41 percent of SME loans from SDFC have become non-performing assets

An audit conducted by the Auditor General's Office has revealed that 41% of loans issued by the SME Development Finance Corporation (SDFC) have become non-performing assets (NPAs). SDFC was established by the previous government to support small and medium sized enterprises.

The audit, requested by Parliament, reviewed the bank’s operations between 2019 and 2023. According to the findings, out of the MVR 1.3 billion disbursed during that period, MVR 554 million became non-performing after remaining unpaid for more than 90 days.

During that time, SDFC issued loans to 827 beneficiaries, amounting to MVR 878 million. In addition, another MVR 151 million was marked as overdue due to irregular repayments.

Of the MVR 554 million in NPAs, MVR 107 million was written off in line with the bank's internal policies. As of 2024, only MVR 12 million has been recovered from these outstanding loans.

The audit also revealed that out of 389 loans registered as NPAs, 116 were for amounts up to MVR 5 million. These loans together accounted for MVR 289 million in outstanding debt, with MVR 70 million classified as overdue.

The report identified several systemic issues in SDFC's loan issuance and recovery processes. It also included a series of recommendations aimed at addressing the problems and improving future performance. Key suggestions from the Auditor General's Office include:

The audit further advised the Ministry of Finance to take steps to reduce the negative financial impact on the bank from interest waivers.

The report concluded that multiple operational shortcomings had adversely affected SDFC. With the government’s stake in the bank now sold to the Bank of Maldives, SDFC will continue to operate as its subsidiary. Despite the change in ownership, SDFC is expected to maintain its focus on providing concessional loans to SMEs under similar terms as before.