Inia Naiyaga: The banking industry in Fiji
Opening speech by Mr Inia Naiyaga, Acting Deputy Governor of the Reserve Bank of Fiji, at
the one-day Banking Expo organized by the Association of Banks in Fiji (ABIF), Suva,
7 May 2011.
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Introductory remarks
Chairman of the Association of Banks in Fiji (ABIF), Mr. Norman Wilson;
Members of the Association of Banks in Fiji (ABIF);
Distinguished Guests;
Ladies and Gentlemen:
Ni sa bula vinaka and a very good morning to you all.
I am delighted to be here this morning and would like to congratulate the ABIF for organizing
this expo to raise public awareness, on the valuable role that commercial banks play in our
economy. I encourage the public to take this opportunity to come and learn of our banking
industry here in Fiji. The commercial banks have a very long history in Fiji, the older ones
spanning over 100 years.
Role of the commercial banks
Ladies and gentlemen, let me say a little about the important role played by the
commercial banks in Fiji
Fiji has a well developed financial system that not only is secure and sound; but has
remained resilient despite the recent global financial crisis. The strong contribution of the
banking industry to the Fiji Financial System has been a major factor in this regard. Over the
years the Banks have invested heavily in Fiji and have remained committed to delivering
services that have helped shape and develop our country into what it is today.
At the end of 2010 the commercial bank's assets alone was around 42% of the entire
financial system and this highlights the importance of this industry in the local economy. The
value of total assets of the commercial banks at the end of 2010 was $4.5b and equates to
around 75% of GDP.
Their role in facilitating trade
Commercial banks are - financial institutions that primarily intermediate between the savers
and the borrowers in an economy. They also buy and sell foreign currencies and facilitate
trade and the transfer of payments both domestically and across international borders. It is
these very transactions that help to pay for our salaries, the importation of goods and
services that we use almost every day, and provide the much needed capital for investment.
At the end of 2010, the total loan book value of all banks stood at $3.1b and this has grown
by 159% over the last 10 years.
Commercial banks play an important role in the transmission of monetary policy in
Fiji. Over the last two years, the Reserve Bank has focused its policy on creating an
economic environment that is conducive to investment and growth. To this effect, the
overnight policy rate has been reduced further to 1.5 percent and a passive approach to
liquidity management was adopted. As a result, it is anticipated that commercial banks and
other market interest rates will generally further decline. The downward movements in
interest rates expected to provide incentives, for investors to borrow and pursue business
opportunities, raise household's disposable income and more importantly boost the
economic recovery.
Their role as corporate citizens
The commercial banks are an integral part of any economy. What is not often appreciated is
that Banks are also major employers and also pay substantial tax contributions in Fiji. In Fiji
they have also participated actively in charity and social work. They have not taken their
corporate social responsibility lightly and have taken the lead in giving back, to the
communities that they operate in.
But most importantly they have been partners together with the Reserve Bank and the
Government in the development of an internationally recognized sound and robust financial
system.
Banking innovation
Banks over the years in Fiji have been involved in financial innovation. We remember the use
of old pass books. Banks have been aggressive in introducing new financial products and
services. We now have the ATMs, EFTPOS and internet banking.
The Reserve Bank of Fiji in collaboration with the banking sector is focusing on innovative
ways of reducing costs of doing business for the commercial banks with the emphasis on
lowering costs of financial services to be more accessible and affordable to everyone. The
introduction of revolutionary products can contribute to financial deepening which in turn will
ensure that more people have access to affordable and appropriate financial services and
products. One has been the growing number of ATMs around the main urban centers. The
good news is that now the ATM's and EFTPOS machines are interoperable, meaning that a
customer from one bank can use the machine of another bank to conduct their banking
transactions, except for one bank. We are delighted with the recent introduction and the
distribution of wireless operated ETPOS machines which can be operated without a
telephone line. These along with smart card products are some of the new tools of the trade
that help to decentralize and make financial services more accessible.
I wish to take this opportunity to express my sincere gratitude for the commitment and
collaboration shown by the commercial banks, towards achieving 90 percent interoperability
to date. Ladies and Gentleman this ensures any bank card can be used at any EFTPOS
machine at any supermarket, service station or any retail outlet in the country. An important
component of this initiative is ensuring interchange fees are affordable and properly
disclosed by the banks and the Reserve Bank will be monitoring this closely.
Developments in the banking industry
Let me now touch on other developments involving the banking industry.
Local Advisory Boards
The Reserve Bank has been working closely with the banks, to ensure alignment and greater
focus.
In 2009, a Local Advisory Board (LAB) policy was issued by the RBF. The Policy requires
Banks' who are foreign branches to establish LAB's that are mandated to provide advice and
guidance to the Head of the Fiji Operations on Fiji's regulatory and supervisory environment.
Other focus areas for these LAB's include national development objectives, particularly
providing financial services to the wider community.
Level of fees & charges
Following the deregulation of the Fijian financial system, bank fees and charges have
become part of the Fijian banking landscape.
We note that the Commerce Commission is currently undertaking a study of the financial
sector in Fiji to examine whether fees and charges are set in a competitive environment or if
banks have a substantive market power. I urge banks to come to the table and take a
wholistic and collaborative approach to this matter. We are confident that in this spirit a
balanced outcome will be achieved for all stakeholders: banks, their customers, the
prudential supervisor, the economy and the Government.
The Reserve Bank has been since June last year working closely with banks to enhance the
disclosure of their fees and charges. The revised policy will be implemented in August this
year and will ensure not only greater disclosure standards particularly in terms of consistency
and transparency but equally important, accountability, primarily on the level and justification
for fees and charges.
The Reserve Bank also issued the
Banking Supervision Policy Statement Number 17:
Interest Spread Disclosure Statement and this requires commercial banks to publicly
disclose any increase in interest rate spreads beyond the previously regulated limit of
4 percent for any given quarter. In addition to disclosing the actual interest rate spread, the
bank will also be required to disclose the specific reasons. The objective of the policy
guideline is to ensure banks are transparent and accountable for any increase in interest rate
spread.
In 2006 following the introduction of the Financial Transactions Reporting Act and the
establishment of the Financial Intelligence Unit at the RBF, I am pleased to say that we have
received very encouraging support and cooperation from the commercial banks who
continue to work closely with the RBF, FIU and law enforcement agencies in combating
money laundering and other fraudulent activities in Fiji.
In 2009 a policy on the Complaints Management Framework was issued by the Reserve
Bank. We have since been able to monitor the manner in which customer complaints are
handled by the banks and are pleased with the way in which they collaborated in resolving or
in addressing the complaints.
Promoting financial inclusion
Financial Inclusion is the new buzz word and its significance cannot be undermined. Whilst
there has been no detailed study done here in Fiji, there is ample evidence to suggest from
other countries that limited access to basic financial services such as savings, loans
products, payments and micro-insurance to the poor and the unbanked tends to restrain
economic growth and development in any country.
One of the major focal areas that the Reserve Bank is championing is greater financial
inclusion in Fiji. A range of new initiatives have been implemented by the Reserve Bank in
partnership with relevant stakeholders over the last two years to achieve this goal. The
commercial banks have been an integral partner of this process as the banks are well
positioned to offer financial services to a broader range of customers due to their extensive
branch network, strong resource backing and experience.
National Microfinance Workshops
As most of you are aware, in 2009 a National Microfinance Workshop was organized by the
Reserve Bank of Fiji with support from the Pacific Financial Inclusion Programme (PFIP). A
key outcome that was agreed upon at this workshop was the commitment by participants to a
common vision of
"reaching at least 150,000 unbanked citizens through a coordinated
national effort by the year 2014".
A National Financial Inclusion Taskforce was then set up to monitor and drive strategies in
achieving the medium term financial inclusion goals Furthermore three working groups were
also established to support the Taskforce in the areas of financial literacy, statistics and
microfinance. The banks have been very forthcoming and are represented at all the three
working groups and at the National Taskforce level.
The banks have also participated at all the RBF Microfinance expos which have been held in
various centers around Fiji.
Conclusion
Let me conclude by thanking everyone today for taking time off from your busy Saturday to
visit this banking expo. This is a very good opportunity for everyone to talk to the banks and
give them your feedback on how you would like them to serve you better. Not only that, also
learn of what they have to offer in terms of financial services and products.
Commercial banks provide a valuable service to the people of Fiji and are strategic partners
of economic development and change. We need them as much as they need us. There
however is a need to work together in creating more accessible and affordable financial
services not only in the urban areas but also in the rural and outer islands that do not have
such fundamental services.
I applaud the Association of Banks in Fiji (ABIF) for staging this one day expo.
I wish each one of you an enjoyable and productive day and I declare the Expo officially
open.
Vinaka and Dhanyabaad