In Search of Sustainability: The Provision of Rural Financial Services in Solomon Islands

United Nations Development Programme (UNDP), Pacific Centre, November 2010

57 Pages Posted: 7 Jul 2015 Last revised: 8 Jul 2015

Date Written: November 1, 2010

Abstract

Despite several attempts to provide financial services in rural areas in Solomon Islands, there has never been a model that follows global best practices or has reached sustainability on a significant scale. Despite the daunting infrastructure, political, economic and demographic impediments to doing so, sustainable models for providing rural finance have been developed all over the world including in the Pacific in neighboring Papua New Guinea, Samoa and Vanuatu. Approaches taken in other parts of the world, such as adequately supported Greenfield institutions, links with post offices and branchless banking technologies are still new to the Pacific; however they may offer the best chance to promote greater financial inclusion in Solomon Islands.

There is significant potential to offer financial services in places such as the area surrounding Honiara, the Auki-Malu’u Corridor (Malaita), and the Noro-Munda-Gizo Triangle (Western Province). These places have relatively high population densities, modern infrastructure and active economies relative to the rest of the country, and offer a small but potential market for lending. There is undoubtedly a need to bring in one or more new financial service providers, and support them financially, until they become operationally sustainable.

Outside these enclaves, there are only marginal areas of economic activity and limited financial activities. Microcredit will be challenging in rural areas without a basis of economic activity. Any new model should focus heavily on deposit taking and domestic money transfers in these areas. Some credit unions and savings clubs concentrated in Isabel province have proven resilient and may also offer an indigenous, immediate strategy for offering financial services in these very rural areas.

In order to design strategies for providing financial services in rural areas, stakeholders need to come together to take a fresh look at the problems and possibilities. As is happening elsewhere in the Pacific, many different actors will have to collaborate to address the myriad of constraints. The best way to do this will be to bring stakeholders together to have an inclusive discussion which prioritises goals and assigns agencies to implement and monitor them.

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

Suggested Citation

McCaffrey, Mike, In Search of Sustainability: The Provision of Rural Financial Services in Solomon Islands (November 1, 2010). United Nations Development Programme (UNDP), Pacific Centre, November 2010. Available at SSRN: https://ssrn.com/abstract=2627536

Mike McCaffrey (Contact Author)

Ulana Insights ( email )

United States

HOME PAGE: http://www.ulana-insights.com

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