Solomon Islands is an archipelago in the South Pacific with more than 900 islands, having a population of a 515,870, spread across 9 provinces. The economy is agrarian, with 52% to the GDP coming from agriculture and primary industries. About 40% of the GDP is from services. Coconut is the most important crop, providing employment to a very large part of the population, directly or indirectly, estimated at nearly 40,000 households in the country. However, the islanders face multiple challenges across the coconut value chain, related to harvesting, processing, transportation and in receiving payments and savings/utilizing the proceeds for personal financial needs and goals.
It is a challenge for the financial institutions and the Government of the Solomon Islands to provide access to suitable, affordable and sustainable financial services for the masses. Formal financial services are limited and mostly concentrated in the capital city of Honiara, and some of the other provincial capitals. Lack of financial and physical infrastructure, in terms of roads and transportation, makes it a near impossibility for a majority of the low-income people to avail basic banking services.
For example, let us visualize the experience of a bank customer of Maoa village in Malaita province, located 35-40 kilometers from Auki, the capital of Malaita province. It takes her around 7 hours and an expense of USD 10-12 (including bank charges) to conduct even a basic bank transaction. A smallholder coconut farmer typically earns USD 40-60 per month. If a bank branch / ATM were to be visited even once a month, it would mean spending 20%-25% of her monthly income just on one transaction. It is obvious why the poor would not want to avail banking or for that matter any other formal financial service, even when it is available.
ANZ bank has made concerted efforts to expand outreach of banking services using innovative approaches and use of technology. ANZ goMoney is a flagship mobile banking product of ANZ Bank. It was introduced in Solomon Islands in 2013 to provide access to a bouquet of digital financial services to the remotest geographies and supplementing governmental efforts towards financial inclusion. The service allows customers to initiate transactions through a linked mobile phone or through an ANZ merchant. To improve customer service and to facilitate cash out services, ANZ partnered with Premier Mobile Money (PMM), an Agent Network Manager (ANM), to on-board and manage a network of over 150 agents/merchants across Solomon Islands. Through this partnership, over 55,000 customers have so far been brought into the fold of formal banking services.
The Australian Government and the Pacific Financial Inclusion Programme (PFIP) have supported the endeavors of ANZ bank through grant and technical assistance. The vision is to design, test and scale innovative models for digitizing payments across coconut value chain, given its significance in Solomon Islands. A need was also felt to strengthen the agent network management and to build sustainable models for mobile money, that offer better user experience, and more relevant, demand driven financial products. In association with MicroSave consultants, a diagnostic study was conducted to access gaps in the financial services required by coconut farmers and to recommend a roadmap to achieve the vision.
PFIP, ANZ Bank and MicroSave are jointly undertaking a five-pronged approach as part of the “PFIP-ANZ Bank Innovation Lab”, to improve access to relevant financial services for the people of Solomon Islands.
The Innovation lab workstreams include: ANZ blog
- Agent network development and optimization: Enhancing the quality, strenght and sustainability of the agent network, through training and capacity building; providing tools for marketing and customer service; improved liquidity management support for agents/merchants and so on. Liquidity management is planned to be improved by establishing cash surplus points (fuel stations, large canteens, wholesalers) as super merchants, and establishing touch points that can be early adopters in accepting digital payments.
- Digitizing payments in coconut value chain: Kokonut Pacific Solomon Islands (KPSI), a Honiara based processor and exporter of Virgin coconut oil (VCO), supports village level entrepreneurs, also known as Direct Micro Expellers (DMEs), establish oil expelling units in villages. These DMEs collect copra (semi-dried coconut kernels) from nearby areas, extract oil and send it to KPSI for further processing. DMEs provide direct employment to 7-10 villagers at their processing units and support 15-20 coconut farmers, who supply the raw material. Many DMEs are also engaged in other employment and cash generating business activities, such as running canteens, timber trade, cocoa value chain and so on. VCO is transported from DMEs to KPSI and then exported. The payments to KPSI are electronic, involving foreign exchange transactions and multiple banks. The Innovation Lab is developing and testing models for payments across the coconut value chain involving the DMEs, the farmers and the workers. The DMEs will be developed as a vital resource to support adoption and usage of ANZ goMoney services and for other banking services.
- Paying digitally for goods and services, and for school fees: It is important to enable the participating farmers and workers not only to receive payments digitally, but also to create opportunities for them to spend digitally. This is critical to reduce dependence on cash and for long-term sustainability. Avenues where farmers spend regularly will be enabled to accept payments digitally, creating a complete ecosystem in the village economies. These will include creating avenues to pay digitally for food (rice, tuna, pork, coffee and noodles), household groceries, and for school fees.
- Long term savings and safety net: Apart from opportunities to save for short term needs, such as for school fees and for emergency needs, there is a need to find solutions to encourage and enable long-term savings. The Solomon Islands National Provident Fund (SINPF) offers a compelling proposition to the people to save for the long term, and to create a safety net. The Innovation Lab is working with SINPF to enable accumulation of small savings, and to make periodic contributions digitally towards provident fund accounts, through ANZ goMoney. This savings cum retirement fund product for the informal sector, named “youSave”, is already witnessing encouraging response and subscription from people. An increasing number of “youSave” clients are making recurring savings contribution into their superannuation membership account using ANZ goMoney.
In addition, on an ongoing basis, the Innovation Lab will work on opportunities for enhanced service delivery and greater consumer convenience. In ensuing blogs, read about the results and the learnings from these interventions.