Pacific Legal Network (PLN) Advises on IFC Risk Sharing Facility Supporting Tonga Development Bank

PLN is proud to have supported International Finance Corporation (IFC) on its latest financial institutions investment in the Pacific, providing legal and regulatory advice in connection with an unfunded risk sharing facility of up to T$3 million in favour of Tonga Development Bank (TDB).

The transaction represents a meaningful step forward for Tonga’s economic resilience and financial sector development, supporting the expansion of credit while maintaining prudent risk management in a small island economy. TDB plays a critical role in Tonga’s banking system, particularly in extending access to finance for households, micro, small and medium-sized enterprises (MSMEs), and productive sectors that underpin employment and income generation.

PLN worked closely with Tevita Aho in Tonga, alongside IFC counsel in Singapore and international counsel in the United Kingdom, to deliver a novel financing arrangement tailored to the Tongan legal and regulatory environment.

PLN’s role included:

• Advising IFC on Tonga-specific banking laws and financial sector regulation;

• Leveraging our experience across multiple jurisdictions to support the structuring and implementation of an innovative risk sharing facility for the Tongan financial market; and

• Providing regulatory and legal guidance on novel or unchartered aspects of Tongan law relevant to the transaction.

An important dimension of TDB’s development impact is its long-established and trusted remittance services, which continue to serve as a vital lifeline for Tongan families and communities. By complementing this remittance platform with a risk sharing facility, TDB is well positioned to translate remittance flows into deeper financial inclusion, stronger financial intermediation, and increased domestic investment.

Looking ahead, the facility is expected to support new lending opportunities, including for MSMEs, climate-resilient investments, and other initiatives that promote inclusive growth, while reinforcing confidence in Tonga’s financial system. The transaction also reflects TDB’s ongoing commitment to innovation and its evolving role as a development-focused financial institution.

PLN is pleased to have collaborated with IFC and R&S Lawyers on this important milestone and to contribute, in a practical and regionally grounded way, to Tonga’s long-term economic and financial stability.

Tevita Aho, R&S Lawyers, Tonga

Dirk Heinz, Pacific Legal Network, Australia