Financial inclusion data the key to unlocking better policy decisions

August 16, 2016

Welcome to the Reserve Bank of Fiji’s public awareness column. Over the next few weeks, a series of articles on financial inclusion will be published. The Reserve Bank of Fiji is co-hosting the annual Alliance for Financial Inclusion Global Policy Forum in September. This is the first time a country in the Pacific is hosting this landmark event for financial inclusion policy makers

GOOD data in the financial inclusion space is not always easy to obtain in the initial stages of any work we wish to do in this area.

However, with the increasing interest in financial inclusion at a global level, policymakers are recognising that data provides an essential foundation for evidence-based decision making. Reliable data enables policymakers to accurately diagnose the state of financial inclusion, identify barriers, craft effective policies, set relevant targets, monitor and assess the impact of financial inclusion efforts in the country.

The year 2014 saw the completion of Fiji’s first medium-term strategy for financial inclusion that was set in 2010.

The first strategy highlighted some important lessons. One is that data is a critical element in the financial inclusion agenda and that there is a need to fill the existing data gaps on the usage and the perception of the general public on the various financial products and services available to them.

Regulators through their supervision role can request and receive supply side data from licensed financial institutions (such as the banks, credit institution and insurers).

A set of key financial inclusion indicators have been formulated using available supply and demand side data to monitor and benchmark the progress of financial inclusion in Fiji.

These indicators were adapted from a global and regional set of financial inclusion measurement tools that have been developed by the Alliance for Financial Inclusion (AFI) member network of central banks and policy makers.

They serve to align and monitor the progress of financial inclusion across countries and regions.

In developing these indicators, consideration was given to the usefulness, pragmatism, consistency, flexibility, balance and aspiration.

To get a more complete view of the status of financial inclusion in Fiji, supply side data as well as demand side data are needed.

Demand side data capture the user’s side and are generally collected through surveys. Fiji has been one of the first three countries in the region that have completed a national demand side survey (DSS) in the last two years.

The main purpose of the DSS was to help financial inclusion stakeholders, and especially policymakers, gain a better understanding of the needs of Fijians in regard to financial products and services.

A brief examination of the results suggest that, overall, our level of access to a formal bank account in Fiji is low when compared to upper-middle income countries surveyed as part of the World Bank’s Global Findex, though it compares well to middle income countries.

Some of the key findings:

* More than a third of the adult population do not have access to formal financial services and exclusion is typically highest among women, youth (aged between 15-30 years) and those in the rural and maritime areas;

* Lack of financial knowledge, understanding and awareness is noted to be a significant barrier to accessing formal financial services;

* It was noted that even though digital technology has great potential to increase access to formal financial services and enhance economic activity, usage in Fiji is relatively low. It was noted that less than 10 per cent are using mobile and internet banking and only 2 per cent are actively using mobile money;

* Use of credit is relatively low at 32 per cent compared with similar upper-middle income countries at 37.7 per cent according to the Global Findex database. It was noted that Fijians rely primarily on informal credit sources such as friends, family and shop credit.

The DSS reports that close to 50 per cent of credit users are from shop credit and hire-purchases (30 per cent use hire-purchases), 6 per cent from credit unions and microfinance institutions, 17 per cent from commercial banks and 5 per cent from finance companies;

* It was also noted that more than 50 per cent of those who reported to have a bank account reported to be saving at home and only 38 per cent reported saving with the formal sector;

* About 23 per cent of Fijians receive money from other parts of Fiji or from abroad and more women receive remittances compared with men. The post office was noted to be the most common channel (51 per cent) for domestic remittances even though this is a more expensive option compared with mobile money (3 per cent); and

* Insurance uptake in Fiji is also very low at around 12 per cent and similar to other formal financial products; insurance cover is higher among those with formal employment and in rural areas. It was noted that 25 per cent of the respondents do not know what insurance is and 40 per cent said they do not need insurance.

The findings from the demand side survey including supply side data provided baseline data that supported our efforts in designing new strategies to expand the access and usage of financial services to all Fijians.

 

Source: Fiji Times