Despite progress being made in reducing the unbanked population in the Pacific, there remains a serious lack of financial inclusion due to the geographic settings of countries in the region.
International development data shows that 80% of people in the Pacific have no access to finance, while combined with the East Asian Region, the area is home to 24% of the world’s unbanked population.
IFC Country Manager for Australia, New Zealand, Papua New Guinea, and the Pacific Islands, Thomas J. Jacobs, said this lack extended across nations, businesses, and individuals: “Apart from Fijians, more than 80% of people in the Pacific have no access to finance while there is limited competition in the banking sector. Microfinance and non-banking financial institutions are significantly underdeveloped.”
See also| IFC contributes to gradual reduction in the unbanked population in the Pacific
The IFC official noted that the region will continue to face the challenges of remoteness and lack of scale which, in turn, will impact the ability to deliver traditional financial inclusion. Indeed, from Papua New Guinea, the biggest country in the region, to the small island nation of Tuvalu, the inhabitants of the region are scattered across 16,000 kilometers of ocean. The smallest Pacific Island nations are among the 25 smallest independent states in the world.
Jacobs said there also existed significant opportunities to reach the unbanked population namely because COVID-19 has underscored the importance of digitization after the pandemic left people scattered apart and how this can bring nations in the Pacific closer to each other and the rest of the world.
Update on progress in Tonga, Papua New Guinea (PNG) Fiji, Samoa, Solomon Islands, and Vanuatu
Providing an update on the highlights of some of the IFC’s work in the Pacific to encourage financial inclusion, the IFC Country Manager said the corporation had supported the Tonga Development Bank to develop ‘Ave Pa’anga Pau remittance products in New Zealand and more recently in Australia where it was launched on November 6.
“Remittances are a lifeline for families in nations across the Pacific, helping to pay for education, healthcare, and other essentials, and no more so than now as COVID-19 weighs on the region’s fragile economies” he was quoted as saying.
According to him, for Tonga, remittances are a key component of economic activity and income for households, with the total value equivalent to about 40% of GDP but the fees Tongans pay for sending money home can be among the highest in the world. The ‘Ave Pa’anga Pau remittance product attracts a much lower fee of 5%, about half the cost of many other services.
“’Ave Pa’anga Pau was first launched in New Zealand in 2017 and has since been taken up widely there, having an additional benefit of encouraging Tongans to save more money. There has already been more than 51,000 transactions worth over NZD$19.1 million since ‘Ave Pa’anga Pau was launched,” he added.
A product known as the Pacific Payments Project is expected to benefit people in Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu by enabling them to access high-quality retail payment products and services at affordable costs through efficient electronic payment systems and remittance corridors.
The Pacific Payments Project is helping to create a sound, efficient, and inclusive legal framework including the legislation and regulations needed to enable electronic fund transfers and retail payments as well as to improve oversight. This project will also help to establish national payment systems including real-time gross settlement for high-value transactions, an automatic clearing house for low-value retail payments, and a switching system to enable cards and mobile payments to be used across different banks’ EFTPOS systems and ATMs. Once these improvements are in place, people will not need to rely as heavily on cash and will also be able to use their bank cards in different banks’ cash machines and retail payments systems.
In Papua New Guinea, a project known as the PNG Retail Electronic Payments System was a development priority for PNG before the COVID-19 crisis.
“IFC sees it as crucial to a sustainable recovery. Since the launch in July 2019 of the PNG Retail Electronic Payments System, six financial institutions have gone live including BSP, Kina Bank, Nasfund Contributors Savings and Loans Society, Mibank, People’s Microbank Limited and Westpac,” Mr. Jacobs commented.
With these six key financial institutions now connected, the volume and value of non-cash payments is increasing and forming a significant share of PNG’s economy. More than 14 million transactions worth PGK2.2 billion had been routed through the Retail Electronic Payments System as of the end of October 2020.
