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Stay up to date with Microfinance Pasifika events by subscribing to our newsletterPacific Islands Financial Services Sector Assessment
The objective of this Financial Services Sector Assessment (FSSA) was to review access to financial services in five least developed countries (LDCs) in the Pacific and make recommendations to the United Nations Development Programme (UNDP), United Nations Capital Development Fund (UNCDF), and their stakeholders regarding programme initiatives that will improve access for the currently unbanked population. Summary of the assessment is as follows:
- The vast majority of Pacific Islanders suffer economically from lack of access to financial services. This observation reflects the reality of low service coverage rates as well as anecdotal evidence of the costs that the unbanked population incur conducting transactions without adequate financial service infrastructure.
- Access to financial services has been constrained primarily by economic inefficiencies that limit the reach of traditional institutional models for delivering financial services. For the most parts, donor support to traditional microfinance institutional models has floundered on these inefficiencies.
- There are new opportunities, primarily driven by communications technology, for achieving efficiencies in the delivery of financial services to the currently unbanked population.
Opportunities for Extending the Financial Services Access Frontier
The access frontier in the LDCs has been defined primarily by the limits of traditional institutional models that rely on economies of scale to cover the costs of vertically integrated organizations. Banks, non-profit organizations and credit unions have all attempted to create organizations that perform all of the functions related to financial service provision and organizational management. Reliance on branch-based service channels is another limiting factor. As a result, financial service providers have struggled to find viable economies of scale outside of principal cities and remote populations have developed other mechanisms for managing their cash resources. The current reach of financial services is a reflection of the limits of branch banking. However, new technologies are creating opportunities for extending the access frontier beyond the limits of branch banking. Collectively, these opportunities demonstrate that the access frontier is no longer defined by branch locations; the reach of telecommunications technology now defines the access frontier.
Emerging technologies are creating new opportunities in the areas of branchless banking, specialized organizational models, and product innovation. Moreover, most of these technologies are provided by telecommunications companies that are well positioned to participate in ventures to provide financial services to their mobile phone clientele. This process is already advancing rapidly in Vanuatu and Samoa.
To view the complete Financial Services Sector Assessment: Kiribati, Tuvalu, Samoa, Solomon Islands, Vanuatu report click here.