the chance that volatile capital inflows will create substantial risk to the economy. this calls for the need to continue with policies to strengthen and reform the financial system. and to the extent that sustained inflows generate the need for real resources to be reallocated across the economy in response to changes in relative prices, a high degree of flexibility in the local economy will be needed to support these adjustments, which will lessen the risks of imbalance and price pressures. the second issue to think more clearly about is the disconnect between the global nature of the problems facing central banks and the domestic orientation of the policy response. as i noted earlier, effectiveness of the domestic policy response tends to weaken when the challenge is of a global nature. a case in point is the current cycle of capital flows which, in essence, is a global phenomenon driven by exceptionally low interest rates in the major economies. hence, policy response calibrated with domestic orientation may be of limited use if the problems at the source remain. this means that the thinking on policy needs to broaden to explore possible benefits of a closer coordination of policies between countries, especially when central banks face similar challenges of a global nature like capital flows. such coordination will elevate central banks ’ policy - making to a new level, commensurate with the new challenge posed by the post - crisis globalisation.

sada reddy : an anatomy of microfinance in fiji opening speech by mr sada reddy, governor of the reserve bank of fiji, at the pacific microfinance week 2009, nadi, 13 - 17 july 2009. * * * distinguished guests, resource persons and honoured participants. let me extend to you all a very warm welcome and bula vinaka to the fiji islands. i am very grateful and delighted to be here this morning to address this distinguished gathering of the pacific community on the important subject of microfinance. firstly, i would like to commend the microfinance pasifika network, the foundation for development cooperation and the sponsors for putting together such a comprehensive programme for us this week. a wide range of issues on microfinance and its role in the development of the pacific communities will be discussed. i note from the programme that we have very distinguished speakers and resource persons to speak to us and provide guidance on the way forward. i guess one of the greatest benefits of this kind of gathering is the networking and the sharing of each other ’ s experiences. i will therefore shortly be sharing with you some of fiji ’ s experiences in the promotion and development of microfinance in fiji. before that, however, let me make some general remarks on microfinance. as we are all aware, the role and contribution of microfinance in economic development and empowering our underprivileged is very important indeed. the impact studies of the various microfinance projects around the world have shown the significant improvement in the lives of people through the outreach of microfinance. it has contributed significantly in tackling poverty, improvements in housing, health & sanitation, better access to education, and more particularly the empowerment & participation of women in social and economic activities. most of you know the seminal work done in bangladesh in the area of developing and promoting microfinance schemes. a number of countries have adopted the bangladesh model. bangladesh saw an astronomical growth in microcredit over the last three decades. it has grown from a loan of us $ 27 to 42 people in 1976 to more than us $ 4 billion to 2. 8 million borrowers in 2003. i am told the recovery rate in bangladesh is 99 percent. these statistics show the phenomenal success of microcredit in bangladesh. therefore, i do not see why similar successes cannot be achieved in our part of the world. but this requires great drive and motivation of our people and policy makers. the basic