Public Report on the maladministration and political interference of loans by the Development Bank of Vanuatu - August 13, 1999 -  Emalus Campus

Public Report on the maladministration and political interference of loans by the Development Bank of Vanuatu - August 13, 1999


The Development Bank of Vanuatu (DBV) was a state owned enterprise incorporated pursuant to statute to facilitate and promote economic development in Vanuatu.  The Bank collapsed and was dissolved by Parliament in 1997.  The Ombudsman subsequently investigated the process of granting and collecting loans by the DBV and the conduct of people involved in these activities from 1983 until its demise.  The investigation revealed numerous instances of improper lending practice and procedure.

The members of the DBV Board were appointed by the Government.  Members of the Board were found to have engaged in practice which was blatantly unreasonable and contrary to established lending practices.  Such conduct included:

    Granting loans without proper applications and without security
    Granting loans to customers when previous loans to the same customer were in arrears
    Granting loans without the required equity contribution by borrowers
    Granting personal loans which are outside the statutory mandate of the bank (including such loans to the General Manager of the bank, Mr. Garae)
    Granting loan as a result of political support to the Minister of Finance’s political party.

Credit officers employed by the bank also failed to abide by sound banking principles in approving unsecured loans.

Proper collection procedures were not followed with a resulting significant loss of revenue.  The Asset Management Unit (AMU) was set up by the Government subsequent to the demise of the DBV to collect debts owed to it.  It was effective in collecting outstanding debts, demonstrating that with effective management, the DBV could also have realized many debts and thereby prevented its own collapse.

The Minister of Finance, Willie Jimmy, in writing to the Board of DBV with instructions to process a particular loan breached the Leadership Code.  The General Manager of the DBV acted inconsistently with directives and created a conflict of interest in applying for and approving loans to himself and a family member.  This amounted to a breach of the Leadership Code.   The subsequent General Manager, Mr. Tele Harry also breached the Leadership Code in authorizing a vehicle, in the custody of the bank, to be used without the authority of the owner and without payment.

·       That certain former members of the DBV’s Board not be appointed to any other boards or public bodies or any position of public trust.

·       That the former Managing Directors, Mr. Gare and Mr. Harry not be appointed to any managerial position with a public body or any position of public trust.

·       That the AMU should continue to collect debts owed on the outstanding loans made by DBV.
·       That the AMU remain independent of any Government or bureaucratic influence.


Written by Edward R. Hill
UNDP Governance and Accountability Project
January, 2001
© Ombudsman of Vanuatu
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