somewhat tight by historical standards, and while emerging market inflation is down, it is still an issue for a number of countries. this suggests that capacity constraints and structural issues have been playing a role in the recent sluggishness, and that somewhat slower growth may be part of the new normal for the emerging market economies as well. how much slower will in part depend on policy choices in the emerging market economies. just as in the mature economies, there is room for emerging market economies to boost potential growth through structural reforms, such as measures to improve the investment regime for infrastructure, improve public services and the business climate, and overhaul tax systems. having said all that, it is completely understandable that there is uneasiness in much of the emerging world with what is going on in the developed economies. over the years, the emerging markets have learned about financial stability the hard way, from their own crises and those of their neighbors. they have had too much experience with the aftermath of excessively loose fiscal and monetary policy, and political gridlock. those experiences have engendered a cautious approach to fiscal and monetary management and financial sector oversight that has served countries well during the volatility of recent years. it has also made them understandably uncomfortable with the risks they perceive in the developed economies. the fact of the matter is that the potential spillovers do pose risks for everyone, developed and emerging. the large and volatile capital flows encouraged by accommodative financial conditions in the developed economies, and the attendant pressures they put on credit markets, asset prices, bis central bankers ’ speeches and currency values do add to the challenges countries face in containing external vulnerabilities. and the failure to address underlying vulnerabilities in the developed economies does expose the ems to the risk of sudden reversals in capital flows. having spent much of my career working with emerging market policymakers, i have a lot of sympathy for these concerns, and the policy challenges they present. regrettably, there are no easy answers here. the reality is that, if policy were less accommodative in the developed economies, global growth would inevitably be slower, and the ems would face another set of side effects including weaker demand for their exports, potential spillovers from renewed macroeconomic weakness or recessions in the developed economies. and, perversely, yields might still remain quite low and capital flows even more volatile. lest you get the wrong impression : i do think that the emes have a

##bread kitchen and many others were once msmes. i am confident that as our small businesses grow they can help raise exports and investment in fiji. they can also help in importsubstitution thereby reducing our imports bill and narrowing the trade deficit. • it creates employment : small businesses are the answer to our unemployment problem. our formal sector cannot absorb all our school leavers – this is the same in all developing countries. the employment growth required for our future can come from the small business sector. rough estimates suggest that close to 60 percent of fiji ’ s labour force is involved in various forms of businesses that fall under the heading of msmes. • it combats poverty : msmes are also a way to combat poverty and can help us achieve our millennium development goals. msmes allow people to help themselves rise above poverty, by supplying the means to provide for basic needs such as education, food, shelter and clothing. smes give people the dignity of working for a living. 3. let me now move on to recent government and rbf policy initiatives to support the msmes over the years, the government and the rbf has put in place various incentives and supportive policies to create a conducive environment for msme activity. as a way to increase the involvement of the financial sector and to enable greater access to finance by micro - entrepreneurs around the country, the rbf in 2010 required all commercial banks to set - up microfinance units at their branches. commercial banks also established agents in rural areas using merchants and post office agents to facilitate finance activity. at the end of 2013, 81 agents were in operation providing basic banking services such as cash withdrawals, deposits and payments. in addition, since 2010, a total of 17 microfinance expos have been held. these expos bring together financial stakeholders that provide financial services, financial literacy training and create more awareness on microfinance activity to those in the surrounding vicinity of the expo. the rbf ’ s import substitution and export finance facility ( iseff ) were set up to improve fiji ’ s bop position by assisting exporters, renewable energy and import substitution businesses to obtain credit at concessional interest rates. currently, the maximum interest rate charged on the facility is 5 % p. a. the bank, from july 2010 to 31 january 2014 approved around $ 54 million under the facility. of this amount, $ 44. 7 million was approved for export finance, around $ 5. 7 million for import substitution businesses