The Reserve Bank of Fiji Governor, Sada Reddy announced at Pacific Microfinance Week, a five-day conference in Fiji, that the Reserve Bank of Fiji (RBF) will work to review the regulatory framework for microfinance development in Fiji [6, 8]. He noted that the RBF will work with commercial banks to introduce rural banking services in the country [6].
The Foundation for Development Cooperation (FDC), an Australia-based independent, not-for-profit international development organization, released a briefing note in 2009 that discusses the microfinance sector in Fiji [4]. The note first provides an overview of the evolution of microfinance in Fiji. The Fiji government initiated a trial delivery of microfinance services through specialized microfinance institutions in 1999 [4]. As reported in a previous MicroCapital story, the Fiji National Microfinance Unit (NMU), which was established in 1999 under Fiji’s Ministry of Finance to oversee the implementation, monitoring and evaluation of Fiji’s microfinance activities, sets country-wide growth targets [7]. The NMU provides support and guidance to Fiji’s microfinance institutions (MFIs) by providing financial assistance, supporting self-employment ventures, promoting household savings, assisting household business operations, and offering basic business training [7]. The government then established the National Centre for Small and Micro-Enterprise Development (NCSMED) in 2004 [4]. The NCSMED is mandated under the Small and Micro-Enterprises Act of 2002 to develop, promote, and support small and microenterprises [3]. NCSMED’s primary aims are to develop business training programs, advocate for a supportive policy and regulatory environment for small and microenterprises, and facilitate credit and funding for small and microenterprises [3]. In April 2009, the RBF announced it is directing all banks to set up specialized microfinance services at their branches by January 2010 [4]. To implement this policy, the RBF has developed a Microfinance Research and Development Unit [4]. Mr. Reddy stated that in the RBF’s efforts to take on an active role in formulating financial strategies and policies to increase access to finance to rural people, the government has set up a new department called the Financial System Development and Compliance Group in April 2009 [2].
According to the CIA World Factbook, Fiji has a total population of 944,720 as of 2009, with an urban population of 52 percent as of 2008 [5]. The FDC note cites that from 2000 to 2007, there were 340,000 unbanked people in the rural areas [4]. In his speech, Mr. Reddy also cites that the number of savings clients rose from 12,500 in 2004 to 24,000 in 2009 [2]. Moreover, he noted that totals savings is around FJD 1 million (equivalent to USD 450,000) [2]. As of March 2009, lending by NCSMED totaled FJD 1 million (equivalent to USD 450,000), and NCSMED had provided grants totaling FJD 7.1 million (equivalent to USD 3.4 million) [2]. Also, there are now 200 new micro businesses as of 2008, compared to 46 in 2004 [2].
As explained in the FDC note, commercial banks in Fiji have a comparative advantage in delivering microfinance services [4]. This can be attributed to the fact that they are licensed and regulated [4]. Moreover, they have capital adequacy and established systems and procedures that can deal with large volumes of clients [4]. Furthermore, they have their own branches to access their client base, and own source of funds that make them less reliant on donor grants and government funding [4]. Finally, they already have the financial products and services available to serve microfinance clients [4]. The note also recommends that these commercial banks partner with local MFIs to develop their microfinance services since MFIs have a relationship with the community that can help identify key issues and solutions [4]. This illustrates the reverse of the commercialization of microfinance where instead of MFIs transforming themselves into registered banking institutions, commercial banks are entering the microfinance sector.
In 2004, the United Nations Development Programme (UNDP), the United Nations’ global development network, initiated a rural banking program in Fiji, called the Fiji Rural Banking Service [10]. UNDP partnered with ANZ Bank to provide rural banking services [10]. ANZ Bank is an Australian bank and traces its origins to the Bank of Australasia, which was established in 1835 [10]. According to its website, it has assets totaling AUD 471.02 billion (equivalent to USD 380 billion) [11]. It is a publicly-listed company with 376,813 shareholders [11]. As reported in its 2008 Annual Report, its return on assets was 0.8 percent [12].
ANZ Bank provided the investment for setting up and operating the rural banking service [10]. The service includes a fleet of six mobile banks that travel on a regular schedule to 150 designated rural villages and settlements in the main islands of Viti Levu, Vanua Levu, and surrounding islands [10]. The bank offers two savings products, a long-term savings account and an everyday savings/transaction account [10]. Clients also have access to other banking products offered by the bank, and can make transactions in any of its urban branches [10]. The UNDP’s role was to assist with the feasibility assessment by sharing its experience on microfinance schemes, and provide information on the rural economy [10].
Furthermore, Mr. Reddy enumerated some of the challenges faced by the RBF. These include lack of data on microfinance in the country and participating MFIs, delivery of low-cost and efficient microfinance services, financial literacy, and lack of proposals for microfinance projects [2]. He intends to have the RBF interface more with the groups like NCSMED, UNDP Pacific Center, a UNDP network serving the Pacific Island countries, and financial institutions to address these issues [2, 9].
By Uyen Tran, Research Assistant
Bibliography:
[1] Reserve Bank of Fiji: http://www.fijitimes.com/story.aspx?id=125451
[2] Reserve bank of Fiji, Governor Sada Reddy’s speech: http://www.reservebank.gov.fj/docs/Keynote%20Address%20Delivered%20by%20Governor%20Reddy%20at%20the%20Opening%20of%20the%20Micro%20Finance%20Week%20in%20Nadi%20%2013%20July%202009.pdf
[3] National Centre for Small & Micro-Enterprises Development: http://www.ncsmed.org.fj/Default.aspx
[4] Foundation for Development Cooperation, “The way forward for Microfinance in Fiji
Risks and opportunities under new financial rules”, May 2009, http://collab2.cgap.org/gm/document-1.9.34824/The%20way%20forward%20for%20Microfinance%20in%20Fiji.pdf
[5] CIA World Factbook – Fiji: https://www.cia.gov/library/publications/the-world-factbook/geos/FJ.html
[6] Fiji Times “RBF chief backs microfinance” by Mereseini Marau, 15 July 2009, http://www.fijitimes.com/story.aspx?id=125451
[7] MicroCapital Story, 11 September 2007: Fiji National Microfinance Unit Targets 7,000 New Microfinance Savings Accounts This Year https://www.microcapital.org/microcapital-story-fiji-national-microfinance-unit-targets-7000-new-microfinance-savings-accounts-this-year/
[8] Pacific Microfinance Week: http://www.microfinance-pasifika.org/PMW2009.html
[9] United National Development Programme Pacific Center: http://www.undppc.org.fj/pages.cfm/about-us/
[10] United Nations Development Programme:
http://waterwiki.net/index.php/Banking_the_Unbanked_in_Fiji:_The_ANZ_Bank_and_UNDP_Partnership
[10] ANZ Bank: http://www.anz.com/
[11] ANZ Bank 2008 Annual Report: http://www.anz.com/about-us/shareholders/annual-reports/
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