Pacific Financial Inclusion Programme (PFIP)
Extending sustainable financial services to 80% of Pacific islanders who remain unbanked
FINANCIAL EXCLUSION IN THE PACIFIC
UNDP estimates that around 6.5 million Pacific islanders, representing 80 % of low income people living in urban, peri-urban and predominantly remote villages and islands scattered across an ocean area covering 1/3 of the world’s surface, do not have access to both formal and informal financial services. As a consequence, the majority of people who are excluded are not able to achieve their full economic potential and are denied the opportunities to attain a productive and dignified living.
The meager 20% coverage reflects both the formidable challenges that financial service providers face as well as the economic inefficiency of the infrastructure and systems providers use to deliver financial services. Traditional approaches to financial service delivery have been ineffective, largely because of inefficiencies in transport and communications infrastructure, payment system infrastructure, conventional financial institution models, service delivery models, and a general lack of understanding about the cash flows of rural households and producers.
Geographic isolation, demographic dispersion, limited income-generating opportunities, financial illiteracy and traditional socio-economic structures create formidable challenges for the delivery of financial services in PICs. The financial service access frontier 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. As a result, financial service providers, including commercial banks and microfinance initiatives, have struggled to find viable economies of scale outside of principal cities and rural population centres across the region.
THE REGIONAL POLICY ENVIRONMENT FOR PRO-POOR FINANCIAL SERVICES
At the Forum Economic Minister Meeting (FEMM) in 2004 Ministers considered the issue of microcredit. They noted success amongst microcredit schemes in the Pacific and endorsed their continued development. Pacific Islands Forum Secretariat (PIFS) was requested to work with others to develop a report on the success of microcredit schemes, including case studies. UNDP and PIFS prepared a regional study on Successful Microfinance in the Pacific: Achieving Financial Inclusion which introduced the concept of financial inclusion to FEMM 2006. The recommendations on priority actions to extend access to financial services for the majority of their populations were officially distributed to member countries.
In order to support member countries to identify key constraints and opportunities for overcoming financial exclusion, UNDP, UNCDF and EU/ACP Microfinance Programme conducted a Financial Services Sector Assessment of the 5 Pacific LDCs (Kiribati, Samoa, Solomon Islands, Tuvalu and Vanuatu) in 2007. This programme draws on the findings of the assessment as well as country-level research and extensive consultations with national and regional stakeholders in all the 15 Pacific island countries that will benefit from this programme.
HOW CAN THE PROGRAMME HELP
The Programme will be demand-driven and provide support to a broad range of stakeholders including policy makers, regulators, financial services providers and regional and international organisations brokering and managing knowledge on pro-poor financial services. The primary criteria for support is that it will lead to increasing efficiencies (in terms of lowering costs) and access by low income and rural people to sustainable financial services.
Programme support provided to stakeholders will entail an undertaking by partners to achieve measurable goals and to also contribute towards the implementation of the project.
THE TYPES OF SUPPORT MAY INCLUDE THE FOLLOWING:
The Pacific Financial Inclusion Programme (PFIP) is supported by the following donors:
FINANCIAL EXCLUSION IN THE PACIFIC
UNDP estimates that around 6.5 million Pacific islanders, representing 80 % of low income people living in urban, peri-urban and predominantly remote villages and islands scattered across an ocean area covering 1/3 of the world’s surface, do not have access to both formal and informal financial services. As a consequence, the majority of people who are excluded are not able to achieve their full economic potential and are denied the opportunities to attain a productive and dignified living.
The meager 20% coverage reflects both the formidable challenges that financial service providers face as well as the economic inefficiency of the infrastructure and systems providers use to deliver financial services. Traditional approaches to financial service delivery have been ineffective, largely because of inefficiencies in transport and communications infrastructure, payment system infrastructure, conventional financial institution models, service delivery models, and a general lack of understanding about the cash flows of rural households and producers.
Geographic isolation, demographic dispersion, limited income-generating opportunities, financial illiteracy and traditional socio-economic structures create formidable challenges for the delivery of financial services in PICs. The financial service access frontier 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. As a result, financial service providers, including commercial banks and microfinance initiatives, have struggled to find viable economies of scale outside of principal cities and rural population centres across the region.
THE REGIONAL POLICY ENVIRONMENT FOR PRO-POOR FINANCIAL SERVICES
At the Forum Economic Minister Meeting (FEMM) in 2004 Ministers considered the issue of microcredit. They noted success amongst microcredit schemes in the Pacific and endorsed their continued development. Pacific Islands Forum Secretariat (PIFS) was requested to work with others to develop a report on the success of microcredit schemes, including case studies. UNDP and PIFS prepared a regional study on Successful Microfinance in the Pacific: Achieving Financial Inclusion which introduced the concept of financial inclusion to FEMM 2006. The recommendations on priority actions to extend access to financial services for the majority of their populations were officially distributed to member countries.
In order to support member countries to identify key constraints and opportunities for overcoming financial exclusion, UNDP, UNCDF and EU/ACP Microfinance Programme conducted a Financial Services Sector Assessment of the 5 Pacific LDCs (Kiribati, Samoa, Solomon Islands, Tuvalu and Vanuatu) in 2007. This programme draws on the findings of the assessment as well as country-level research and extensive consultations with national and regional stakeholders in all the 15 Pacific island countries that will benefit from this programme.
HOW CAN THE PROGRAMME HELP
The Programme will be demand-driven and provide support to a broad range of stakeholders including policy makers, regulators, financial services providers and regional and international organisations brokering and managing knowledge on pro-poor financial services. The primary criteria for support is that it will lead to increasing efficiencies (in terms of lowering costs) and access by low income and rural people to sustainable financial services.
Programme support provided to stakeholders will entail an undertaking by partners to achieve measurable goals and to also contribute towards the implementation of the project.
THE TYPES OF SUPPORT MAY INCLUDE THE FOLLOWING:
- Research into lower segment markets – including rural household and supply chain cash flow studies.
- Specialized technical experts to work on specific pro-poor financial service development
- Advocacy and sensitization with policy makers and regulators
- Facilitation of partnerships between financial services providers
- Facilitating access to and sharing of knowledge and information
- Capacity development of financial service providers and regulatory bodies
- Study visits, workshops and learning events
- Design financial literacy programmes to support implementation of new financial services and products
- Micro-capital grants to financial services providers to develop and implement a pro-poor financial service
The Pacific Financial Inclusion Programme (PFIP) is supported by the following donors:
