Financing your tourism business in Vanuatu – part 3

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Welcome back…

This is the final post in the 3 part series, financing your tourism investment in Vanuatu. In our earlier posts, we have talked about the currency, interest rates, the process and the costs. In this blog, we will cover the burning issue of borrowing ratios and we’ll bring it all together via discussing an alternate borrowing strategy.

Borrowing ratios?

Vanuatu is a beautiful South Pacific paradise however due to the pacific location, the downside to paradise is natural disasters in particular, cyclone and earthquake activity. And when it is natural disaster ‘time’, the impact can be catastrophic…you will recall the impact of cyclone Pam.

As a result of this country risk issue, lenders in Vanuatu allow a maximum borrowing ratio of 60% which means for a tourism resort valued @ AUD1,500,000, the maximum loan will be AUD900,000 or equity requirement of AUD600,000 (plus costs). I support this level of perceived conservatism as this level of equity in a project does provide a good cushion for you to manage through the difficult times…if and more realistically, when, the difficult times arrive.

Let’s talk numbers?

So, overall – how much do I need to contribute?
Let’s complete a couple of sums. Based on a tourism property purchase price $1,500,000, your minimum contribution will be as follows:
Contribution to purchase i.e. 40% of purchase price: $600,000
Allocation for costs i.e. government, valuation, finance: $150,000
Total contribution based on purchase price $1,500,000: $750,000

Alternate borrowing structure

In part 1 of our series, we talked about borrowing conditions in Vanuatu. If you are retaining income producing property in Australia, there is the option to intelligently structure a loan in Australia to be repaid from the income being earned in Australia.

Various loan packages are available for this type of asset i.e. residential line of credit, residential investment property, commercial investment loan and commercial line of credit.

Due to the current historically low interest rates in Australia and reasonable yield being received from residential and commercial property, this structure could prove to be valuable as a way to source the required level of equity to invest in your Vanuatu tourism property and have the added advantage to reduce your overall borrowing costs.


1. There are currently good opportunities for investment in tourism in Vanuatu – in particular the main island of Efate and Espiritu Santo.
2. Investing and borrowing in Vanuatu is very different from Australia and as a result, working with local business professionals (real estate, legal, accounting, risk and finance) is recommended.
3. Equity contribution is quite high however this is recommended due to the inherent risk (e.g. country, natural disasters) of investing in a pacific paradise
4. There is the opportunity to leverage income producing property assets in Australia to contribute funds towards the purchase and reduce your overall borrowing costs.

I do hope this 3-part blog has assisted you in your research for an investment in tourism in Vanuatu paradise. Please do contact me, should you wish to discuss how we can convert your dreams into reality…