Supporting Low-income Homes in the Pacific

MiCash is a bank account operated through a mobile phone.

The Commitment – Summer 2014, SIDS Special

In some Pacific nations, it is estimated that less than 10 percent of the population has access to basic financial services, rendering the region that spans a third of the Earth’s surface one of the least bankable in the world. Pervasive poverty, unstable infrastructure, devastating storms, challenging geography, and asubsistence lifestyle have always served as obstacles to establishing reliable financial systems in the Pacific – which is why the Pacific Financial Inclusion Programme (PFIP), a sustainable financial services initiative, is circumventing the traditional microcredit programmes and microfinance institutions that have failed the region in the past.

Instead, the PFIP is bringing a new focus to financial inclusion and education for Pacific Islanders by providing quality, affordable banking services across the region. By 2020, they hope to have doubled the number of Pacific Islanders who currently have access to basic financial services. “The PFIP encourages the private sector to invest in products, services and delivery channels that target unbanked, rural and low-income people who have no access to banks,” PFIP Manager Reuben Summerlin told The Commitment. “The programme identifies key constraints to the financial system and actively seeks out partners best positioned to offer solutions. We then fund research to inform interested partners on opportunities in the market in order to catalyse investments, product design and financial inclusion activities. We also offer grants or technical assistance packages designed to assist and encourage the innovation necessary to introduce new ways of serving hard-to reach populations.”

PFIP prides itself on its holistic approach to banking: the initiative works with the public, civil society organizations, nongovernmental organizations, and the private sector. Summerlin and his colleagues aim to foster a fully inclusive financial service programme, a sizable undertaking in such an expansive and fragmented region. Fortunately, the PFIP has gleaned support from major institutions, including the Australian government and the European Union. “The Australian Government has contributed $15 million AUD to a fouryear partnership with PFIP beginning in July 2014 and ending in 2018,” Summerlin told The Commitment. “This will support regional projects, as well as specific projects in Fiji, Papua New Guinea and Solomon Islands. The EU has funded PFIP regionally and has committed €6 million to fund programs in Papua New Guinea. Additionally, representatives from Australia’s Department of Foreign Affairs and Trade and the EU are active members on PFIP’s investment committee.” In addition to providing low-income communities with financial education and banking services, PFIP is cultivating innovative approaches to sustainable banking specific to Pacific Islanders – for example, branchless banking, “a distribution channel strategy that allows for delivering financial services without requiring people to visit a bank branch,” according to Summerlin. Branchless banking is particularly appealing to Pacific communities, where unreliable technology, weather, and infrastructure can prevent islanders in remote communities from being able to physically visit a bank.

“New technologies developed in recent years have provided an opportunity to change course in the Pacific,” Summerlin told The Commitment.“The use of mobile phones, point of sale devices, smart cards and other technologies for the ease of payments, as well as third party agents, makes the delivery of financial services more cost-effective and can begin to reach previously underserved and unbanked populations in the Pacific at a lower cost, closer to where they live and work.

Reuben Summerlin

Reuben Summerlin

Although the PFIP primarily works with government and private sector partners, the United Nations Development Programme and the United Nations Capital Development Fund are contributing to the implementation of the initiative in Fiji, Papua New Guinea and Solomon Islands. The regional programme also covers Samoa, Tonga and Vanuatu, and has tentative plans to expand to Kiribati and Tuvalu in the next three years. “People, households and businesses need financial services on a permanent basis. For this to happen, the services must be sustainable,” Summerlin told The Commitment. “When the private sector has the opportunity to earn a reasonable profit by providing services, it generally will do so efficiently. But often, when dealing with low-income and rural populations, these opportunities must be de-risked in the initial stages — which is where organizations like PFIP can contribute.”

“The PFIP encourages the private sector to invest in products, services and delivery channels that target unbanked, rural and low-income people who have no access to banks.”– Reuben Summerlin Pacific Financial Inclusion Programme (PFIP) Manager