Introduction Limited access to finance remains a constraint to inclusive and resilient growth in Tonga, especially for micro, small, and medium-sized enterprises (MSMEs), and particularly for women-owned/led businesses. Women operate about 48% of formally registered businesses and 56% of informal businesses, yet MSME lending accounted for an estimated 8% of total bank lending in 2024. Microfinance remains an important source of finance for many of these women entrepreneurs. However, those who have outgrown microfinance and are seeking to expand often struggle to transition to commercial loans because of rigid lending requirements, including collateral. Barriers to Finance Tonga’s financial system is small and relatively undiversified, comprising three commercial banks, the state-owned Tonga Development Bank, one microfinance provider, several finance companies and moneylenders, and a small, unregulated insurance sector. Currently, the country has no capital market, which limits businesses’ access to alternative sources of finance, but the government has committed to developing a domestic bond market. There is no framework for resolving non-performing loans, which rose to 14.7% of bank loans by June 2025, prolonging the foreclosure and recovery timelines. Although a movable asset registry exists and now holds more than 12,500 registrations and digital financial services are expanding, cash remains dominant because trust and confidence in the financial system are still thin. More broadly, the credit registry does not exist to delineate positive and negative information and credit profile a borrower. The national payment system is also awaiting upgrades with transfers between banks still taking several days to be cleared in practice, affecting the rate at which money changes hand and limiting private sector activity. MSMEs form the backbone of Tonga’s private sector, but access to finance remains a widely cited barrier to investment and growth. Lending practices remain conservative, with heavy reliance on land as collateral. Banks require real estate, salary or third-party guarantees to facilitate any loans, with land or other productive assets necessary for commercial loans. Uneven ownership of assets among businesses leads to credit concentration among established borrowers with strong asset base and formal financial records, leaving smaller and informal businesses underserved. Women-owned/led businesses are disproportionately affected. Tonga’s land inheritance system substantially disadvantages women, who cannot inherit land in the same way as men. Leasing land remains a possibility but securing a lease can be time-consuming and costly and leasehold interests turn to have limited collateral value. Women entrepreneurs, therefore, often struggle to meet banks’ collateral requirements. Combined with the need to present up-to-date financial records and cash flow projections, and reliably accessing a bank branch, this adds to the time and administrative burden to navigate and meet the loan application requirements. As a result, women entrepreneurs rely disproportionately on personal savings or informal lending—which is easier to access but offer only relatively small size of finance, shorter repayment terms, and high interest rates risks—over indebtedness, constraining business expansion and reducing resilience to shocks. In Tonga, women entrepreneurs are concentrated in activities that are particularly exposed to climate and disaster shocks, such as agriculture, food and beverages, and handicrafts, increasing the importance of appropriate financial and risk-management products. They also face considerable time and mobility constraints associated with unpaid care and community responsibilities, which limit their opportunities to access advisory services and business networks. These factors directly affect women entrepreneurs’ ability to strengthen their entrepreneurial capabilities and formalize their businesses, making it harder to prepare financial statements, demonstrate cash flows, build the track record banks require, and complete loan applications. Without targeted interventions, these financial gaps risk perpetuating structural inequalities, thus, limiting women's economic participation and constraining the broader growth potential of the private sector. Expanding Financial Access The Government of Tonga, supported by development partners, has made important progress in advancing financial inclusion. The National Financial Inclusion Strategy (2023–2027) outlines priorities to expand access to quality financial services, strengthen financial capability, and promote responsible financial innovation. Importantly, targeted programs are beginning to address the specific constraints faced by women entrepreneurs. The recently approved Women Entrepreneurs Leveraging Innovative Finance in Tonga Project is a key step forward. The project aims to improve access to finance for women-owned/led MSMEs through innovative financial products, capacity building, and institutional support, which aim to bridge longstanding gender gaps in financial access. The project introduces a first targeted risk-sharing facility for women entrepreneurs, reducing collateral barriers to access finance. This is complemented by tailored business development services to strengthen women’s entrepreneurial, financial and digital capabilities. Taking an ecosystem-based approach, the project will also strengthen the collection and use of sex-disaggregated for market intelligence, helping financial institutions and policymakers better understand the women entrepreneur market and design more appropriate products and support services. Development partners have also supported diagnostics, policy reforms, and pilot programs to promote inclusive finance. While these efforts are encouraging, progress remains uneven and key structural barriers—especially those affecting women-owned/led MSMEs—persist. Way Forward Unlocking the potential of women-owned/led MSMEs will require reforms that reach beyond the project and address the legal and market infrastructure that shapes how financial institutions behave and respond to private sector needs. First, a non-performing loan resolution and insolvency framework, together with the national credit registry, with positive and negative reporting capabilities is needed to ease foreclosure hurdles and credit profile borrowers. Second, modernizing the national payment system and regulating the insurance sector is necessary for efficiency in finance flows that eases working-capital pressure on micro and small traders and give lenders and borrowers tools to manage climate risk. Third, financial institutions need support to serve the missing middle through capacity development that targets MSME lending, gender-responsive products, and credit assessment based on cash flow and alternative data. Fourth, business development services must be tied to tangible outcomes, such as market access, financing and formalization, creating organic pathways for growth, graduation, and expansion of enterprises. Finally, expanding digital financial services offers significant potential to overcome geographic and cost barriers to financial inclusion, particularly in the outer islands, but sustainable gains will require corresponding growth in cash-in/cash-out agent networks and increased public trust in formal financial services. Conclusion Improving access to finance for women-owned/led businesses is not only about inclusion; it is central to Tonga’s economic future. When MSMEs can access finance, they invest, grow, and create jobs. When women entrepreneurs are better able to grow and sustain their businesses, the benefits extend to households, communities, and the broader economy. Resources Asian Development Bank (ADB). Finance Sector. ADB. 2025. Report and Recommendation of the President to the Board of Directors: Women Entrepreneurs Leveraging Innovative Finance in Tonga Project. Government of Tonga. 2025. Budget Statement for the Year Ending 30 June 2026. National Reserve Bank of Tonga, Government of Tonga. 2023. Tonga: National Financial Inclusion Strategy 2023–2027. United Nations Capital Development Fund. 2023. Assessing Digital and Financial Literacy in Tonga. Ask the Experts Isoa Wainiqolo Senior Economics Officer, Pacific Department, Asian Development Bank Isoa Wainiqolo works at ADB’s Pacific Subregional Office in Suva, Fiji. He currently serves as the country economist for the Cook Islands, Niue, and Tonga, supporting ADB’s programs and initiatives. Prior to joining ADB in 2019, he worked as an economist and senior economist at the Reserve Bank of Fiji for 12 years. He holds a master’s degree from Columbia University in the US and a bachelor’s degree in economics and accounting from the University of the South Pacific. Leave your question or comment in the section below: View the discussion thread.