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By Andrew Collard, Manager Finance, National Bank of Tuvalu

FUNAFUTI, Tuvalu (May 1999 - Tuvalu Echoes)---It is a requirement of the National Bank of Tuvalu that large home loans be secured dollar-for-dollar by applicants' Tuvalu Provident Fund (TPF) accounts. This means that people with small TPF accounts are unsuccessful in obtaining home loans.

To assist more people to obtain home loans, the Bank is exploring an alternative security referred to as a mortgage of rental. The proposed mortgage would not be a mortgage of sale, as is usually the case, as land ownership in Tuvalu is not individually based. Instead, if a customer fails to meet scheduled repayments, the Bank could take possession of the house and rent it to a tenant until the customer's debt is cleared, at which time the mortgage would expire and the house would be returned to the customer.

We at the Bank are aware that the above arrangements are not in keeping with any traditional precedents but neither is the existence of a bank and the granting of large monetary loans.

It should be stressed that calling on a mortgage should only take place after all other avenues have first been exhausted. Mortgages of rental would be compulsory. They represent another option available to customers seeking new loans.

The advantages of a mortgage of rental would be as follows:

Discussions on mortgage of rental are only at their infant stages.

The Bank is seeking community views as to whether the proposed security is suitable for Tuvalu.

Andrew Collard Manager Finance

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