Local businesses are nearly $300,000 behind on payments of the $6.9 million loan issued by the Cook Islands Government to support them during the 2020 Covid-19 pandemic.

With $3.3 million already repaid, there is an outstanding balance of $3.6m, the Prime Minister told Parliament last week.

Brown, who is also the Minister for Finance, was responding to a question raised by Opposition MP Vaitoti Tupa of Matavera who asked whether loans have been repaid.

The Prime Minister said 151 business loans totalling $6.9 million were approved, with an interest rate of 3 per cent per annum; however, the rate was reduced to 1 per cent if repaid within 12 months.

As of the end of September, 116 loans remain out of the 151 originally approved, with an outstanding balance of $3.6 million.

“So almost $3.3m of loans has been repaid as well as a small amount of interest.

“Out of the remaining 116 loans, 47 loans that are in arrears with approximately $300,000. Out of the $6.9m lent, the arrears represent less than 5 per cent.”

Brown acknowledged that while some businesses are performing well and repaying their loans promptly, others are facing challenges and require more time.

He said the loan scheme was part of the Business Continuity Credit Facility managed by the Bank of the Cook Islands in collaboration with the Ministry of Finance and Economic Management (MFEM).

“This is one of the better initiatives that we put in place during Covid, because it certainly helped a number of our business to stay afloat when borders closed and it enabled them to hit the ground running when we opened our borders for tourism.”

The amounts available for loans were between $12,500 and $312,500, depending on the number of employees, MFEM earlier said.

Repayments were not compulsory in the first 24 months and following the two-year grace period, the businesses were required to make regular payments of both the principal and interest. If businesses fell behind on their compulsory repayments, which start after 24 months, they will be subject to a penalty interest rate of 10 per cent rather than the standard 3 per cent annual rate.

Financial Secretary Garth Henderson earlier said: “It was our intention to provide a low-cost, low-stress source of finance at a very stressful time for our businesses. Our businesses are now beginning to recover, so we expect to see improved ability to repay those loans.  We have not seen these businesses fail; our life.”