Op-ed Tevita Motulalo
MSc Geopolitics and International Relations
Tonga’s financial and development systems remain anchored in conservative and often outdated models of credit and state intervention. The country’s growth narrative has for too long revolved around supporting “old and legacy” sectors—agriculture, fisheries, and tourism—through collateral-heavy loans and bureaucratic programs. While these areas are important, this approach limits innovation, concentrates market power, and perpetuates dependence on slow-yielding industries. A strategic shift is needed: from collateral-based, bureaucracy-driven finance to confidence-based, innovation-led growth.
Angel investing and venture capital (VC) represent that shift. They prioritize ideas, leadership, and scalability over physical collateral. Angel investors—often local or diaspora professionals—provide seed funding to startups in exchange for small equity stakes or convertible instruments, while offering mentorship and networks. Venture capital funds build on this, investing larger sums once market traction is proven, earning returns through company growth rather than fixed interest. Together, they build ecosystems that reward initiative, experimentation, and entrepreneurship.
The National Reserve Bank of Tonga (NRBT) took a promising step in June 2025 with its FinTech Regulatory Sandbox Framework, launched with the Alliance for Financial Inclusion (AFI). The sandbox allows innovators to test digital payment, remittance, and financial inclusion solutions within a controlled regulatory environment. It signals an openness to experimentation and technology-driven finance—a direction Tonga urgently needs.
However, for this initiative to achieve its potential, greater coordination is required between the NRBT’s sandbox and the Government Development Loan (GDL) Facility operated through the Tonga Development Bank. The GDL currently channels concessional loans into traditional sectors. Instead, a portion of that capital should be reallocated to seed new, high-impact ventures emerging from the sandbox and other innovation pipelines. These funds should take the form of equity or revenue-sharing instruments, not traditional debt, to ensure startups have breathing room to grow.
At the same time, the government must reconsider its development paradigm. It should ease off the endless injection of resources into state-owned enterprises and entrenched oligopolies in communications, finance, and utilities—entities that dominate the economy but deliver limited innovation or productivity gains. Bureaucratic interference in markets has stifled private initiative. Public capital should instead be strategically injected into new, locally founded ventures capable of building Tonga’s next generation of industries. These companies—if properly supported—can drive export value, digital capacity, and job creation far more effectively than legacy enterprises.
Transparency is also essential. The NRBT’s sandbox operations should be publicly transparent in its schedules, participants, and outcomes to ensure genuine private sector access rather than quiet capture by existing institutions or state entities.
