Challenge 2: Efficient access to finance for MSME’s

Partner: National Bank of Vanuatu 

Country: Vanuatu

Website: http://www.nbv.vu

 

 

About the National Bank of Vanuatu

National Bank of Vanuatu (NBV) is the only commercial bank in Vanuatu that provides services outside of the major population centres of Port Vila and Luganville. It achieves this through its network of 25 branches, mobile microfinance officers while running an extensive micro-loan portfolio and nation-wide financial literacy program.

NBV offers a comprehensive range of services in Business, Retail, Rural, International, Treasury and Investment Banking. NBV has three shareholders: The Government of Vanuatu (70%), Vanuatu National Provident Fund (15%), and the International Finance Corporation of the World Bank (15%).

Earlier this year,  with support from PFIP, the bank started a project to digitize many of its front and back-end processes using a tablet-based application to create more customer convenience and significantly reduce operational costs, which in turn allowed NBV to increase penetration in remote and rural areas of Vanuatu.


Challenge

While all MSMEs in the Pacific region face significant constraints regarding the enabling environment, access to finance typically ranks top of the list of barriers in most surveys and market research reports. These barriers may include, among others; limited access to assets that can be used as collateral, lack of sufficient business and personal documentation to meet KYC regimes, limited available data on cash-flow to estimate working capital needs, and lower levels of business skills and financial competence and confidence.

As a result, there is a substantial unmet demand in the market for MSME financing; e.g. working capital (manage cash-flows), asset acquisition (machinery or equipment), infrastructure (shop improvement). An IFC study estimated it is USD 135 million.

These barriers equally apply to both demand-side of the market (i.e. MSMEs) as well as for the supply-side (i.e. financial service providers). These are amplified by the logistical challenges of working in remote island locations which have had, until very recently, an almost complete lack of ICT infrastructure to support the credit application and appraisal process. This led to inefficient business processes and the bank’s inability to expand the portfolio.

In recent times, ICT infrastructure including 4G mobile communications, smartphones & tablets, solar power solutions etc. have become available in these remote island locations. It is now possible to build digital application systems to support efficient loan application, appraisal and disbursement processes. Leveraging this opportunity, the goal of NBV is to significantly reduce the average loan application-to- disbursement time for rural MSMEs.

Though NBV already has a substantial micro-loan portfolio, it has the ambition to expand this by improving access to finance facilities for MSMEs. Therefore, it is looking for FinTechs that can offer innovative digital solutions that leverage its existing digitisation project and addresses explicitly the earlier mentioned barriers for them to offer MSME financing facilities more efficiently. 


The value proposition for the Fintech

  • An estimated USD 232 million of potential demand for finance by SMEs, of which USD 135 million is the financing gap present substantial untapped market potential[1].
  • Opportunity to enter other Pacific markets beyond Vanuatu as NBV and PFIP have received significant levels of interest from other Pacific financial service providers to invest in a joint solution if it is proven in Vanuatu
  • A strong and digital savvy management team that is dedicated to using innovative digital solutions to make an impact on the local economy


Other Relevant Information

  1. Vanuatu National Financial Inclusion Strategic Plan (click here)
  2. PFIP’s ongoing project with NBV (click here)
  3. Financial services demand side survey findings for Vanuatu (click here)
  4. Financial Services Sector Assessment for Vanuatu (click here)
  5. MSME finance survey for Vanuatu 2016 (click here)
  6. Doing business and economy profile of Vanuatu 2019 (click here)
  7. More about e-commerce readiness and the ICT infrastructure (click here)
  8. The Vanuatu Chamber of Commerce and Industry has useful information on starting a new business and has a list of relevant websites (click here)

 

NBV Presentation on the challenge 

[1] IFC SME Financing Gap estimates, 2017