This piece is the second in a three-part series on Fiji.
You can read the first piece on BlueNotes.
Old rules
The Fiji National Provident Fund’s chief operating officer, Jaoji Koroi says the old rules on withdrawals contributed to the problem. Members were reaching 55 years with low account balances, with about 40 per cent of working Fijians who retire over the next five years having balances lower than $F10,000.
Now, 70 per cent of their balance is preserved until retirement.
“Before, members could access up to two third of their balances,” he says. “People were looking at this as working capital or their overdraft facility, which is really the wrong mind-set.
“We want 80 per cent of our members at least to reach retirement with $60,000 to $70,000 in the next 10 to 15 years.”
The issue of funding decent retirement is an issue for all countries, including Australia and New Zealand.
But Fiji and other Pacific nations face the added challenge of bringing more citizens into the formal economy, with an estimated 35 per cent of Fijians not having a bank account or using informal services.
The big issue is how Fiji can increase employment and wages, as the number of job seekers joining the labour market every year outweighs the number of new jobs.
There are problems with informal work and under-employment, and with university-educated job seekers struggling to find work, while there is a shortage of workers with trades and technical training.
Meanwhile, there is the cultural custom of kerekere, borrowing from kinfolk without an obligation to repay the loan. This works both ways, in a family member can expect to receive support as will give it. But it can work against individual savings.
As things stand, remittances sent home by Fijians working abroad are worth almost $F500 million a year, which includes members of the military on UN peacekeeping missions, as well as private citizens employed in Australia, New Zealand and elsewhere.
The good news is the Fijian government’s financial inclusion taskforce, chaired by Reserve Bank governor Barry Whiteside, is making steady progress and providing a model for many developing nations to follow.
Starting out four years ago, Mr Whiteside and his colleagues set a target of reaching half of the estimated 300,000 Fijians who were excluded from the formal economy. They achieved that milestone with time to spare.
But about 27 per cent of Fijians, or about 166,000 people, still do not have a bank account while nine per cent (about 55,000 people) use informal sources such as savings clubs, moneylenders or hire purchase from shops. Just 12 per cent of the population have insurance cover.
Under a new five-year plan, Fiji aims to increase the number of adults with access to formal financial services from 65 per cent of the population to 85 per cent, some 130,000 people, of whom at least half will be women.
The last point is important because Fiji lags on financial inclusion for women and rural dwellers, although it does better than other Pacific countries like the Solomon Islands and Samoa and is well ahead of the Philippines and Indonesia.
Meaningful usage
The Reserve Bank’s manager of financial system development, Christina Rokoua, says the first stage of the work was to give access to services, which might mean a ‘mobile wallet’ for electronic payments or using a microcredit provider.
The second stage focuses on “meaningful usage”, which can be an increase in savings over time for a low-income family or an insurance policy to provide a safety net in times of crisis.
These programs are backed at the grassroots by financial education in schools and by the MoneyMinded financial literacy program run by ANZ in villages and among small traders.
The Government is increasingly using electronic payment for welfare and for land-leasing payments, which is increasing the number of bank accounts.
There are already success stories like Miriama Tawalovo (pictured left) who started out running a roadside juice stall.
She borrowed $F200 in micro-finance for a juice cooler and later expanded to a handicraft stall for tourists.
After further MoneyMinded training, she opened a mini-mart in her village, started exporting handicrafts, bought a pig farm and won the Reserve Bank’s microfinance entrepreneur of the year award in 2014.
Fiji is now a leading player in the Alliance for Financial Inclusion, hosting that body’s Global Policy Forum last September, which was attended by representatives from 114 countries.
As part of the push Fiji has signed the Maya Declaration to develop sustainable business models to mitigate climate change.
The Reserve Bank’s Rokoua explains: “Green finance and financial inclusion overlap because the poor and the low-income are the most vulnerable to climate change and would be hit hardest.”
The upside is many small steps can add up to major advances. And one of the biggest steps is financial empowerment of women.
* Mark Skulley is one of Australia’s most-respected business journalists, a veteran of more than two decades at Fairfax Media including The Australian Financial Review.