CBSI Governor Denton Rarawa delivers his opening remarks at 2nd Pacific Islands Regional Initiative Forum in Port Vila, Vanuatu, in June 2016.

2 June 2016

CBSI Governor Denton Rarawa Opening Remarks at 2nd Pacific Islands Regional Initiative Forum

Opening Remarks by Chairman of the Pacific Islands Regional Initiative (PIRI), Governor Denton Rarawa at the Opening of the 2nd PIRI High Level Conference on SME Financing, Port Vila, Vanuatu, June 2-3, 2016. Check against delivery.

Deputy Prime Minister of the Republic of Vanuatu, Hon Joe Natuman Honourable governors and deputy governors,

Mr. Norbert Mumba, Deputy Executive Director of AFI, Representatives from PIRI member central banks, Ladies and gentlemen,

I am honoured indeed to welcome you all to the PIRI meeting this morning, in this beautiful setting of Port Vila.

This is the third High Level Meeting of PIRI, and I look forward to hearing some updates on progress since we met in Maputo, Mozambique last September ahead of the 2015 AFI Global Policy Forum.

This year, the focus is on SME financing.

We all share the same belief that financial inclusion is not complete without SMEs having access to credit.

Anecdotal evidence shows that SMEs contributes to nation building. They are seen as the backbone of our economies as the presence and activities of SMEs are spread across our respective countries.

Therefore, promoting SMEs as vehicles for broadening and deepening financial inclusion in our countries is an appropriate policy priority to pursue.

In saying that, I would like to highlight three important issues that I want to put forward for serious consideration by this conference. I hope that by the end of our meeting, not only would our understanding of each issue is enhanced, but we would have also identified potential means to address each issue.

These three issues are:

  • Firstly, what do we mean when we talk about SMEs? How do we define an SME?
  • Secondly, who is responsible for addressing the financing needs of SMEs in our jurisdictions: should this be the role of commercial banks, the government, private sector or the central bank? And;
  • Thirdly, lack of data on SMEs impedes our understanding of the players in the SME business and makes it difficult for us to measure their performance and contribution to our economies.

On the issue of definition, I am sure each of our countries has its own definition of SMEs.

Some countries I understand use the number of employees; some use sales turnover or the level of capital, while others use some combination of these measures.

So the question is, what definition of SMEs would PIRI members adopt?

Should the definition of SMEs be specific to the business environment of each country or should we use a standard regional or international definition?

This is an issue that PIRI needs to address and I hope we can deal with this during the conference. Hence, I look forward to an agreed definition of SME for adoption by PIRI members after this conference.

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A child waits for his mother near a fruit stand outside Port Vila, Vanuatu. Photo credit: Eliki Boletawa.

Another related point to note is that if our target is credit to rural communities, then we need to include mini or micro enterprises in the definition. So the acronyms become MSMEs – i.e. micro, small and medium enterprises.

On the second issue, it is more of a policy question of who should provide the financing for SMEs. I understand in the region; we all have different experiences.

In some countries, central banks direct banks to establish SMEs units within their operations and focus on developing funding for SMEs.

In other countries, financing models that enhance and support the collateral base of potential SME borrowers are used. This is the case in Solomon Islands, where the government through the central bank guarantees the shortfall in assets of SMEs required to secure loans from the commercial banks.

Still in other countries, the government or NGOs provide direct funding to SMEs outside of the banking system, while in other cases, private institutions serve this market segment.

So the key question is, who should be the lead promoter of SMEs in our countries?

The third issue I want to touch on is the lack of data on the activities of the SMEs sector.

As I alluded to earlier, SMEs are important drivers of economic growth and the backbone of national economies. Unfortunately, we have little or incomplete information on this market segment. We don’t have historical data on SME numbers, their businesses activities and investments, total workforce, and how they finance their operations.

I hope we can, as a group, address this matter during the conference as well.

Before, I conclude, let me briefly highlight some of the things we are doing in the Solomon Islands. We have developed an MSME Policy and Strategy which was approved by Cabinet in 2012.

Implementation of this policy framework however, has been slow. Currently, the government is working on three areas:

  • Establishing an MSME Advisory and Support Service Centre within the Ministry of Commerce and Industries to provide technical and financial services to MSMEs in the country,
  • Established a credit guarantee scheme for MSMEs (both for start-ups and existing businesses);  and
  • Established an equity supplementation facility for agricultural   SME’s.

Furthermore, in our second National Financial Inclusion Strategy (NFIS2), which has been formulated and guided by the G20 principles for innovative financial inclusion, we have four thematic working groups. One of the working groups is known as the MSME Working Group. Besides, we have six objectives, which our NFIS2 strives to achieve. The MSME as a sector is detailed in objective number two (2) along with its KRAs.

Ladies and gentlemen, let me stop here. More details will be made available during the course of our discussion in the next two days.

Once again, let me warmly welcome you all to this conference and let us pledge our commitment to move forward and strengthen and broaden the MSME sector in our region.

Thank you very much.


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