> Posted by Caitlin Sanford, Lanna Lome-Ieremia, and Sameer Chand, Bankable Frontier Associates, Central Bank of Samoa, and Reserve Bank of Fiji

Another version of this post is published on the Alliance for Financial Inclusion website.

Sigatoka Market, Sigatoka, Fiji

Until now there have been few sources of publicly available data about financial access and usage in the Pacific Islands. Although individual central banks are measuring and tracking progress towards financial inclusion, the small island countries in the Pacific region have often been left out of international financial inclusion datasets, such as the Global FindexThe IMF Financial Access Survey captures some key financial inclusion indicators but this does not include all the countries from the Pacific.

The Pacific Islands Working Group on financial inclusion (PIWG) of the Alliance for Financial Inclusion came together this year to define and collect financial inclusion data specifically tailored to the region. Fiji, Papua New Guinea, Samoa, Solomon Islands, and Vanuatu participated in this data project. While the Alliance for Financial Inclusion (AFI) and the Global Partnership for Financial Inclusion (GPFI) have elaborated key sets of financial inclusion indicators to be used for global comparison, in some instances, individual countries such as Mexico, Brazil, Tanzania, and others have crafted broader sets of country-level indicators. This is the first time a broader set of common indicators have been developed at a regional level.

In selecting these indicators that they will track over time, policymakers focused on measuring variables related to government commitments and factors likely to advance financial services markets in their countries. The five countries wanted to measure progress against their Maya Declaration commitments, as well as market development topics such as growth of mobile financial services in this sparsely populated region. In addition, measuring remittance flows to help assess how they can be drivers of financial inclusion was another priority. Barriers to opening an account and benchmarks for client protection and financial education were also measured.

As the table at right shows, Fiji leads the region in per capita regulated deposit accounts, followed by Solomon Islands, Vanuatu, and Papua New Guinea (usage data is not yet available for Samoa). Fiji also has the largest regulated credit accounts per capita, with Vanuatu, Papua New Guinea, and Solomon Islands all trailing with closely comparable figures.

The comparatively large population and land area of Papua New Guinea results in lower numbers of access points per 10,000 adults and per 1,000 square kilometers, despite there being more access points in absolute terms in the country. Similarly, the land area of the Solomon Islands is the second largest of the countries sampled, contributing to lower access levels in the indicators calibrated by land area.

Electronic funds transfer point of sale (EFTPOS) devices are more prominent than other types of access points in all five countries. This is due to the improvements in technology in the region, including the introduction of mobile financial services. For the percentage of banks offering mobile financial services, Papua New Guinea’s figure (3 percent) appears low because there are 35 banks in the country, compared with about five banks in each of the other countries sampled. We learned that the size of the banks and their market share, not just the number of banks should ultimately be taken into account when considering the development of the mobile financial services market.

Encouragingly, although the access metrics for the Solomon Islands are some of the lowest in the region, usage indicators show that the number of deposit and credit accounts per 10,000 adults are on par with Vanuatu and exceed the figures from Papua New Guinea.

Measured using a simple mystery shopper exercise, two indicators shed light on the differences in the average balance and average number of identification documents required to open a bank account in the five countries. The average opening balance in Papua New Guinea is US$2.26, significantly less than about $18 in Samoa and $15 in Vanuatu. While Fiji has some of the strongest access indicators in the region, the fact that an average of 3.6 documents are required to open an account, compared to two or fewer in Vanuatu and Samoa, suggests potential barriers to account opening for individuals without multiple forms of identification.

Several indicators permit Pacific Island countries to track their progress against key policy objectives, including Maya Declaration commitments, integrating financial education into the national school curriculum, and developing national financial literacy strategies. The consumer protection-related indicators show that Samoa, Solomon Islands, and Vanuatu have not yet put in place a credit bureau or consumer protection policies or guidelines.

Members of AFI’s Pacific Island Working Group will continue measuring these indicators approximately every six months. Some countries such as Fiji are also collecting indicators from the past five years in order to have a sense of the progress made to date.

Caitlin Sanford is an Associate at Bankable Frontier Associates specialized in demand-side research, and served as project manager for the PIWG Data and Measurement project.

Lanna Lome-Ieremia has been with the Central Bank of Samoa since the start of 2003 in the Financial Markets Department. She is currently Manager of the Financial System Development Department.

Sameer Chand has been with the Reserve Bank of Fiji since the start of 2011 in the Financial Systems Development & Compliance Group. He is Secretariat to the National Financial Inclusion Taskforce in Fiji.

Image credit: john.trif

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