Solomon Islands Loan Defaults Among Highest in Pacific: Dr Forau

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The Governor of the Central Bank of Solomon Islands (CBSI), Dr Luke Forau, has warned that Solomon Islands remains one of the highest in the Pacific in terms of loan defaults, a situation that is slowing economic growth and raising the cost of borrowing.

Dr Forau made the remarks on Tuesday during the official opening of the Development Bank of Solomon Islands (DBSI) Branch in Auki, Malaita Province.

“Solomon Islands is among the highest in the region in terms of loan defaults,” Dr Forau said. “We are seeing cases where people take loans and intentionally do not repay them. Some even open accounts in other banks and abandon their debts, allowing the National Provident Fund to take over recovery. This is not healthy for our financial system.”

He said the accepted international threshold for non-performing loans is about five percent, but Solomon Islands is currently recording levels between nine and twelve percent.

“The recommended threshold is around five percent, but we are well above that,” he said. “This puts our country in an awkward position when dealing with foreign investors and international lenders.”

According to Dr Forau, the high default rate has made Solomon Islands a high-risk lending environment, forcing banks to increase interest rates.

“The bigger the risk, the higher the interest rate,” he said. “Foreign investors already see our market as risky, and this makes lending more expensive for our people and businesses.”

He urged borrowers to take responsibility for repaying loans, saying a strong repayment culture would improve confidence in the financial system.

“If we are committed to repaying what we borrow, things will improve,” Dr Forau said. “Banks will be more willing to lend and interest rates will come down, supporting growth and development.”

Dr Forau said the opening of the DBSI Branch in Auki is a positive step toward strengthening access to finance in Malaita, but stressed that improved financial discipline is essential to ensure its success.