Financial Service Sector Assessment of Vanuatu

United Nations Development Programme (UNDP), Pacific Centre, 2011

56 Pages Posted: 7 Jul 2015

Date Written: July 1, 2011


Financial services in Vanuatu are highly concentrated in the two urban areas of Port Vila and Luganville, and dominated by four commercial banks, a superannuation fund, and four domestically licenced general insurers. Of these stakeholders, only the National Bank of Vanuatu (NBV) is providing services on any scale to low income clients. These services are complemented by the two much smaller semi-formal providers, Vanuatu Women’s Development Scheme (VANWODS) and the Department of Cooperatives.

Since the last financial service sector assessment (FSSA) for Vanuatu in 2007, great progress has been made towards developing an inclusive financial sector in the country, with the number of people accessing financial services increasing by an average rate of 19% a year. Currently an estimated 19% of the population has access to formal or semi-formal financial services, and the percentage of the population with banking services is about half that of Fiji (39%), which benefits from a vastly more developed economy and concentrated population, and outperforms both Solomon Islands (15%) and Papua New Guinea (8%). This improved situation in Vanuatu can mostly be attributed to the above mentioned three main service providers.

The enabling environment for financial services is now both more flexible and transparent. Improved regulations such as the Secured Transactions Bill allow financial service providers to use movable assets as collateral against loans; reduced Know Your Customer (KYC) regulations permit banking institutions to open accounts for people without official identifications; Digicel has been given a letter of no objection to launch its mobile phone based payments system; and VANWODS, V-ONE credit union, the Vanuatu Agricultural Development Bank (VADB) and The Vanuatu National Provident Fund (VNPF) are now all under the supervision of the Reserve Bank of Vanuatu (RBV). Further, a credit bureau will soon be introduced and other important regulations are under review with the support of the Asian Development Bank (ADB).

New projects and developments, both currently implemented and planned, promise even greater access and improved services to low-income and rural people within Vanuatu on the retail level. NBV has worked hard to install VSAT systems and solar power in its rural branches, and introduce ATM cards and SMS banking to its clients. VANWODS has expanded to three new provinces and many different institutions are now becoming involved with financial literacy training. Other exciting developments on the horizon include Digicel’s mobile money product called “Isi Mani” which will allow people to make financial transactions over their mobile phones from almost anywhere in the country. ANZ has plans to launch a similar product in 2012 and other commercial banks are also evaluating their future involvement in this market segment.

Yet there is still significant room for further improvement and growth within the sector. It is estimated that only 37% of the demand for deposit services, 28% of the demand for loans and 25% of the demand for insurance are currently being met. Constraints associated with the country’s challenging geography and low level of economic development are significant factors. However, greater access and use of financial services is feasible if appropriately designed products and marketing/education campaigns are successfully created and implemented. For the increasing amount of people using microfinance services, more reporting on product performance is needed, and potentially more oversight for semi-formal providers.

The number of new financial inclusion initiatives, including those focusing on client education, has grown, increasing the need for a coordinated countrywide approach in an environment where coordination has historically been very poor. At a minimum, the outreach and quality of services being provided by suppliers must be better monitored and more research should be done on the financial behaviours of people in rural areas. Additionally, further linkages between service providers with greater outreach and those with efficient management systems should be explored. Further, financial literacy training providers need to coordinate their approaches to ensure that lessons and coverage are complementary.

This report provides an overview of the status of the financial sector with regard to serving low income and rural populations, consequently offering an informational platform to policymakers and practitioners working in the area. It is by no means comprehensive, and lacks demand data, but it is a solid departure point from which to formulate policies and priorities for a more coordinated approach to financial inclusion.

Keywords: Money, Access to Finance, Financial Inclusion, Digital Finance, Mobile Banking, Branchless Banking, Microfinance, Vanuatu, Pacific Financial Inclusion Programme, Credit Unions, Banking

Suggested Citation

McCaffrey, Mike, Financial Service Sector Assessment of Vanuatu (July 1, 2011). United Nations Development Programme (UNDP), Pacific Centre, 2011, Available at SSRN:

Mike McCaffrey (Contact Author)

Ulana Insights ( email )

United States


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