An audit by the Auditor General's Office has revealed that 41 percent of loans issued by the SME Development Finance Corporation (SDFC) have become non-performing assets. The SDFC was created under the previous government to provide financial support to small and medium-sized enterprises in the Maldives.
The review, requested by Parliament, examined the bank’s operations between 2019 and 2023. During this period, the SDFC disbursed MVR 1.3 billion in loans. Of this total, MVR 554 million became non-performing after remaining unpaid for more than 90 days.
Between 2019 and 2023, SDFC issued loans to 827 beneficiaries, totaling MVR 878 million. Another MVR 151 million was flagged as overdue due to irregular repayments. Out of the MVR 554 million classified as non-performing, MVR 107 million has been written off following the bank’s internal policies. As of 2024, only MVR 12 million has been recovered from these outstanding loans.
The audit highlighted that among 389 loans registered as non-performing, 116 were for amounts up to MVR 5 million. These smaller loans collectively account for MVR 289 million in outstanding debt, with MVR 70 million classified as overdue.
The Auditor General's report pointed to several weaknesses in SDFC’s loan issuance and recovery processes. Recommendations included:
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Strengthening the criteria for granting loans
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Pursuing legal action against borrowers who consistently fail to repay, in line with the bank’s recovery manual
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Revising collateral and other procedures to reduce defaults
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Actively following up on recoveries and working with the government on unresolved loans
The report also advised the Ministry of Finance to take measures that would limit the negative financial impact from interest waivers.
The audit concluded that operational shortcomings had affected the bank’s performance. Following the government’s sale of its stake in SDFC to the Bank of Maldives, the SDFC will continue operating as a subsidiary. Despite the change in ownership, it will maintain its focus on providing concessional loans to small and medium-sized enterprises under similar terms as before.
This report underlines the need for stronger financial management and more rigorous oversight to protect the support intended for SMEs and ensure that the bank remains a reliable source of funding for the country’s small business sector.
