VANUATU NATIONAL FINANCIAL INCLUSION STRATEGY 2018 - 2023

RESERVE BANK OF VANUATU 4. 4V.isiVoins,ioMn,isMsioisnsioanndanOdbjOecbtjievcetsives

4.1 4.1Vision Vision CreateCreate an enabling an enabling environment environment for enrichingfor enriching the livelihoodsthe livelihoods of the of peoplethe people and and MSMEs MSMEs in Vanuatu in Vanuatu through through inclusiveinclusiveinclusiveinclusive financialfinancial financialfinancial services services servicesservices and and consumer andconsumerand consumerconsumer empowermentempowerment empowermentempowerment andand protection.andprotection.and protection.protection.

4.2 4.2Mission Mission

By 2023,By 2023,  Ensure Ensurean additionalan additional 54,000 54,000 (total (total of 130,000) of 130,000) adults adultswill bewill active be active users users of formal of formal or semi or semi-formal-formal financialfinancial services, services, of which of which 50% 50% will bewill women. be women.  Ensure Ensure 40% 40%of the of financiallythe financially included included will bewill active be active users. ususers.5ers. 5  Ensure Ensure a suite a suite of MSME of MSME business business financing financing products products are available, are available, which which are tailored are tailored also alsoto the to needsthe needs of businessesof businesses led by led women by women and youthand youth

4.34.3 Objectives Objectives 4.3.14.3.1To facilitateTo facilitate an enabling an enabling regulatory regulatory and andsupervisory supervisory environment environment for providersfor providers and andusers users of financial of financial services.services. 4.3.24.3.2To enableTo enable the peoplethe people and MSMEsand MSMEs in Vanuatu in Vanuatu to have to have access access to a torange a range of appropriate of appropriate and sustainableand sustainable financialfinancial services services at an at affordable an affordable cost. cost. 4.3.34.3.3To fosterTo foster financial financial inclusion inclusion deepening deepening and andresilience resilience via increasedvia increased and andregular regular usage usage of financial of financial services.services. 4.3.44.3.4To strengthenTo strengthen the financialthe financial competencies competencies of the of peoplethe people of Vanuatu of Vanuatu to enable to enable better better informed informed financial financial decisiondecision making making together together with with the optimalthe optimal use ofuse financial of financial services services to better to better their their livelihoods. livelihoods. 4.3.54.3.5 To facilitate To facilitate consumer consumer protection protection of consumers of consumers of financial of financial services services and and for MSME for MSME finance finance 4.3.64.3.6To useTo usea multi a multi-stakeholder-stakeholder and andmulti multi-sector-sector approach approach to enable to enable a concerted a concerted and andcomprehensive comprehensive nationalnational approach approach to addressing to addressing financial financial exclusion. exclusion. 4.3.74.3.7To promoteTo promote the developmentthe development in the in MSMEthe MSME sector sector to improve to improve financial financial users’ users’ income income

5 Active55 Active users users conduct conduct at least at leastone transactionone transaction within within a 90 daya 90 period. day period. 22 | 22Page| Page ForewordForeword

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Women fromisis lower lower consultthe ownership strategiesation thanthan wereamongamong amounts menmen to .around. withthose relevant with key the financial Financial inclusion Inclusion stakeholders, Taskforce including (FIT). the Government and those within the private sector, Women20Womendeveloped The percent strategy ownership ownershipfrom, providesindicating consultation amountstheamounts a meanswit gaph relevant tototo from achievingaroundaround key the financial target20the20 vision percentpercentinclusion of of30 creating,stakeholders,, indicatingindicatingpercent an enablingunder including aa gapgap the environment the fromfromMaya Government thethe Declaration. thattargettarget and will leadofof 30Access30to to financial services provides and other agencies. 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Itsin goalsVanuatu. are to Its facilitate goals anare enabling to facilitate regulatory an enabling regulatorydeepening,enable a more strengthenand concertedsupervisory financial and environment, competenciescomprehensive ofenhance financialapproach access services to address and users, usage financial facilitate of financial exclusion.consumer services, prote It hasction fourfoster and key financial priority andII regulatorywouldwouldwould supervisory likelikelike and environment,tototo supervisory thankthankthank the the theenhance environment, A AAlliancelliancelliance access for for forenhanceand Financial FinancialFinancialusage access of inclusionfinancial inclusion inclusionand usageservices, (A (( FAAofIF)F IIforfinancialfoster)) forfor providing financialprovidingproviding services, deepening, grant foster grantgrant funding financial fundingfunding which whichwhich enabled deepening,enableareas that a more are strengthen concertedcritical to financial andachieving comprehensive competencies progress approach in the of financialfinancial to address inclusion services financial agendausers, exclusion. facilitate in Vanuatu. It has consumer four key priority prote ction and strengthenenabledtheenableddeepening,areas survey that financial thearethe strengthen tocritical surveysurvey competenciesbe to sufinancial achievingtotoccessfully bebe of financialcompetenciessuccessfullys progressuccessfully carried services in the of carriedcarriedusers, financialout.financial facilitateI also inclusion out.out.services consumer thankII alsoalso agendausers, thank thanktheprotection facilitate in Vanuatu.survey thethe andconsumer surveysurvey enableTechnical aproteTechnicalTechnical more ctionCommittee and CommitteeCommittee which was concertedenable and a more comprehensive concerted approach and comprehensive to address financial approach exclusion. to It hasaddress four key financial priority areas exclusion. that are criticalIt has four key priority whichresponsiblewhichenable waswasa more responsibleresponsible for concerted every and aspectforfor comprehensive everyevery of theaspectaspect surveyapproach ofof thethe –to developing addresssurveysurvey financial –– developingdeveloping survey exclusion. instrument surveyItsurvey has four sinstrumentinstrument, keysampl prioritye design,ss ,, samplsampl piloting,ee to achievingareasI am grateful that progress are for critical in the the financialcommitmentto achieving inclusion progress of agenda the sta in keholders Vanuatu.the financial during inclusion the consultation agenda in Vanuatu. phase and look forward to the areasI am grateful that are for critical the commitmentto achieving progress of the sta inkeholders the financial during inclusion the consultation agenda in Vanuatu. phase and look forward to the design,fielddesign, survey, piloting,piloting, data fieldfield cleaning, survey,survey, assessment,datadata cleaning,cleaning, and assessment,assessment, for putting andand the forfor report puttingputting together. thethe reportreport I also together.together acknowledge. II role theythey will will play play in inthe the future future in thein theimplementation implementation of the of strategy. the strategy. Finally, Finally,I wish to I wishsincerely to sincerely thank the thank the I amalsocalsoIontributions am grateful acknowledge acknowledgegrateful for the forto commitment thethe cccommitment ontributionsontributionssurvey of the by stakeholders ofvarious toto the thethe sta during surveysurveystaffkeholders the and bybyconsultation during variousvariousDirectors the phase staffstaff consultation of and andtheand look Reserve forwardDirectorsDirectors phase to andtheBank ofof role lookthethe of Reserve forwardReserveVanuatu. to BankBank the Finally, I theIReserve yam will grateful play Bank Bank in the forof offuture Vanuatu the Vanuatu commitmentin the Technical implementationTechnical ofCommittee the Committee sta of keholdersthe on strategy. Financial on Financialduring Finally, Inclusion the I wishInclusion consultation and to sincerely the and Pacif phasethe thankic FinancialPacif theand icReserve look Financial Inclusion forward Bank Inclusion Program to the Program ofofferofrole VanVanuatu. they auatu. specialwill playFFinally,inally, inthank the II offer offerfutureyou aainto specialspecial theall implementation who thankthank welcomed youyou oftoto the allallthe strategy.whowho MSME welcomedwelcomed Finally, Survey I wishthethe team MSMEtoMSME sincerely whole SuSurveyrvey -thankheartedly teamteam the and of Vanuaturole(PFIP), they which Technicalwhich will playis is itselfCommittee itselfin the backed backedfuture on Financialby in by thethe the UNCDF,Inclusionimplementation UNCDF, UNDPand theUNDP and Pacific of thetheand Financial strategy.Alliance the InclusionAlliance Finally,for Financial Program forI wish Financial Inclusion to(PFIP), sincerely which Inclusion (AFI) isthank for (AFI)the for the itselfwholeparticipatedwholeReservedevelopment backed--heartedlyheartedly Bank Bank by ofthe of toaVanuatu comprehensiveaVanuatuUNC makecomprehensive andandDF, Technical UNDP participated participatedtheTechnical surveyand financial Committee financialthe Committee Alliancea inclusion tosuccess.to inclusion on makemake forFinancial on strategy Financial Financial thethe strategy Inclusion whichsurveysurvey Inclusion Inclusion which will and aa form (AFI) success.success. thewill and the Paciffor form keythetheic the Financialpolicy Pacifdevelopment keyic strategy Financialpolicy Inclusion of instrategy improvinga Inclusion Program in improving Program comprehensive(PFIP), whichwhich financial is is itself itself inclusion backed backed strategy by bythe which theUNCDF, UNCDF,will formUNDP theUNDP and key policytheand Alliance strategythe Alliance forin improving Financial for Financial the Inclusion livelihoods Inclusion (AFI) of for (AFI)the for the GovernorGoGtheovernorvernor livlivelihoodselihoods SimeonSimeon of of the the ni A-AniVanuatuthythy-Vanuatu in the in theyears years ahead. ahead. thedevelopment ni-Vanuatu in ofthe of a yearscomprehensivea comprehensive ahead. financial financial inclusion inclusion strategy strategy which which will form will the form key thepolicy key strategy policy instrategy improving in improving the livelihoods of the ni-Vanuatu in the years ahead. the livelihoods of the ni-Vanuatu in the years ahead.

Simeon Malachi Athy Simeon Malachi Athy Governor Simeon Governor Malachi Athy GoveReserveReserveSimeonReservernor MalachiBank BankBank of VanuatuAthy ofof VanuatuVanuatu SimeonReserve MalachiBank of VanuatuAthy ReserveGovernorChairperson Bank of Vanuatu –Financial Inclusion Taskforce ChairpersoGovernorChairpersonn –Financial –Financial Inclusion Taskforce Inclusion Taskforce Reserve Bank of Vanuatu iiiiiii ChairpersonReserve Bank –Financial of Vanuatu Inclusion Taskforce 1 | Page Chairperson –Financial Inclusion Taskforce 1 | Page ii 1 | Page 1 | Page 1 | Page

Reserve Bank of Vanuatu Financial Inclusion Commitments

Maya Declaration

Maya commitment made in 2012/Updated at 2015 AFI Global Policy Forum

Thematic Area Commitment – Concrete Target Current Status 1 National Financial Council of Ministers to endorse the newly established Completed* Inclusion Strategy National Financial Inclusion Strategy and the National Financial Inclusion Taskforce before quarter 1 of 2013. 2 Data and Conduct survey on financial access and demand for Completed June 2016 Measurement financial services by end of 2014. and launched 2017. 3 Consumer Review legislation and regulation on use and delivery Being pursued at the Empowerment, of financial services to strengthen client protection by regional level via PIRI. Consumer Protection end of 2014. A draft regulation is in & Market Conduct place for PIRI members. Further, the draft Vanuatu National Competition Policy (CP) is currently under consultation. The CP for the banking & insurance industries is the 9th priority area within. 4 Financial Literacy Incorporate financial education in the core school FinEd integrated within curriculum by 2013. Expected to be completed by Year 1-3 core 2016. curriculum. 5 Overarching National To enable the increased access and usage of basic Not yet achieved. Goal financial services like savings, micro-credit, micro- According to the insurance, remittances and a range of appropriate and Vanuatu 2016 Mini affordable finance to MSME businesses. Census report a total of 63,224 of the total The overall goal is to cover additional 76,000 adult population are unbanked Ni-Vanuatu (at least 38,000 to be women) banked, of which by December 2016, through a nationally coordinated 26,985 are women. effort, in partnership with a range of service providers Included in NFIS 2018- and relevant government institutions, offering a broad 2023. range of relevant and cost effective financial services. * Informed by Alliance for Financial Inclusion 2016 Maya Declaration Progress Report.

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Additional Maya commitments made at 2016 AFI Global Policy Forum

Thematic Area Commitment – Concrete Target Current Status 1 Financial inclusion of Put in place policies to support access for MSMEs, Included in NFIS 2018 - Women in MSME targeting 30% women. 2023 Finance 2 Consumer Protection Implement a Secured Transaction Act Completed 3 Consumer Protection Promote consumer protection and empowerment Included in NFIS 2018 - in MSME Finance specific to MSME finance 2023

Money Pacific Goals 2020

In 2009, the Reserve Bank of Vanuatu joined 7 Pacific central bank governors and endorsed the following Money Pacific 2020 regional goals, whilst making a commitment to lead action on building financial competency within individual countries.

2020 Money Pacific Goals

In each Pacific Island nation by 2020, through the combined actions of public and private sectors, our goals are:  All school children to receive financial education through core curricula.  All adults to have access to financial education.  Simple and transparent consumer protection to be in place.  To halve the number of households without access to basic financial services.

Maputo Accord

In 2015 the RBV made a commitment during the Alliance for Financial Inclusion Global Policy Forum held in Mozambique, to become a member of the AFI’s Small and Medium Enterprises Finance Working Group. The commitment included putting in place policies to support SMEs, the implementation of the Personal Properties Securities Act (Secured Transaction Act), review of legislations and regulations to strengthen client protection and empowerment, and market conduct in relation to the use and the delivery of financial services for SMEs.

Denarau Accord

At the 2016 Alliance for Financial Inclusion Global Policy Forum held in Fiji, the Reserve Bank of Vanuatu joined other countries in agreeing to work towards addressing the gender gap in financial inclusion.

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Table of Contents

LIST OF ACRONYMS AND ABBREVIATIONS USED ...... 6

ACKNOWLEDGEMENT ...... 8

EXECUTIVE SUMMARY ...... 9

FIGURES ...... 10

1. BACKGROUND ...... 11

2. GUIDING PRINCIPLES ...... 12

3. FINANCIAL INCLUSION IN VANUATU ...... 13

3.1 FINANCIAL INCLUSION STRAND ...... 13 3.2 SAVINGS ...... 14 3.3 CREDIT ...... 14 3.4 BANK ACCOUNT USAGE ...... 14 3.5 INSURANCE ...... 15 3.6 REMITTANCES ...... 16 3.8 FINANCIAL INCLUSION STRAND FOR MSME FINANCING ...... 18 3.9 MSME: ACCESS TO CREDIT FOR BUSINESS START-UP ...... 19 3.10 MSME: ACCESS TO CREDIT FOR BUSINESS FINANCING ...... 19 3.11 MSME: APPLICATION FOR AND USE OF CREDIT ...... 20 3.12 MSME: USAGE OF CREDIT FOR BUSINESS FINANCING ...... 20 3.13 MSME: PAYMENT INSTRUMENTS ...... 21 3.14 MSME: INTERNET BANKING ...... 21 3.16 GENDER IN BUSINESS ...... 22

4. VISION, MISSION AND OBJECTIVES ...... 23

4.1 VISION ...... 23 4.2 MISSION ...... 23 4.3 OBJECTIVES ...... 23

5. FINANCIAL INCLUSION STRATEGY 2018 – 2023 ...... 24

5.1 STRATEGIC GOAL 1 – CREATE AN ENABLING POLICY ENVIRONMENT AND FINANCIAL INFRASTRUCTURE ...... 24 5.2 STRATEGIC GOAL 2 – PROMOTE AND FOSTER INCLUSIVE PRODUCTS, SERVICES AND CHANNELS ...... 25 5.3 STRATEGIC GOAL 3 - MICRO, SMALL AND MEDIUM ENTERPRISE FINANCING ...... 25 5.4 STRATEGIC GOAL 4 - FINANCIAL LITERACY AND CONSUMER EMPOWERMENT ...... 26 5.5 STRATEGIC GOALS AND ACTION PLAN ...... 27 GOAL 1: CREATE AN ENABLING POLICY ENVIRONMENT AND FINANCIAL INFRASTRUCTURE ...... 27 GOAL 2: PROMOTE AND FOSTER INCLUSIVE PRODUCTS, SERVICES AND CHANNELS ...... 29

4 | P a g e GOAL 3: MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT ...... 31 GOAL 4 - FINANCIAL LITERACY AND CONSUMER EMPOWERMENT ...... 34

6. STAKEHOLDERS ...... 35

7. COORDINATION, MONITORING AND EVALUATION ...... 37

7.1 COORDINATION ...... 37 7.2 MONITORING AND EVALUATION FRAMEWORK ...... 39

ANNEX 1: KEY EVALUATION INDICATORS ...... 40

1.1 ACCESS CHANNELS BY URBAN AND RURAL ...... 40 1.2 ACCESS CHANNELS BY GENDER ...... 40 1.3 USAGE ACCOUNTS AND CHANNELS ...... 40

ANNEX 2: NFIC, FIT AND WORKING GROUP REPRESENTATIVES ...... 41

2.1 NFIC MEMBERS ...... 41 2.2 FIT MEMBERS ...... 41 2.3 REGULATORY WORKING GROUP ...... 41 2.4 INCLUSIVE PRODUCTS AND SERVICES WORKING GROUP ...... 41 2.5 MSME FINANCE WORKING GROUP ...... 42 2.6 FINANCIAL LITERACY AND CONSUMER EMPOWERMENT WORKING GROUP ...... 42

5 | P a g e List of Acronyms and Abbreviations Used

Acronym ADB Asian Development Bank AFI Alliance for Financial Inclusion AML/CFT Anti-Money Laundering/Combating the Financing of Terrorism ANZ Australia and New Zealand Bank Corporation ATM Automated Teller Machine (or) Automatic Teller Machine BAV Bankers Association Vanuatu BB Branchless Banking BRED Bred (Vanuatu) Ltd BSP Bank of South Pacific BVL Bred (Vanuatu) Limited DARD Department of Agriculture & Rural Development DLA Department of Local Authorities DMT Domestic Money Transfer DFAT Department of Foreign Affairs & Trade, Australian Aid Program DFS Digital Financial Services DSS Demand Side Survey EFTPOS Electronic Funds Transfer at Point of Sale FIT Financial Inclusion Taskforce FSPs Financial Service Providers G2P Government-to-person GDP Gross Domestic Product IFC International Finance Corporation KYC Know Your Customer MALFFB Ministry of Agriculture, Livestock , Forestry, Fisheries and Biosecurity MFAT New Zealand Government’s Ministry for Foreign Affairs and Trade MFEM Ministry of Finance and Economic Management MFI Microfinance Institution MFS Mobile Financial Services MJCS Ministry of Justice and Community Services MM Mobile Money MNO Mobile Network Operator MOET Ministry of Education and Training MFAICET Ministry of Foreign Affairs, International Cooperation and External Trade MSMEs Micro, Small and Medium Enterprises MTTICNVB Ministry of Trade, Tourism, Industry, Commerce and Ni-Vanuatu Business NBV National Bank of Vanuatu NFIS National Financial Inclusion Strategy NFIC National Financial Inclusion Council

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NGO Non-Government Organisation NTDC National Trade Development Committee NZAID New Zealand Aid Programme OGCIO Office of the Government Chief Information Officer ORCBDS Office of the Registrar of Cooperatives and Business Development Services PIRI Pacific Island Regional Initiative P2G Person-to-Government P2P Person to Person PFIP Pacific Financial Inclusion Programme PMO Prime Minister’s Office RBV Reserve Bank of Vanuatu RTC Rural Training Centres SDGs Sustainable Development Goals TRBR Telecommunications, Radio communications and Broadcasting Regulator TVET Technical and Vocational Education and Training SMS Short Message Service URA Utilities Regulatory Authority UNCDF United Nations Capital Development Fund VCCI Vanuatu Chamber of Commerce and Industry VFIU Vanuatu Financial Intelligence Unit VFSC Vanuatu Financial Services Commission VNPF Vanuatu National Provident Fund VNSO Vanuatu National Statistics Office VSP Vanuatu Skill Partnership VUV Vanuatu Vatu VQA Vanuatu Qualification Authority

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Acknowledgement

The Reserve Bank of Vanuatu (RBV) acknowledges and thanks the valuable contribution of all stakeholders, and development partners for contributing to the national financial inclusion strategy for Vanuatu. We wish to acknowledge the contribution of the Pacific Financial Inclusion Programme (PFIP) during stakeholder consultations carried out in 2017 and in drafting this document.

The Reserve Bank of Vanuatu also wishes to make mention the Alliance for Financial Inclusion (AFI), Bankable Frontier Associates (BFA), the Government of Vanuatu through the Vanuatu National Statistics Office (VNSO) for their contributions to the Demand Side Survey (DSS) and the Micro, Small and Medium-sized Enterprises (MSME) survey.

Also the Bank wishes to thank our stakeholders for their feedback at the consultation period and consultation workshop, as well as the immense contributions from the members of the Technical Committee on Financial Inclusion at the Reserve Bank of Vanuatu, the Governor and Deputy Governor of the Reserve Bank of Vanuatu for their commitment towards this strategy document.

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Executive Summary

Financial Inclusion or Inclusive Financing is an initiative to deliver financial services such as deposits and savings accounts, credit, payment channels and insurance services, affordable and accessible to the disadvantaged, low income earners, the underserved or unserved segments of the society. Financial Inclusion is now widely accepted as an effective strategy for equitable economic growth, through which low income earners can be economically empowered and can improve their standard of living.

Financial Inclusion has become an important policy and development agenda for many developing countries including Vanuatu. Vanuatu is amongst the many developing and emerging countries globally that have made measurable commitments under the AFI’s Maya Declaration to achieve financial inclusion.

The Vanuatu National Financial Inclusion Strategy (NFIS) 2018 - 2023 presents the medium-term road map to drive financial inclusion across the country. This five year strategic plan is linked to Pillar 3 of the Vanuatu Government’s National Sustainable Development Plan 2016-2030. Pillar 3 seeks to ensure a stable economy through sustainable and equitable growth and has nine main objectives, the latter two being “ECO. 1.8 - Ensure financial sector stability and make financial services affordable and accessible for all through pursuing financial inclusion strategies. ECO 1.9 Promote financial literacy and consumer empowerment.”

In addition, the NFIS is further informed by the work of the Pacific Islands Regional Initiative (PIRI) in the region, together with the recently launched Vanuatu Financial Services Demand Side Survey on Financial Inclusion and the MSME Finance survey.

The NFIS has been developed after a series of consultations with key financial inclusion stakeholders across the private and public sectors and includes a series of structured consultations with civil society, non-governmental organisations and development partners. These consultations have been jointly facilitated by the Reserve Bank of Vanuatu and the Pacific Financial Inclusion Programme, including consultations prior to, during and post the preparation of the NFIS.

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Figures

No. Title 1a Financial Inclusion Strands 1b Financial Inclusion Strands Table 2 Savings by source and value (VT) 3 Credit 4 Bank account usage 5 Insurance 6 Remittances 7 Financial Inclusion in PIRI member countries 8 Number of commercial banks branches 9 Number of ATMs 10 Gender access to financial services in PIRI member countries 11 Financial Inclusion Strands for MSME Financing 12 MSME: Access to credit for Business Start-ups 13 MSME: Access to Credit for business financing 14 MSME: Use of Credit 15 Use of credit for business financing 16 Mode of payments for MSME 17 MSME: Internet Banking 18 MSME: Insurance 19 Gender in Business 20 Diagrammatic framework of the 4 strategic goals 21 Key financial inclusion stakeholders 22 Structure of the National Financial Inclusion Council 23 Indicators – Access, Usage, Quality and Financial Literacy 24 Key Evaluation Indicators

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1. Background

Financial inclusion is defined as creating an enabling environment whereby all adults, households and micro, small and medium enterprises (MSMEs) in Vanuatu, both have access to and use affordable and appropriate formal financial services to improve their lives. These financial services are complemented by financial literacy and consumer empowerment & protection.

Being part of the formal financial system, helps individuals to improve their welfare by:  Safeguarding savings, which can help individuals, households and MSMEs manage irregular cash flow, smooth consumption and build working capital;  Conducting day-to-day transactions effectively and efficiently, including making payment for basic needs, sending and receiving money;  Mitigating shocks and managing expenses related to unexpected events such as medical emergencies or natural disasters;  Planning and paying for recurring expenses, such as utilities and school fees; and  Financing small businesses or microenterprises by helping owners invest in assets and grow their businesses.1

The RBV is committed to and has taken a strategic lead in driving financial inclusion in Vanuatu. The Financial Inclusion journey began with a National Financial Inclusion Workshop held in early 2012. The workshop gathered together stakeholders from the public and private sector, civil society groups, donor agencies and development partners to take stock, consult and strategize on a way forward for the development of financial inclusion in Vanuatu.

In late 2012, the RBV took a step further and joined other countries to make global measurable commitment to the Maya Declaration at the 4th AFI Global Policy Forum (GPF) in Cape Town, South Africa. The four main areas of focus were: (1) national financial inclusion strategy; (2) data and measurement; (3) consumer empowerment, protection and market conduct; and (4) accessible and appropriate financial literacy and education.

To date, significant achievements have been made to most of the above targets. These included: the integration of financial education (FinED) into the school curriculum at primary level (years 1 – 3); the issuance of guidelines to commercial banks for reporting of data on access and usage of financial services; and public awareness and community outreach through a variety of initiatives offered by various institutions including the RBV.

In spite of these achievements, there still remains a lot to be done to ensure more ni-Vanuatu are financially included.

1 CGAP http://www.cgap.org/about/faq/what-financial-inclusion-and-why-it-important

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2. Guiding Principles

The NFIS has its foundations in the guiding principles for innovative financial inclusion established by the G20 Financial Inclusion Experts Group. These principles are built on the experiences and lessons learned from policymakers across the world, including leaders from developing countries.

1. Leadership: Cultivate a broad-based government commitment to financial inclusion to help alleviate poverty.

2. Diversity: Implement policy approaches that promote competition and market-based incentives for delivery of sustainable and affordable services, as well as a diversity of service providers.

3. Innovation: Promote technological and institutional innovation as a means to expand financial system access and usage, including by addressing infrastructure weaknesses.

4. Protection: Encourage a comprehensive approach to consumer protection that recognizes the roles of government, providers and consumers.

5. Empowerment: Develop financial literacy and financial capability.

6. Cooperation: Create an institutional environment with clear lines of accountability and co-ordination within government, and encourage partnerships and direct consultation across a range of stakeholders.

7. Knowledge: Utilize improved data to make evidence-based policy, measure progress, and consider an incremental “test and learn” approach acceptable to both regulators and service providers.

8. Proportionality: Build a policy and regulatory framework that is proportionate with the risks and benefits involved in such innovative products and services and is based on an understanding of the gaps and barriers in existing regulation.

9. Framework: Consider the following in the regulatory framework, reflecting international standards, national circumstances and support for a competitive landscape: an appropriate, flexible, risk-based Anti- Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime; conditions for the use of agents as a customer interface; a clear regulatory regime for electronically stored value; and market-based incentives to achieve the long-term goal of broad interoperability and interconnection.

These principles are a reflection of the conditions conducive to spurring innovation for financial inclusion while protecting financial stability and consumers. They are not a rigid set of requirements but are designed to help guide policymakers in the decision making process. They are flexible enough so they can be adapted to different country contexts.

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3. Financial Inclusion in Vanuatu

Financial inclusion is a journey that begins with enrolment with a formal financial service provider and develops as the customer uses savings, credit, insurance, and payment services to manage his or her daily financial life.

In Vanuatu, 37% of adults aged 15 years and over have a commercial bank account, while another 10% access financial services from other formal providers such as credit unions, microfinance, insurance, mobile money, or finance companies. 32% of adults are excluded from both formal and informal financial services.

3.1 Financial inclusion strand

Figure 1a: Financial Inclusion Strands

37% 10% 21% 32%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Banked Other formal Informal only Excluded

Figure 1b: Financial Inclusion Strands

Financial inclusion strand Banked The respondent currently has a formal bank account.

Other formal Over the past 12 months, the respondent used the services of a credit union, microfinance institution (MFI)2, pension, investments (stocks, bonds and others), insurance or owns a mobile money account. Informal only Over the past 12 months, the respondent has used a savings club or other non-regulated financial instrument, such as taking credit from a shop, moneylender, or hire purchase. Excluded Over the past 12 months, the respondent has not used any of the services mentioned for the other three categories, but may have borrowed from or lent to friends and family, saved money in the house, pawned goods, borrowed from an employer, saved with a money guard, or trusted person, etc. This category would include respondents who only use money transfer services, as well.

The excluded are more likely to be: • Lower income earners • Women • Earn income from agriculture • Rural

2VANWODS Microfinance, Inc. is the only MFI operating in Vanuatu. It is a registered NGO.

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3.2 Savings

According to the DSS report, 59% of ni-Vanuatu adults saved money in the past year, with women much more likely to be savers. Informal instruments are more commonly used for saving than bank accounts, with 58% of adults saving a median of 10,000 Vatu (USD 94) at home. While just 21% of adults saved in the bank in the past year, they saved double that amount.

Figure 2: Savings by source and value (VT)

80% 25,000 20,000 ) 58% 60% 20,000 15,000 40% 10,000 10,000 10,000 9,000 21% 10,000 20% 10% 9% 8% 5,000 0% 0

Home Savings in the Family Savings clubs Moneyguard Amount saved (vatu Amount Percentwith source bank

Percent with source Amount saved (Median)

3.3 Credit

Forty six (46%) of adult DSS respondents took some form of loan in the past year, with informal instruments such as shop credit,(32%), moneylenders and family being the most commonly used. The largest credit amounts come from the bank, but only 6% of adults have taken credit from a bank in the past year.

Figure 3: Credit

80,000

40% 32% 60,000

40,000 20% 60,000 7% 7% 6% 4% 4% 20,000 1,000 2,000 3,000 3,500 1,500 0% 0 Percent with with source Percent Shop credit Moneylender Family Credit from the Employer Savings club

bank owed (vatu) Amount Percent with source Amount owed (Median)

3.4 Bank account usage

The DSS depicts that even among banked adults (37%), almost 40% are not saving or borrowing regularly with banks: 22% of banked adults reported no transactions in the past 12 months and a further 17% of banked adults only use their accounts for deposits or withdrawals. Women are significantly more likely to use their accounts to save than men.

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Figure 4: Bank account usage

22% 17% 45% 2% 13%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% No transactions Transactions only (withdrawals or deposits) Saved in the past 12 months Borrowed in the past 12 months Saved and borrowed in the past 12 months

3.5 Insurance

Almost half of adults in Vanuatu do not know what insurance is. The DSS finds that only 5% have some form of insurance coverage. The main reasons stated by respondents for not having insurance cover are that it is too expensive (over 1/3 of respondents), not knowing where or how to get it (over ¼ of respondents) and not knowing what it is or how it works (nearly 1/5th of respondents).

Figure 5: Insurance

5%

48%

47%

Have insurance Know what insurance is but don’t have it Don’t know what insurance is

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3.6 Remittances

Almost 50% of adults of the DSS respondents have either sent or received remittances in the past year. In Vanuatu, the majority of remittances are sent from within the country, with 55% of these sent through Western Union. Due to the timing of the survey, this result may have been influenced by inward remittance flows related with Cyclone Pam. Figure 6: Remittances

60% 49%

33% 40% 27% 20% 11% 0% Received remittances Sent remittances Send or receive Send and receive remittances remittances

3.7 Regional Comparison

In Vanuatu, the percentage of banked adults (37%) appears to be lower across other Pacific Island Regional Initiative (PIRI) member countries: Samoa (39%), Tonga (41%) and Fiji (60%), however higher than Solomon Islands (26%).

Figure 7: Financial Inclusion in Vanuatu compared to other PIRI-member countries

Fiji (2015) 60% 4% 9% 27%

Tonga (2016) 41% 11% 14% 34%

Samoa (2015) 39% 12% 15% 34%

Vanuatu (2016) 37% 10% 21% 32%

Solomon Islands (2015) 26% 8% 35% 31%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Banked Other formal Informal only Excluded

The data collected by the International Monetary Fund’s Financial Access Survey (FAS) helps to explain the variation between countries. Vanuatu has financial inclusion levels in the middle of other PIRI-member countries, and it is similarly situated according to supply-side measures like the penetration of commercial bank branches and ATMs.

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As Figure 8 shows, in 2014 Vanuatu had the second highest levels of commercial bank branches per 100,000 adults, behind Samoa, and the third highest number of ATMs per 100,000 adults, behind Fiji and Samoa.

Figure 8: Number of commercial banks branches per 100,000 adults

30 23 25 21 22 22 20 15 10 5 0 2011 2012 2013 2014 Vanuatu Tonga Samoa Fiji Solomon Islands

Source: IMF Financial Access Survey, available at http://fas.imf.org/

Figure 9: Number of ATMs per 100,000 adults

50

40 34 36 35 35

30

20

10

0 2011 2012 2013 2014 Vanuatu Tonga Samoa Fiji Solomon Islands

Source: IMF Financial Access Survey, available at http://fas.imf.org/

In Vanuatu, the percentage of adult females with bank accounts (32%) appears to be lower than across other Pacific Island Regional Initiative (PIRI) member countries: Fiji (52%) and Samoa (40%) though higher than Solomon Islands (20%).

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Figure 10: Percentage of female who have bank accounts

37% Account at a financial institution (% 15+) 60% 39% 26%

41% Account at a financial institution Male (%15 +) 68% 38% 32%

32% Account at a financial institution Female (% 15+) 52% 40% 20%

0% 20% 40% 60% 80%

Vanuatu Fiji Samoa Solomon Islands

Source: National Financial Inclusion strategies for Fiji, Samoa and Solomon Islands

3.8 Financial inclusion strand for MSME Financing3

Figure 11: Financial Inclusion Strand for MSME financing

Financial Inclusion Strand for MSME Financing MSMEs accessed commercial banks loans for starting their business Commercial banks Over the past 12 months the MSME have accessed and used loans and overdraft from commercial banks for financing their buiness Other financial Institutions MSME accessed and used loans from Credit Corperation Vanuatu, Vanuatu Agriculture Bank, Vanwoods, Apma Financial Investment Corporation (AFIC) and Other financial Institutions (OFI) for business startups During the past 12 months businesses have accessed and used credit from Credit Corporation Vanuatu, the Vanuatu agriculture bank, Vanwwods, AFIC and OFI for the financing of their business Informal savings Business used savings ( held at home) for buisness startups Over the last 12 months Buisiness used (savings) retained earnings from buisiness for financing their business Informal credit Business borrowed money lender family and friend for busines startups MSME borrowed from the informal sector to finance their buisness Excluded MSME did not access the above categories for business start-up, however may have used other sources such as sale of assets, Buisnesses who have enquired from financial institutions but were rejected. Over the past 12 months the businesses have not accessed and used any services provided by the said categories OR do not know of the services available or though it was not applicable to their business

3Due to resource and data limitations encountered during the MSME survey, the financial inclusion strand for MSME finance is a summary of the findings and may not be used as a baseline indicator. These indicators are subject to improvement in the next MSME survey.

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The excluded are more likely to be: • Seasonal workers • Agri- businesses • Irregular income earners

3.9 MSME: Access to credit for business start-up

Seventy seven (77) percent of MSMEs in Vanuatu used informal savings for business start-ups, followed by 10 percent borrowed from commercial banks, 8 percent use other sources not specified in the survey, while 2 percent used informal credit and loan from other financial institutions respectively.

Figure 12: Access to credit for business start-ups 2 2 8 10 77

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other financial Institutions Informal credit Excluded Commercial banks Informal Savings

3.10 MSME: Access to credit for business financing

Sixteen (16) percent of MSMEs applied for loans from commercial banks during the past twelve months. Forty two (42) percent did not apply for other reasons and 42 percent were excluded. Similarly, only 2 percent of MSMEs applied for loans from other financial institutions, 32 percent did not apply for other reasons and 66 percent were excluded.

Figure 13: Access to credit for business financing

Excluded 42 66

Did not apply but aware of the product 42 32

Applied for loans 16 2

0 20 40 60 80 100 %

Commercial bank Other financial institutions

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3.11 MSME: Application for and Use of Credit

Of those MSMEs which applied for loans, only 15 percent received part or total loans requested from commercial banks, 5 percent of businesses which had applied for credit were rejected while 81 percent were excluded. With regards to other financial institutions, only 2 percent of MSMEs which applied for loans from other financial institutions received part or everything, 1 percent were rejected and 97 percent were excluded.

Fifty three (53) percent of the MSMEs used the loans for working capital, 30 percent for purchasing land, buildings or equipment and vehicle, 6 percent, for buying another business, 7 percent for restructuring and process development, less than 1 percent on research & development and promotion, respectively and 2 percent spend on others.

Figure 14: MSME Credit Application

Informal Inst. 0 99

2 1 Other financial institution 97 5

Commercial bank 15 81

0 20 40 60 80 100 %

Received part or total loan requested Applied but did not receive loan Excluded

3.12 MSME: Usage of credit for Business financing

In terms of the financing structure of the business, 72 percent of businesses in Vanuatu used internal funds for financing their business, 21 percent used commercial bank loans and overdrafts, 3 percent used trade credit and 1 percent borrowed from other financial institutions.

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Figure 15: Use of credit for business financing

3.13 MSME: Payment Instruments

Eighty-seven (87) percent of the total businesses surveyed used cash for transactions, 10 percent used cheques, 2 percent used other modes of payment4, and only 0.2 percent used electronic mode of payments such as ATM card, Visa card and MasterCard.

Figure 16: Mode of Payments of MSME

87 10 2

% 0 10 20 30 40 50 60 70 80 90 100

Electonic payments Cash Cheque Others

3.14 MSME: Internet banking

According to the MSME survey, 8 percent of the MSME in Vanuatu used internet banking for business transaction while 92 percent did not use internet banking.

4 Other modes of payment for this purpose includes, bank telegraphic transfers and direct debits from bank accounts

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Figure 17 Proportion of MSMEs using Internet Banking

92 8

% 0 20 40 60 80 100 Not Use of Internet Banking Use of Internet Banking

3.15 MSME: Insurance

Twenty three (23) percent of MSMEs in Vanuatu had insurance cover, while 77 percent did not. This slow uptake in insurance cover may be attributed to the lack of awareness and understanding by potential insurance buyers (businesses), and its affordability.

Figure 18: Percentage share of business with insurance

3.16 Gender in Business

In Vanuatu, 60 percent of MSMEs are owned by male followed by 20 percent female, 12 percent are within the youth category and 8 percent, other category*.

Figure 19: Percentage share of male, female and youth in business

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4. Vision, Mission and Objectives

4.1 Vision

Create an enabling environment for enriching the livelihoods of the people and MSMEs in Vanuatu through inclusive financial services and consumer empowerment and protection.

4.2 Mission

By 2023,  Ensure an additional 54,000 (130,000) adults will be active users of formal or semi-formal financial services, of which 50% will be women.  Ensure 40% of the financially included will be active users.5  Ensure a suite of MSME business financing products are available, which are also tailored to the needs of businesses led by women and youth.

4.3 Objectives

4.3.1 To facilitate an enabling regulatory and supervisory environment for providers and users of financial services. 4.3.2 To enable the people and MSMEs in Vanuatu to have access to a range of appropriate and sustainable financial services at an affordable cost. 4.3.3 To foster financial inclusion deepening and resilience via increased and regular usage of financial services. 4.3.4 To strengthen the financial competencies of the people of Vanuatu to enable better informed financial decision making together with the optimal use of financial services to better their livelihoods. 4.3.5 To facilitate consumer protection of consumers of financial services and for MSME finance. 4.3.6 To use a multi-stakeholder and multi-sector approach to enable a concerted and comprehensive national approach to addressing financial exclusion. 4.3.7 To promote the development in the MSME sector to improve financial users’ income.

5 Active users conduct at least one transaction within a 90 day period.

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5. Financial Inclusion Strategy 2018 – 2023

The Strategy sets out a clear direction for financial inclusion and is driven by the overarching goals of improving both, access to and usage of appropriate financial services by the Ni-Vanuatu population and micro small and medium enterprises in Vanuatu. These financial services could include formal and informal financial services for the adult population and formal and informal business financing for MSMEs, in addition to consumer empowerment and protection via financial literacy programmes, consumer protection mechanisms and equitable market conduct standards.

Based on recent findings of the DSS report, an estimated 32% of adults are the underserved, comprising individuals in the informal sector together with excluded as per the financial inclusion strands in Figure 1a above. Also the MSME survey indicated that around 42% and 66% of MSMEs are excluded from accessing credit from commercial banks and other financial institution, respectively.

Figure 20: Diagrammatic framework of the 4 strategic goals

Enabling policy Inclusive products, environment services and channels

2018 - 2023

Financial literacy & MSME Financing Consumer empowerment

5.1 Strategic Goal 1 – Create an enabling policy environment and financial infrastructure

5.1.1 Establish a forum through which legally appointed regulators and supervisors can interact and share information regularly on financial inclusion-related policy, regulation, supervision and financial service provider or industry data. 5.1.2 Develop and strengthen financial infrastructure, policy and regulatory environment and ecosystems that balance opportunities and innovations in financial markets leading to improved access, usage and quality of financial services. 5.1.3 Ensure consistency in Know Your Customer requirements across all financial service providers and ensure that they facilitate the changing market whilst meeting regulatory and other needs for KYC. 5.1.4 Bridge the data gap to enable rigorous data collection for evidence-based policy making and effective product and services development. 5.1.5 Create a coordinated effort to build a financial inclusion eco-system and to provide oversight of the implementation of the NFIS.

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5.2 Strategic Goal 2 – Promote and foster inclusive products, services and channels

5.2.1 Improved access to formal financial services for all, particularly the rural population, women, individuals engaged in agriculture and lower-income households. 5.2.2 Encourage a suite of financial products and services, including digital financial services and inclusive insurance that suit the needs of the excluded population. 5.2.3 Implement interoperability of electronic payment platforms between formal financial service providers such as banks and further between financial service providers and mobile network operators. 5.2.4 Promote electronic payment channels in Government transactions, including state-owned enterprises. 5.2.5 Encourage digital payment channels among medium to large private sector employers and associations for business-to-business transactions. 5.2.6 Explore green finance vis-à-vis financial inclusion to extend the outreach and usage of financial services. 5.2.7 Test and roll-out institutional innovations including technology, agent networks and shared platforms that can improve both outreach and access whilst reducing costs and addressing agent liquidity and other agent-related administrative issues. 5.2.8 Test digital solutions for informal financial service providers, including electronic book-keeping and financial literacy applications. 5.2.9 Enhance the range of financial services by strengthening existing financial service providers across the formal, other formal and informal sectors, inclusive of aligning human resource and capacity training with international best practice.

5.3 Strategic Goal 3 - Micro, Small and Medium Enterprise Financing

5.3.1 Introduce policies and a regulatory environment to support access to finance for MSMEs, with a specific target of 30% of women. 5.3.2 Coordinate and harmonize Government’s work through a variety of line Ministries to mainstream financial inclusion products and Programmes targeted at MSME, rural entrepreneurs and women-owned institutions. 5.3.3 Ensure there is effective collaboration between Government and the private sector in regard to improving access and usage of financial services for MSMEs. 5.3.4 Promote the development of an accessible suite of quality, affordable and easily accessible financial services, including insurance for MSMEs and value chains in the agriculture, fisheries and tourism sectors. 5.3.5 Simplify loan application processes for small rural entrepreneurs. 5.3.6 Encourage widely available financial literacy Programmes targeted at building entrepreneurial and financial management skills, including women entrepreneurs. 5.3.7 Promote consumer protection and empowerment in MSME Finance.

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5.4 Strategic Goal 4 - Financial Literacy and Consumer Empowerment

5.4.1 Strengthen financial education in educational institutions at the national and sub-national level, the latter being within the TVET sector or other tertiary institutions. 5.4.2 Integrate financial literacy and product awareness by financial service providers into financial services offerings. 5.4.3 Raise awareness of the general public vis-à-vis the Secured Transaction Act and other Financial Services- related consumer impact legislation. 5.4.4 Ensure consistency in financial services product disclosure and transparency on fees and charges across all financial services providers. 5.4.5 Ensure consistency in or wide awareness of financial services redress and recourse mechanisms across financial services industries. 5.4.6 Develop a financial literacy strategy.

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5.5 Strategic Goals and Action Plan

Goal 1: Create an enabling policy environment and financial infrastructure

Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 1. Establish a forum through which legally Financial Inclusion Taskforce to create a separate Meetings once every two FIT, RBV, TRR, VFSC, Q3, 2018 appointed regulators and supervisors can working group of regulators and supervisors. months, OGCIO, ORCBDS, and ongoing interact and share information regularly on attendance/representation. VFIU, URA financial inclusion-related policy, regulation, Map full spectrum of financial service related legislation Map of financial service Q1, 2019 supervision and financial service provider or and policies. regulators and supervisors industry data. and related financial service-related legislation and policies created.

Data of the financial services industry extended beyond Consolidated financial Q1, 2020 the purview of the RBV. services industry data 2. Develop and strengthen financial Collaborate with development partners on diagnostic Regulatory Impact FIT, RBV, VFSC, Q2, 2019 infrastructure, policy and regulatory exercises and assessments of financial infrastructure, Assessment Study report. OGCIO, ORCBDS, and ongoing environment and ecosystems that balances including reviewing the design of, prioritization and VFIU, TRR,URA opportunities and innovations in financial sequencing of financial sector reforms, key markets leading to improved access, usage interventions and policies. and quality of financial services. Review existing and proposed regulation and Q1, 2019 supervision to establish areas of conflict with financial inclusion and financial stability needs. Identify financial services and channels for which “No No. of financial services for Q2, 2019 Objection” letters are possible. which the regulatory sandbox is being applied. Encourage innovation through amendment of financial Put in place Payment Q4, 2020 system rules and regulations to address financial System Infrastructure. inclusion target groups.

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Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 3. Ensure consistency in Know Your Customer Develop reduced KYC requirements that can be used Reduced KYC requirements RBV, VFSC, OGCIO, Q3, 2019 requirements across all financial service across all financial service industries and the MSME with industry-wide VFIU, PMO, MFEM providers and ensure that they facilitate the sector and undertake awareness on the same. acceptability. changing market whilst meeting regulatory and other needs for KYC. 4. Bridge the data gap to enable rigorous data Build database leveraging off existing regulatory data Database of key financial FIT, RBV, VNSO Q4, 2019 collection for evidence-based policy making collection from financial service providers, inclusion indicators. Data and effective product and services requirements to inform commitment compliance and reported semi-annually development. obligations under the AFI Data Project, amongst others. and/or quarterly. Share pertinent information with other regulators and supervisors in the market. Engage with FSPs for regular MOUs between RBV and timely reporting other supervisors/ regulators or non-regulated institutions for the purpose of financial inclusion data collection. Undertake 1 additional DSS activity to inform progress. DSS Report. Proxy demand FIT, RBV, VNSO Q3, 2023 side data tracked semi- annually 5. Create a coordinated effort to build a Review of FIT mandate and prepare TORs for Working No. of quarterly reports of FIT, RBV Q4, 2018 financial inclusion eco-system and to Groups, which includes quarterly reporting on NFIS progress against NFIS and ongoing provide oversight of the implementation of targets. targets. the NFIS. Clear regulatory backlog of draft legislations: Payment 2 Legislations enacted RBV, MFEM, VFSC, Q1, 2020 System, Competition and Consumer Protection OGCIO, MTTICNVB

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Goal 2: Promote and foster inclusive products, services and channels

Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 1. Improved access to formal financial services Develop synergies and build public/private partnership Public/private partnerships FIT, RBV, donors, Ongoing for all, particularly the rural population, models to progress financial inclusion. ORCBDS, MNOs individuals engaged in agriculture, lower- Develop and maintain a publicly available online geo- Financial inclusion map FIT, RBV Ongoing income households, women and youth. spatial map of financial access points, updated posted online and updated quarterly. quarterly. 2. Encourage a suite of financial services, Research and pilot new services and approaches, DSS 32% are financially FIT, RBV, FSPs (mainly Ongoing including digital financial services that suit including digital financial services. excluded Commercial banks) , the needs of the excluded population. MNOs, 3. Implement interoperability of electronic Implement Payment Systems Act Act finalized and enacted RBV, MFEM Q2, 2019 payment platforms between formal Introduce ATM interoperability for banks Interoperability. RBV, Commercial Q3, 2019 financial service providers such as banks and No. of transactions Banks , MNOs further between financial service providers Introduce EFTPOS interoperability for banks Interoperability. RBV, Commercial Q2, 2020 and mobile network operators. No. of transactions Banks, MNOs Undertake mobile money pilot No. of transactions FSPs (mainly Q2, 2020 Commercial Banks) MNOs, Introduce MNO interoperability for users Interoperability. RBV, MNO Q4, 2022 No. of transactions 4. Promote electronic payment channels in Map government payment and receipt flows. More than 60% of FIT, RBV, MFEM, Q4, 2019 Government transactions, including state- Government payments and FSPs, Commercial owned enterprises. receipts flow through Banks, MNOs electronic channels Undertake pilot to digitize G2P/P2G Payments within a 2 pilots using electronic FIT, MFEM, RBV, Q4, 2019 Government ministry/department with potential to payment channels in MNOs, FSPs, rollout to wider Government. Government transactions Commercial Banks

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Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 5. Encourage digital payment channels among Working Group to initiate discussions with industry No. of companies making FIT, RBV, VCCI, MNOs, Q2, 2019 medium to large private sector employers bodies or large private sector employers payments for taxes, goods FSPs (mainly and associations for business-to-business Conduct B2B study and support selected field trials & services and wages & Commercial banks) Q2, 2020 transactions. Promote digital/electronic payment options via salary electronically. Q2, 2019 Vanuatu Chamber of Commerce & Industry 6. Explore green finance vis-à-vis financial Undertake 1 green finance pilot, preferably impacting No. of customers, new FIT, RBV, FSPs, MNOs, Q3, 2022 inclusion to extend the outreach and usage women or a segment of the low-income and rural financial inclusion service. ORCBDS of financial services. population 7. Test and roll-out institutional innovations Standards to be established for measurement of and Standards endorsed FIT, RBV, FSPs Q3, 2021 including technology, agent networks and operating rules for agent liquidity. (Commercial Banks), shared platforms that can improve both MNOs outreach and access whilst reducing costs and addressing agent liquidity and other agent-related administrative issues. 8. Test digital solutions for informal financial Introduce digital book-keeping via a pilot for an No. of participants and no. RBV, VFSC, OGCIO, Q1, 2023 service providers, including electronic book- informal service provider with the opportunity to scale of trained. PFIP, ORCBDS, MNOs keeping and financial literacy applications. up. Source and promote app using a smart phone. Introduce technology for the training and financial literacy of customers. 9. Enhance the range of financial services by Identify capacity and capability gaps and options for No. of new services, FIT, RBV, VFSC, Q4,2023 strengthening existing financial service training of FSPs. Coordinate action plan to optimally No. of FSPs trained OGCIO, ORCBDS providers across the formal, other formal address these gaps. and informal sectors, inclusive of aligning human resource and capacity training with international best practice.

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Goal 3: Micro, small and medium enterprise development

Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 1. Introduce policies and a regulatory Liaise with MTTCINVB on MSME Act with relevant Finalize and adopt FIT, RBV, NTDC, VFSC, Q4, 2019 environment to support access to finance policy regulations targeting MSMEs, including; legislation and relevant VCCI, MTTCINVB for MSMEs, with a specific target of 30% of - National SME/MSME Definition policies - National SME/MSME Coordinating women. Body/ structural framework - Establishing an avenue for MSME support and development and asset and risk management

RBV to work with Government to develop and regularly Registry developed RBV, FIT (MSMEF Q4, 2019 update MSME registry and standardized registry in WG) MTTICNVB, every province. DARD, DLA

2. Coordinate and harmonize Government’s Government to establish MOUs between line The number of MOUs FIT, RBV, MALFFB, Q2, 2021 work through a variety of line Ministries to Ministries to enable a Holistic Approach in addressing signed MTTICNVB, MoET, mainstream financial inclusion products and MSME issues TRR, VFSC Programmes targeted at MSME, rural entrepreneurs, women and youth owned institutions.

A stock-take of Government MSME initiatives, target Stock-take completed FIT, RBV, VCCI, Q1, 2019 population segments and Government entities MTTCINVB involved to be undertaken

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Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 3. Ensure there is effective collaboration Consider the implementation of a credit bureau for 1 policy paper RBV, MTTICNVB, Q1, 2019 between Government and the private MSMEs VFSC sector in regard to improving access and Public/private sector MSME Working Group Meetings held, FIT, RBV Q3, 2018 usage of financial services for MSMEs. established attendance/ and ongoing representation Re-establish and expand rural agricultural expansion Number of expansion RBV, MALFFB, MFEM, services to increase farmer participation through the services available NBV following avenues: Q1, 2019 - Collaborate with financial service

providers for agriculture extension services to advise, mentor and support farmers’ access to credit

- Identify avenues to act as credit guarantee Q4, 2022 or risk sharing to minimize lending risk - Identify other potential financial infrastructures to specifically target the Q4, 2022 MSME Sector

4. Promote the development of an accessible Research and pilot new products and services, Number of products, FIT, RBV, FSPs, Ongoing suite of quality, affordable and easily including digital financial services and mobile banking, Number of customers with Insurance accessible financial services, including insurance and value chains gender disaggregated data Companies, MNOs, insurance for MSMEs and value chains in the MTTCINVB agriculture, fisheries and tourism sectors. 5. Simplify loan application processes for small Review current MSME targeted loan application Simplified loan application FIT, RBV, Commercial Q4, 2019 rural entrepreneurs. processes and information and standardize processes/ Standardized Banks loan process and assessment across the industry

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Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 6. Encourage widely available financial literacy Review current vocational training providers Harmonize training FIT, RBV, VQA, On going Programmes targeted at building Programmes to ensure financial literacy is covered to Programmes on financial MTTCINVB entrepreneurial and financial management strengthen financial management, women and youth literacy for all vocational skills, including women and youth entrepreneurs after completion of training. training providers. entrepreneurs. Undertake stock-take of Financial Literacy Programmes Number of financial literacy FIT, RBV, Financial Q1, 2019 targeted at MSMEs Programmes offered Literacy Training Providers, MTTCINVB Develop key general learning areas for financial Matrix of key learning FIT, RBV, MTTCINVB, Q3, 2019 literacy, entrepreneurship and enterprise training for outcomes for the 3 training VCCI MSMEs areas Develop and maintain database of trainings held for Number of trainings held, FIT, RBV, MTTCINVB, Ongoing MSMEs with gender disaggregated Financial Literacy data Training Providers Introduce Financial Literacy and entrepreneurship Curriculum developed. FIT, RBV, MOET, VSP Q4, 2022 education within targeted curriculum at targeted Number of students educational institutions impacted. 7. Promote consumer protection and Develop specific financial consumer protection Act passed FIT, RBV, VFSC, Q1, 2020 empowerment in MSME Finance. legislation and wider regulation on use and delivery of OGCIO, MTTICNVB financial services to strengthen client protection for MSMEs. Public Awareness drive Number of public FIT, RBV, VFSC, Q3, 2020 awareness activities/ OGCIO, FSPs, number of trained MTTCINVB

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Goal 4 - Financial literacy and consumer empowerment

Key Result Areas Action Plan Target/Indicator Lead Institution(s) Timeframe 1. Strengthen financial education in Develop action plan for Financial Education in schools, Student Impact Assessment FIT, MoET, RBV Q4, 2019 educational institutions at the national and which includes development and piloting of student Tools developed sub-national level, the latter being within impact assessment the TVET sector or other tertiary Identify and commence pilot for sub-national education No. of students and courses FIT, MoET, RBV, Q4, 2021 institutions. provider. of study RTCs/VSP 2. Integrate financial literacy and product Map existing financial literacy activities done and by who No. of FinLit trainings FIT, RBV, FSPs, FinLit Q1, 2019 awareness by financial service providers delivered/annum providers into financial services offerings.

Develop minimum financial literacy training areas of Compendium of minimum FIT, RBV, FSPs, NGOs, Q4, 2019 learning, in English, Bislama and French, which can be financial literacy training FinLit providers, used to ensure minimum standards of coverage to work areas and sample Government enhance financial competencies of adults across the training materials. country, especially those in rural areas. 3. Raise awareness of the general public vis-à- Public awareness drive No. of public awareness FIT, RBV, VFSC, Q4, 2020 vis the Secured Transaction Act ( Personal activities/ No. of trained OGCIO, FSPs, Properties Securities Act) and other Commercial Banks Financial Services-related consumer impact legislation. 4. Ensure consistency in financial services Develop and implement financial services product Financial services product RBV, VFSC, OGCIO, Q2, 2020 product disclosure and transparency on, guidelines and client protection guidelines. and client protection ORCBDS (MTTICNVB) terms and conditions, fees and charges guidelines across all financial services providers. Develop supervisory policy on disclosure of fees and Supervisory policy RBV, FIT Q2, 2020 charges 5. Ensure consistency in or wide awareness of Draft Competition and Consumer Protection legislation Act passed FIT, RBV, VFSC, Q1, 2020 financial services redress and recourse and wider regulation on use and delivery of financial OGCIO, ORCBDS mechanisms across financial services services to strengthen client protection. (MTTICNVB) industries.

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The aforementioned goals, their related key result areas, action plans, targets, responsibilities and time frames will be further fleshed out through annual action plans developed by the various working groups established under FIT. It is envisaged that by December 2020, action plans for all commitments under the Maya Declaration together with the 2020 Money Pacific Goals would be largely completed.

6. Stakeholders

A multi-stakeholder, multi-sector approach to financial inclusion is involved to bring about positive and quantifiable change. The placement of financial inclusion within the Vanuatu Strategic Development Plan provides stakeholders across a wide range of sectors including private, public, civil society and non- governmental organisations to align their financial inclusion-related efforts and objectives.

Key stakeholders and their roles are listed in the table below.

Figure 21: Key Financial inclusion stakeholders

Categories Institutions Roles/Responsibilities Regulatory RBV,VFIU, TRR, URA,  Ensure enabling and supervisory framework in place Authority VFSC, ORCBDS, for financial inclusion MFEM, including  Coordinate and monitor financial inclusion initiatives OGCIO & VNSO  Provide advice to government and providers on financial inclusion initiatives and developments  Ensure compliance with financial inclusion policies NFIC NFIC Members  Provide oversight and direction on overall NFIS FIT FIT and Working  Drive, monitor, coordinate NFIS implementation Group members through Working Groups Government MFEM, MOET,  Drive and implement financial inclusion initiatives Ministries/ MoFAICET,  Allocate budgetary funds for financial inclusion and its Departments MTTICNVB,MALFFB, promotion MoJCS, PMO, MOIA Financial Service Commercial banks,  Implement financial inclusion initiatives Providers MFIs, Credit Unions,  Innovate, develop, test and review new financial Cooperatives, services and financial service access points/channels Insurance companies,  Supply relevant financial inclusion data to regulatory Finance Company, authority on a regular basis Capital market intermediaries, financial literacy providers.

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Categories Institutions Roles/Responsibilities Advocacy Bankers Association of  Collaborate on interoperability of financial services Institutions Vanuatu (BAV), and linked digital payment channels National Youth  Ensure compliance with financial consumer Council, Insurance protection matters Companies  Escalate and report financial service complaints to Association, VYEC relevant authority Development Donor agencies,  Provide and facilitate capacity building and technical partners international entities support and NGOs e.g. AFI, PIRI, PFIP, MFAT, DFAT, ADB, IFC, Regional Central Banks etc. Clients/Customers Clients and other users  Provide feedback of financial services

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7. Coordination, Monitoring and Evaluation

7.1 Coordination

National Financial Inclusion Council (NFIC) Purpose: The NFIC will provide a high-level forum for steering and coordination of the overall implementation of the national financial inclusion strategy.

Composition: The NFIC is chaired by the Prime Minister and consists of key ministers from four different ministries, namely; MFEM, MTTCINVB, MALFFB and MoET. The Governor of RBV is also a member of NFIC.

Financial Inclusion Taskforce (FIT) Purpose: The Financial Inclusion Taskforce is the coordinating committee for the overall National Financial Inclusion Strategy 2018 – 2023.

Composition: The membership of the Taskforce and Working Group is aimed at ensuring representatives of key stakeholder groups and every effort will be made to ensure equal representation.

Working Groups (WG) Purpose: The four working groups are structured around the four strategic goals and will provide thematic expertise to the Taskforce. The four working groups are tasked with specific areas of focus as noted below:

1. Regulatory Working Group - Create an enabling regulatory environment; - Strengthen the existing financial infrastructure; and - Discuss and coordinate regulatory initiatives relevant to financial inclusion which span the domain of more than one regulator (e.g Digital Financial Services).

2. Inclusive Product & Services Working Group - Ensure the provision of sustainable, relevant, affordable and accessible financial products and services including insurance products; - Create a digital financial services ecosystem; and - Increase and strengthen public private sector partnership.

3. MSME Working Group - Facilitate and offer relevant MSME financing products that are sustainable, affordable and responsive to the needs of MSMEs including those led by marginalised groups; and - Create a balance between regulations, enhancing access to MSME financing and empowerment and protection of MSMEs.

4. Financial Literacy and Consumer Empowerment Working Group - Improving financial competencies through financial education in the school curriculum;

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- Building adult financial competency through better coordination and increase public private sector support; and - Enhance financial education awareness; and - Ensure effective protection and empowerment of consumers.

The RBV will provide the leadership and secretariat support to the Taskforce as well as Secretariat to each of the four Working Groups.

Data collection and Dissemination RBV will coordinate and monitor data collection and dissemination. Specific areas of focus are: - Monitor the outreach and coverage of existing financial services; and - Regularly monitor impact of financial inclusion efforts through coordination and comprehensive data collection and sharing

The monitoring and coordinating committee is structured as per that below.

Figure 22: Structure of the National Financial Inclusion Council

National Financial Inclusion Council (NFIC)

Financial Inclusion Taskforce (FIT)

Financial Literacy Inclusive Products Regulatory MSME Finance & Consumer & Services Working Group Working Group Empowerment Working Group Working Group

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7.2 Monitoring and Evaluation Framework

Each working group established under the FIT will develop medium and shorter (annual) implementation plans for strategic goals and objectives falling with their purview. Once endorsed by FIT, a half-yearly update on the progress against these strategic goals and objectives, will be escalated to the FIT by each Working Group on a bi-annual or quarterly basis, via structured updates.

The evaluation framework will be largely based on a mix of the AFI Core Set of Indicators, Quality Indicators, and PIRI Core Plus indicators to measure the state of financial inclusion in Vanuatu. The core indicators relating to Access, Usage, Quality and Financial Literacy form the foundation for measuring national financial inclusion efforts.

Figure 23: Indicators – Access, Usage, Quality and Financial Literacy

Access Indicators - Accounts and Channels

•New accounts opened including for specific interest groups eg. women •Measured via availability of a financial access point

Usage Indicators - Accounts and Channels

•Measured through active financial accounts ie. accounts which have had at least one transaction in the most recent 90 days •Measured through use of specific channels, which had at least one transaction in the most recent 90 days

Quality Indicators

•Captured through barriers to accessing and using financial services and products

Financial Literacy

•Types of financial literacy Programs and number of individuals trained, with breakout for specific interest groups eg. women

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Figure 24: Key Evaluation Indicators

Annex 1: Key Evaluation Indicators

1. Access Channels by Urban and Rural

2. Access Channels by Gender

3. Usage Accounts and Channels

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Annex 2: NFIC, FIT and Working Group Representatives 10. 2.1 NFIC Members Prime Minister of Vanuatu (Chairman) Minister of Tourism, Trade, Commerce, Industry and Ni-Vanuatu Businesses Minister of Finance and Economic Management Minister of Education and Training Minister of Agriculture, Livestock, Forestry, Fisheries and Bio-security Governor, Reserve Bank of Vanuatu

2.2 FIT Members Governor, Reserve Bank of Vanuatu (Chairman) Deputy Governor, Reserve Bank of Vanuatu Advisor, Reserve Bank of Vanuatu Director General, Prime Minister’s Office Director General, Ministry of Finance and Economic Management Director General, Ministry of Agriculture, Livestock, Forestry, Fisheries and Bio-security Director General, Ministry of Internal Affairs Deputy Program Manager, PFIP Chairman RWG Chairman IPSWG Chairman FLCEWG Chairman MSMEFWG

2.3 Regulatory Working Group Vanuatu Financial Intelligence Unit Vanuatu Financial Services Commission Telecommunications Radio-communications and Broadcasting Regulator Office of the Government Chief Information Office Utilities Regulatory Authority Minister of Tourism, Trade, Commerce, Industry and Ni-Vanuatu Businesses Department of Customs and Inland Revenue Department of Rates and Taxes Department of Finance & Treasury Vanuatu National Statistics Office Department of Strategic Policy Planning and Aid Coordination Reserve Bank of Vanuatu

2.4 Inclusive Products and Services Working Group Vanuatu National Provident Fund VNPF Subsidiary- Members Financial Service Limited Telecom Vanuatu Limited Digicel (Vanuatu) Limited Vancare Insurance Capital Insurance 41 | P a g e

National Bank of Vanuatu ANZ Bank Bank South Pacific Bred Bank (Vanuatu) Ltd Vanuatu Post Pacific Financial Inclusion Programme Credit Corporations Vanuatu Limited Vanwods MFI South Pacific Business Development (SPBD) Non-Governmental Organization (NGO) Department of Finance and Treasury Reserve Bank of Vanuatu

2.5 MSME Finance Working Group Department of Cooperatives and Business Development Services - MTTCINVB Department of Industry Trade Division Unit – MTTCINVB Department of Tourism Vanwods MFI Ministry of Justice and Community Services Ministry of Youth and Sports Development Vanuatu Chamber of Commerce and Industry South Pacific Business Development Insurance companies Department of Local Authority Department of Agriculture and Rural Development Vanuatu Young Entrepreneur Council Reserve Bank of Vanuatu

2.6 Financial Literacy and Consumer Empowerment Working Group Department of Education and Training – MoET Curriculum Development Unit – MoET Commercial Banks Vanuatu National Provident Fund Vanuatu Qualifications Authority Vanuatu National Youth Council Department of Cooperatives and Business Development Services - MTTCINVB Department of Industry - MTTCIVB Trade Division Unit – MTTCINVB Non-Governmental Organisation (NGO) Vanuatu Vocational Training Centers (APTC, VIT, TVET, VRTC etc.) Reserve Bank of Vanuatu

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