Sada Reddy: Information exchange on microinsurance in Fiji
Speech by Mr Sada Reddy, Governor of the Reserve Bank of Fiji, at the "Information
Exchange on Microinsurance" in Fiji, Suva, 15 July 2010.
* * *
It is a pleasure for me to address the opening of this "Information Exchange on
Microinsurance."
First, let me extend a warm welcome to you all. Tonight we have gathered leaders from
the private and public sectors together in order to discuss an important topic in financial
inclusion - microinsurance. From the CEO's of insurance companies, to rural cooperatives of
farmers, everyone here has a part to play in the development of this field, which will help
create a more stable and secure Fiji.
As you all know the Reserve Bank of Fiji continues to partner with key stakeholders of
financial inclusion like the Pacific Financial Inclusion Programme (PFIP), to extend financial
services and financial literacy to rural and low income people around Fiji. This event is
another example of this strong partnership and represents some of the wonderful progress
we have made together over the last year.
The National Financial Inclusion Taskforce turns five months old in three days, and has
already been displaying some impressive results. Exactly one month ago, NFIT brought Vijay
Mahajan, Founder of Basix bank and Chair of the CGAP Executive Committee to provide
insight on the status of financial inclusion in Fiji. Further at the end of last month the Asian
Development Bank presented a comprehensive report it completed on the same topic to
NFIT. The report made obvious some areas in which we need to make reforms, and also
offered some clear guidance on paths we can take moving forward.
One issue the report exposed was that we currently have no standardized reporting format
for microfinance, which means financial transparency is very low. In order to increase the
transparency of microfinance institutions, and facilitate better performance monitoring
standards, RBF and PFIP collaborated to provide financial reporting training to 35 people
here in Fiji at the beginning of this month. This is an important step to building the local
capacity here now, to ensure that microfinance initiatives in the future are both stable and
sustainable.
Further, the NFIT working group on financial literacy has designed a strategy and is busy
implementing financial literacy into the national curriculum here in Fiji, so all our children will
have the basic understanding of money management they will need to succeed. Scoping is
also being done by PFIP to conduct a national baseline for financial literacy in Fiji, so we can
accurately measure the impacts of our work in this field.
While all the efforts I have mentioned above are all positive, as we all know the overarching
goal of the National Financial Inclusion Taskforce is to:
"To reach 150,000 unbanked clients by 2014 through a nationally coordinated effort,
supported by a variety of financial service providers, offering a broad range of relevant,
accessible, affordable and cost effective financial services."
There has been significant progress on this front as well. Shortly after the RBF's e-money
launch, Vodafone officially launched its M-Paisa product, and since then, Digicel has also
made public that it will soon offer its Mobile Money product here in Fiji. The ability to provide
financial services over these mobile networks now allows us to access rural and low income
people that were previously too remote, or too expensive to reach. M-Paisa already has
thousands of customers, and is growing exponentially every day.
As this access continues to improve, we shift our focus to the types of financial products that
can be offered on these platforms. The NFIT goal was written with forethought to promote a
"broad range" of services as international experience has clearly shown that microfinance
products beyond savings and credit yield significant benefits to those struggling to overcome
poverty.
It is obvious to us all that while there are situations when most of us need credit, it is by no
means the "cure-all" financial product that it is often touted as. Some of these events are
unpredictable, meaning that they are hard to save for, and when they occur, a loan may not
be available or appropriate. These events, like floods, injuries at work, a death in the family,
are the exact situations for which insurance was created. When these situations occur, low
income people should have the appropriate financial mechanisms available to them to
reduce their risk of catastrophic income and property loss.
Microinsurance does not currently exist in Fiji on any large scale, but its power to increase
people's financial security and fortify their level of social protection warrants this informational
event today. As many of you know this product is now the fastest growing microfinance
product in the world, providing benefits to millions of mothers, farmers, and small business
owners around the world.
Because of this phenomenon the RBF has reviewed the Insurance Act of 1998, to ensure
that there are no restrictions hindering the introduction of this product here in Fiji. We totally
support any initiative or pilot project in microinsurance, and hope that insurance companies
do take the initiative to explore the potential of this market.
I'll now invite Mike McCaffrey, the Technical Specialist for PFIP to introduce the topic for the
evening, Microinsurance.