TIMOR-LESTE ECONOMIC DIVERSIFICATION ANALYSIS: CANDLENUT, MOBILE FINANCE MARKET & TOURISM ASSESSMENTS REPORT #20 August 2015 This publication was produced for review by the United States Agency for International Development. It was prepared by Megan O’Donnell and Amancio Bruno (Mobile Banking), Adam Sendall and Luis Gusmão (Candle­ nut), Robert Travers and Jinky Comon (Tourism), for ACDI/VOCA with funding from USAID/E3’s Leveraging Economic Opportunities (LEO) project. 1 TIMOR-LESTE ECONOMIC DIVERSIFICATION ANALYSIS: CANDLENUT, MOBILE FINANCE MARKET & TOURISM ASSESSMENTS REPORT #20 DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS EXECUTIVE SUMMARY ............................................................................................. 1 PART I: CANDLENUT ASSESSMENT ...................................................................... 5 ACRONYMS.................................................................................................................. 6 I. INTRODUCTION ................................................................................................ 7 II. CURRENT STATUS OF THE CANDLENUT MARKET................................. 8 A. Production ............................................................................................................................... 8 B. Market channels ..................................................................................................................... 9 C. Value chain stakeholders .................................................................................................... 12 D. Market functions .................................................................................................................. 13 E. Value addition ....................................................................................................................... 15 F. Price determination ............................................................................................................. 17 III. CROSS-CUTTING FACTORS .......................................................................... 19 IV. PREVIOUS SUPPORT & LESSONS LEARNED ............................................. 20 V. MARKET ANALYSIS: SWOT ........................................................................... 21 A. Strengths ................................................................................................................................ 21 B. Weaknesses ........................................................................................................................... 22 C. Opportunities ....................................................................................................................... 23 D. Threats ................................................................................................................................... 23 VI. INSIGHTS FOR FUTURE INTERVENTIONS ................................................. 23 ANNEX: KEY REFERENCES .................................................................................... 26 ANNEX: MEETINGS HELD ...................................................................................... 27 PART II: MOBILE FINANCE ASSESSMENT .......................................................... 28 ACRONYMS................................................................................................................ 29 I. INTRODUCTION .............................................................................................. 31 A. Benefits of digitizing payments .......................................................................................... 32 II. DEFINITIONS .................................................................................................... 34 A. Mobile money & mobile banking ...................................................................................... 34 B. What is a mobile wallet versus a mobile account? ....................................................... 36 TIMOR-LESTE ECONOMIC DIVERSIFICATION ANALYSIS I III. CURRENT SITUATION ASSESSMENT: SUPPLY-SIDE .............................. 37 A. Mobile finance products (available and on the horizon) ............................................. 37 B. Stakeholder map – who to work with ............................................................................ 41 C. Regulatory framework for mobile finance ...................................................................... 42 D. Regulatory issues to consider ........................................................................................... 43 IV. CURRENT SITUATION ASSESSMENT: DEMAND-SIDE ........................... 45 A. Overview of financial inclusion, and access and use of financial services ................ 45 B. Demand-side barriers to address to enable mobile finance use ............................... 48 V. CROSS-CUTTING ISSUES ............................................................................... 50 A. Gender & women’s issues .................................................................................................. 50 B. Youth ...................................................................................................................................... 51 C. Climate change ..................................................................................................................... 51 VI. INSIGHTS FOR USAID’S ROLE INTERVENTIONS .................................... 51 A. Need for intervention to catalzye market (usaid role or other) .............................. 51 B. Guiding principles ................................................................................................................. 52 C. Enable agricultural value chain finance ............................................................................ 53 D. Reaching women in agriculture ......................................................................................... 53 E. Financial education ............................................................................................................... 53 F. Digitizing payments in current usaid project operations ............................................ 53 G. Government payments (salaries, social welfare payments) ........................................ 54 H. Integrating payments into usaid programs...................................................................... 54 I. Other usaid tools available globally .................................................................................. 54 ANNEX: KEY REFERENCES .................................................................................... 56 ANNEX: MEETINGS HELD ...................................................................................... 58 ANNEX: MINISTRY OF SOCIAL SOLIDARITY DISBURSAL PROCESS ........ 61 PART III: TOURISM ASSESSMENT ........................................................................ 62 ACRONYMS................................................................................................................ 63 I. INTRODUCTION .............................................................................................. 64 II. APPROACH TO TOURISM ASSESSMENT................................................... 66 III. CURRENT SITUATION ASSESSMENT ........................................................ 69 A. Overview ............................................................................................................................... 69 B. Demand .................................................................................................................................. 71 C. Value chain facilitators ........................................................................................................ 85 D. Key enabling environment issues ...................................................................................... 91 E. Major bottlenecks to address ............................................................................................ 92 IV. END MARKET COMPETITIVE-ANALYSIS ................................................... 92 A. Tourism growth potential .................................................................................................. 99 TIMOR-LESTE ECONOMIC DIVERSIFICATION ANALYSIS II B. Unique selling proposition/market positioning/ competitive advantage ................ 101 C. Opportunities for expansion ........................................................................................... 102 V. CROSS-CUTTING ISSUES ............................................................................ 103 A. Gender ................................................................................................................................. 103 B. Youth .................................................................................................................................... 103 C. Finance .................................................................................................................................. 103 D. Climate change and adaptation ....................................................................................... 103 VI. POTENTIAL TO DIVERSIFY THE ECONOMY........................................... 104 A. Strengths .............................................................................................................................. 104 B. Weaknesses ........................................................................................................................