denton rarawa : the credit union movement in solomon islands address by mr denton rarawa, governor of the central bank of solomon islands and registrar of credit unions, at the international credit union day celebrations, honiara, 20 october 2011. * * * chairman, sicul general manager, sicul directors and members of credit unions representatives of partner organizations participants ladies and gentlemen let me thank the organizers for inviting me to say a few words at this event to mark the international credit union day. it is an honour to be here this morning to deliver this address as part of celebrating and observing the international credit union day with the rest of the world. today the international credit union day is celebrated all over the world in recognition of the many positive contributions that credit unions have made in the lives of millions of their members around the world. our theme for this year : “ credit unions build a better world ” – fittingly highlights the economic and social contributions credit unions make to their members and communities worldwide. it is important that we acknowledge the contribution of credit unions as an important vehicle for social and economic development. i will return to this theme later in my speech. credit unions are owned by the members and aim to provide affordable financial services to improve their living standards. in the words of the founder of the movement, f. w. raiffeisen, “ credit unions must not confine itself to granting loans. the main objective should be to control the use of money, and improve the moral and physical values of people and their will to act by themselves ”. it is therefore important that we view credit unions not only as institutions where we can borrow money rather credit unions should be seen as vehicles for ( members ) to improve their livelihoods through ; financial self - reliance ; financial discipline – save first before spending ; borrowings for opportunities. productive purposes including creating self - employment solomon islands context recently we have started observing the international credit union day in solomon islands. this was in recognition of the global reach of the credit union movement and to celebrate the achievements and contribution of credit unions in the country in delivering financial services to their members and the solomon islands economy. bis central bankers ’ speeches for many years, credit unions have demonstrated that they can provide micro - finance services to their members in our communities. credit unions therefore, are an important part of our financial system and have the potential of advancing national development that could improve the living standards of people in the country. stakeholder commitment the office of the registrar of credit

with the process of financial deregulation that has taken place in the asian countries over the last 10 years or so is that it was driven partly by doctrine. this doctrinal imperative reflected two separate forces, which came together more or less by accident. the first of these forces was the dominance in academic circles of the “ efficient markets paradigm ”. this is a powerful analytical device, which has taken thinking in economics down very useful directions. but it, like all paradigms, is an imperfect representation of the real world. perhaps more seriously, in the course of academic debate, it became quasi - religious, with beliefs and facts becoming confounded. this made it hard to leaven the efficient markets paradigm with some real - world facts – principally, that markets are imperfect. the second force was a simple commercial imperative on the part of foreign financial institutions to gain access to new markets and compete in the most vigorous way. this commercial imperative was successfully transplanted into the political processes, so we saw, for example, the oecd insisting on capital market deregulation as a condition of korea ’ s membership of the organisation. these forces combined to form powerful rhetorical pressures, to deregulate as fully as possible, with special virtue being attached to those who opened their markets at the most breakneck speed. one of the notable manifestations of this was the bangkok international banking facility, whereby small thai businesses were presented with a frictionless conduit to international financial markets, where they could borrow at attractively low interest rates, in foreign currency. in australia, we know, from our small taste of the swiss loans in the 1980s, how dangerous it is to have relatively unsophisticated borrowers given the opportunity and incentives to take on sophisticated products involving foreign exchange risk. but in australia this was relatively modest in macro - economic terms. in thailand, the inflow through the bangkok international banking facility was not far short of 10 % of gdp. with this change of attitude, it should be easier to insert some common sense into the process of deregulation, and have the courage to say “ no ” ( or “ not yet ” ) to some aspects of deregulation which seem to make countries more vulnerable. so it may be quite sensible, from this viewpoint, to put various restrictions on short - term capital inflows, and on foreign - currency borrowing. this is compatible with free - market principles, because these are properly seen as transition measures, to be modified and