4th PIRI High-Level Forum – Opening Remarks from AFI Deputy Executive Director, Norbert Mumba

4th Pacific Islands Regional Initiatives (PIRI) High-Level Forum,
Wednesday, 6 June, 2018
Apia, Samoa

Opening Remarks by Norbert Mumba, Deputy Executive Director, AFI

Honorable Mr. Sili Epa Tuioti, Minister of Finance, Samoa,

Mr. Simeon Athy, Governor, Reserve Bank of Vanuatu and Pacific Islands Regional Initiative Chairman,

Mrs. Atalina Maiava, Governor, Central Bank of Samoa and host of the 4th PIRI High Level Forum,

Esteemed Governors of the PIRI Members,

Members of PIRI and Small Island States and Nations,

Distinguished partners, stakeholders and guests.

Ladies and gentlemen,

Talofa lava and a very good morning to you all.

Your Excellency, on behalf of the Alliance for Financial Inclusion, Board, Management and Members of the network, I would like to extend our warmest congratulations and best wishes to the government and people of Samoa on the occasion of its 56th anniversary of independence.  May I wish you and the people of your country continued success, prosperity and peace.

It is my great pleasure this morning to welcome you all to the 4th Pacific Islands Regional Initiatives (PIRI) High Level Forum, in the beautiful city of Apia, Samoa, the land of pristine beaches. I also just came to know that the word “Pacific” means “peaceful”, coming from the Latin “pace” from Ferdinand Magellan in 1521 who called these waters “mar pacifico” which means peaceful sea.

Ladies and gentlemen,

Allow me to express my utmost gratitude to Mrs. Atalina Maiava, Governor, Central Bank of Samoa and her wonderful team at the Central Bank of Samoa for their endless support and excellent arrangements in hosting and organizing of this meeting.

I would like to acknowledge the presence of our partners; VISA, Asian Development Bank (ADB), Pacific Financial Inclusion Programme (PFIP),  Regional Office for Asia and the Pacific for International Monetary Fund (IMF), United Nations Economic and Social Commission for Asia and the Pacific and University of New South Wales (UNSW) for their continuous engagements and technical supports to this meeting and the Pacific region.

The Pacific is spread across a unique and diverse region made up of hundreds of islands and scattered over an area equivalent to 15% of the globe’s surface. Its rugged geography however, limits population density that is dispersed among many small islands, also restricts physical and digital infrastructure for access of financial services. For example, we notice that that the average mobile SIM penetration in the seven PIRI countries is 61% – limiting the scope of digital financial inclusion. Certainly, along with enabling regulatory environment, infrastructure also plays an important role in achieving financial inclusion and economic growth in Pacific economies.

Ladies and gentlemen,

The theme of this year’s high-level forum “Fintech for Financial Inclusion in the Pacific Islands” is a timely one to explore. With the challenges that the region and other small islands face, the disruption in financial technology (Fintech) offers great opportunities to address these challenges. While leveraging on digital financial services and Fintech for financial inclusion goals come with new risks such as unfair practices, risks related to big data and increased systemic vulnerabilities due to cybersecurity, we believe that if these providers are effectively supervised and provided an enabling environment, it will strengthen both financial stability and financial integrity. Various countries around the world are taking a closer look at their financial regulatory guidelines to see how they can be adjusted to accommodate the Fintech revolution.

For the issue of de-risking, we see that the Pacific continues to bear the brunt. The cost of sending money continues to be among the highest in the world. Formal flow of remittances is going down (and certainly, informal flows are increasing). I commend the PIRI member countries for being vociferous in highlighting this issue at international level. I also urge the private sector partners and fintech companies to break the old, opaque and costly hegemonies and come up with alternative ways of sending money that are safe, convenient and cheap!

Ladies and gentlemen,

With strategic efforts concentrating on technology-led innovation, mainly via DFS and FinTech, the number of Pacific Islanders with access to finance has increased to around 1.8 million[1]. Certainly, there is many reasons to continue our focus on fintech and digital financial services. I highlight four key challenges that the Pacific/ small islands states face and how fintech can address them:

Extending Access to Financial Services: Technology can break geographical barriers. It enables delivery of financial services at rapid scale and speed, thus extending access to payments and financial services to underserved segments in a relatively short period of time. For example, the latest findex[2] data shows that ownership of mobile money accounts in Sub-Saharan Africa has increased from 12% in 2014 to 21% in 2018. Beyond Africa, in Bangladesh this number jumped from 3% in 2014 to 21% in 2017. Closer home, we see that in many pacific countries such as PNG, Tonga, Solomon Islands – there are more DFS agents than banks and ATMs put together. Clearly – an indicator of things to unfold in the Pacific.

Enhancing Usage and Quality of Financial Services: The days of traditional financial institutions being the sole providers of everything are over. Innovations in technology is leading to market place fragmentation with fintech companies, start-ups offering specialised products/services. Further – technological developments such as cloud computing, application programming interface (API), digital identity enables complex partnerships and interoperable ecosystems. These ecosystems help DFS providers moving beyond basic cash-in/out services to value added financial services such as savings, credit, micro-insurance and cross border remittances. These innovations are already unfolding in the Pacific with products such as remittance linked savings, insurance for disaster resilience, micro-pensions etc[3]. I am sure these innovations, especially from the context of small islands and nations, will be discussed during the PIRI proceedings.

Strengthening Financial Education & Literacy Initiatives: Let me commend the extraordinary efforts put in by members in the Pacific in coming up with financial education initiatives.  Six of the seven PIRI members (Fiji, SI, Samoa, PNG, Timor Leste & Vanuatu) have national financial inclusion strategies and all of them have financial literacy as a core component. Indeed, financial literacy is of paramount importance especially as unserved/underserved segments of the society are new to technology enabled financial services. It is in this context that digital platforms can be leveraged to offer financial literacy initiatives. Digital financial literacy tools/platforms are rapidly scalable, more affordable and provide better use experience.  These tools help the hard to reach people develop financial literacy skills to manage their finances and develop financial resilience. For example, ANZ’s financial education efforts in the Pacific have led to marked increase in savings behaviour of up to 50%[4]!

Broadening New Avenues of Financings for MSMEs: MSMEs are the backbone of a country’s economy and employment. The contributions of MSMEs cut across all sectors mainly in the areas of tourism, fisheries and agri-value chain such as cocoa and coconut that contribute to the growth and livelihood of Pacific communities. However, financing gap persists and impedes the development of MSMEs. PIRI members recognise this and it is heartening to note that many of them have SME finance policies to reduce the gap. Given this situation, lack of collateral, business and financial records – there is a need for a financial based on alternate credit infrastructure/assessment model. With the emergence of fintech platforms, Bigdata and Industry Revolution 4.0 enable the use of soft data such as mobile phone usage, digital payment records and psychometric data to assess credit-worthiness to offer “remote, quick and automated” credit to individuals and MSMEs. Fintech platform also opens new avenues for different types of financing to the MSMEs. These models are proliferating in many parts of East Asia and Sub-Saharan Africa and can hold promise in the Pacific also.

Going forward, some suggestions to the leaders/policy makers for the 4th Pacific Islands Regional Initiative (PIRI) High-Level Forum and beyond:

Enabling Policy and Infrastructure: Innovative technology based financial services demand a relook at the existing regulatory structures. There is a need to come up with regulatory innovations, tools and approaches to improve supervision and oversight. Further, fixing regulations is only half job done. Frugal innovations to create physical, digital and financial infrastructure is the need of the hour.

Collaboration and Partnerships: Technology is borderless, but our jurisdictions have borders. So – as a first step, we regulators need to collaborate at domestic, regional and global level. Further, we need to proactively reach out to the industry, academia, researchers, innovators and technologists to co-create solutions to advance financial inclusion. I am confident that PIRI is one such platform for collaboration. AFI’s Public Private Dialogue (PPD) also seeks to bring regulators and private players to balance innovations and oversight. As the proverb goes – “If you want to go fast, go alone. If you want to go far, go together”.

Measuring the Progress:  As regulators, we need to recognise the importance of evidence-based policymaking and the critical role of data in the policymaking process, from design and implementation to monitoring and evaluation. AFI’s Maya Declaration Commitments also enables AFI member institutions to make concrete financial inclusion targets, implement in-country policy changes, and regularly share progress updates.

Ladies and gentlemen,

In 2017, 94% of financial regulators and policymakers in the AFI network signed the Sharm el-Sheikh Accord, the first agreement of its kind which stated the intention of the AFI members to address climate change by sharing ideas and knowledge on mainstreaming climate change considerations into financial inclusion policy and regulation.

As we consider the new and innovative approaches to financial inclusion: fintech, digital financial systems and emerging technological solutions, we must not forget the emerging risks, climate risks and impacts – felt especially in small islands and the Pacific – which may threaten the great gains we have made in financial inclusion as an organisation in the past 10 years, and within our own countries.

The Strategy for the Development of Samoa 2016/7 – 2019/20 is guided by the theme “Accelerating Sustainable Development and Broadening Opportunities for All”. This is very much in line with AFI’s approach to the Financial Inclusion and Climate Change workstream.

Access to tailor-made, affordable financial products and services will enable these populations, particularly those marginalised or most vulnerable, to build adaptive capacity by being empowered to anticipants and absorb sudden climate change-related impacts, or slow-onset disasters like sea level rise. Regulators and policymakers will need to think outside their usual disciplines in addressing the on-coming threats of climate change. Collaboration between a wider variety of stakeholders (i.e. Central Banks and Ministries of Environment) is necessary to assess and estimate the potential climate risk to households, communities, small business and microfinance institutions.

We are proud to announce a very recent, positive development in this area. This month marks the launch of AFI’s Financial Inclusion and Climate Change Policy Peer Learning Initiative (FICC) which is part of the International Climate Initiative (IKI), supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).

Conclusion

Allow me to conclude by urging regulators, service providers and all other stakeholders to focus not only on access but also on usage and quality of financial services. That – dear colleagues – is the path to true financial inclusion. Moving forward, the “Apia Action Plan” on fintech for financial inclusion in the Pacific which was endorsed by the Leaders at the Experts Group on Financial Inclusion (EGFIP) meeting held here yesterday, is great milestone that members of PIRI have taken forth in its workstream. Recognizing the importance of fintech, we will continue this theme in the next 10th GPF, in Sochi on innovation, inclusion and impact.

Thank you!