not been operating as a bank should by making hard-nosed commercial decisions and investing in projects which do not put its (read: taxpayer’s) money at risk.

How the bank, after so many years of disappointing performance, was last Financial Year able to see its bad loans (or those more than 30 days overdue) double raises questions about the level of the Government’s commitment to changing the Bank’s ways. 

The D.B.S.’ annual report, on which yesterday’s story was based, paints an even less flattering picture of the bank’s financial status in its fine print.

So-called “non-accrual” loans on the Bank’s books (industry jargon for money the bank suspects it may not see again) is as high as $24.7 million - a jump of a little less than $5 million tala from the year prior.

“Uncertainty represents 21 per cent of [our] loan portfolio,” the report reads.

When one considers what else this money could have been spent on, to raise the living standards of everyday Samoans, these reports make for sobering reading indeed. 

Part of the Bank’s mission statement is an obligation to serve the community and to invest in projects that are for the good of the nation. 

Losing money on civic-minded projects such as nurturing new industry or seeking to gain access to new markets for Samoan exports is one thing. 

But the bank’s loan portfolio is stacked nearly nine-to-one in favour of tourism compared to agriculture. 

Mostly large tourism operators have outstanding loans to the value of more than $95 million tala; agribusiness, by contrast, has received less than $11 million.

Intuition alone tells us which of these two sectors is more in need of Government assistance. 

But the statistics make the point all the starker:  97 per cent of Samoan households participate in some form of agricultural production and 19 per cent are reliant on it. 

The Bank’s loan portfolio hardly reflects the community it has been tasked to serve. 

In fairness, the Minister of Finance, Sili Epa Tuioti, candidly acknowledged last September the problems of sustainability the Bank was facing and undertook to have the Asian Development Bank and World Bank review its strategy to avert the serious threat of collapse.

But the Bank’s report also canvasses the way in which Cabinet as a whole is impeding its mission to recoup bad loans and reshape its business. 

In May, the Cabinet stopped the D.B.S. from taking legal action and seizing the assets of at least eight tourism properties.

“The intervention to postpone the sale of hotels has placed the D.B.S. in a very challenging position,” the report reads. 

“Sustainability has become an issue that should be accorded urgent attention”. 

In a foreword to the report, D.B.S.’ Chairman, Leasiosiofaasisina Oscar Malielegaoi, does highlight some commendable signs of a reform to the bank’s strategy. 

A total of 54 per cent of loans the bank approved last year were to the agriculture and fishing sector. And, despite the spike in its rate of bad loans, the Bank also increased the rate at which it was successfully collecting and settling other outstanding loans.

A ship of D.B.S.’ size cannot be expected to turn on a dime.

Those presiding over the bank are dealing with the consequences of decisions and agreements made many years prior. 

And reforging a loan book with a value of more than $110 million is not something that can be done overnight. 

But the people of Samoa have been underwriting D.B.S.’ losses for years, money that could have gone to projects that raised their standards of living. 

We should be doing everything we can to reshape the bank into a transparent operation that serves the nation. Cabinet must recognise this too.