fiji financial sector development plan 2016-2025...providers TABLE OF CONTENTS FIJI FINANCIAL SECTOR...

fijifinancial sector development plan

2016-2025

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FIJI FINANCIAL SECTOR DEVELOPMENT PLAN | 2016-2025

MessagefromtheGovernor 3

ExecutiveSummary 5

SECTION 1: INTRODUCTION AND BACKGROUND

1.1 Introduction 8

1.2 FinancialSectorasaCatalysttoEconomicGrowthandDevelopment 8

1.3 RoleofGovernmentintheFinancialSectorDevelopmentPlan 10

1.4 ApproachandConsultationProcess 10

SECTION 2: ECONOMIC AND FINANCIAL SECTOR OVERVIEW

2.1 EconomicOverview 13

2.2 AnOverviewofFiji’sFinancialSystem 14

2.3 PastReformsinFiji’sFinancialSector 15

2.4 KeyHighlightsofCurrentPolicyInitiativesandReforms 17

SECTION 3: FIJI’S FUTURE FINANCIAL SECTOR LANDSCAPE

3.1 Vision 19

3.2 Fiji’sFutureFinancialSectorLandscape 20

SECTION 4: ACHIEVING THE VISION – PILLARS TO DRIVE CHANGE

4.1 Pillar 1 –Ensureanenablingandsoundlegislativeandregulatoryenvironment 24

4.2 Pillar 2 –Enhancethedevelopmentoftalentmanagementanddynamicservice 25

providers

TABLEOFCONTENTS

FIJIFINANCIALSECTORDEVELOPMENTPLAN|2016-2025

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4.3 Pillar 3 –Promotetheadoptionofstateofthearttechnologiesformoreefficient 27

paymentandsettlementservices(includingremittances)todrivefinancialsystem

efficiency

4.4 Pillar 4–Enhancethedevelopmentandcompetitivenessofnon-bankfinancial 28

institutionsandotherfinancialinstitutions

4.5 Pillar 5 –Promotesustainablefinancialinclusionandstrengthenconsumer 29

protection

4.6 Pillar 6 –Createavibrantenvironmentforthedevelopmentandfinancingof 31

Micro,SmallandMediumEnterprises

4.7 Pillar 7 –Enhancetheaffordability,dynamism,transparencyandefficiencyofFiji’s 33

bankingindustrytoservicedomesticandregionalclientele

4.8 Pillar 8 –Introducecompetitioninthesuperannuationindustryandestablisha 35

cultureofretirementandlong-termsavings

4.9 Pillar 9 –Provideaffordableriskprotectionandpromotethewidespreaduseof 36

insuranceservicesandproducts

4.10 Pillar 10 –BecomethepreferredcapitalmarketcentreintheSouthPacific 38

SECTION 5: INSTITUTIONAL ARRANGEMENTS FOR MONITORING AND EVALUATION

5.1 NationalFinancialSectorDevelopmentTaskforce 40

5.2 WorkingGroupsandAnnualWorkPlans 40

5.3 Secretariat 41

5.4 MonitoringandEvaluationFramework 41

SECTION 6: SUMMARY OF KEY FSDP RECOMMENDATIONS

6.1 Top25Recommendationsby2025 43

Acronyms 46

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MessagefromtheGovernor

Oneofthekeyelementsofdevelopinganinternationallyreputablefinancialsystemistostocktakeandreviewthecurrentstate

offinancialsectordevelopment.Againstthebackdropofagrowingfinancialsectorlandscape,aforwardlookingandproactive

policystanceisneededthus,theformulationoftheFinancialSectorDevelopmentPlan(FSDPorPlan)forFiji.Theunderlying

goaloftheFSDPistocontributemoreeffectivelytoinclusive,sustainableeconomicgrowth.

AsFiji’scentralbank,theReserveBankofFiji’sprimaryresponsibilitiesaretomaintainmonetaryandfinancialstabilitywhilstin

pursuitofeconomicgrowth.Therolethereforeofdevelopingthefinancialsectorisonethatfallsdirectlyundertheambitofthe

ReserveBankofFijianditsmanystakeholderswithinthefinancialsector.

ThisFSDPaimstoarticulatethekeyreformareasforthefinancialsysteminthenext10years. It identifies10keypillars in

whichsuchreformsareneededandwhereproposedrecommendationshavebeenformulatedtounlockfurthergrowthinthe

financialsector.Policyobjectives,broadstrategiesandkeyrecommendationsarearticulatedtoguideimplementationbythe

widespectrumofstakeholders.ThepolicyobjectivesareconsistentwiththeGovernment’snationaldevelopmentplansand

goals,andthefinalproductisanoutcomeoftheinputbykeystakeholders.Strategiesareprovidedforallstakeholderstodrive

theireffortsinthenext10years.

TheFSDPrecognisestheneedtoallocateprivateinvestmenttobroadenoureconomicbaseandtoaddressthevulnerabilities

ofFiji’snarrowbasedeconomyandoverrelianceonimports.Italsoacknowledgestheneedtocomplementcurrenteffortsto

improveaccesstofinanceandfinancialservicestotheMicro,SmallandMediumEnterprises(MSMEs),priorityeconomicsectors

andtothepoorandlowincomehouseholdstoachieveinclusivegrowth.Theresponseofthefinancialsectortowardsachieving

thesustainabledevelopmentgoalsandsupportinggreenfinanceisinherentintheFSDP.

TheformulationoftheFSDPisanoutcomeofaconsultativeprocessundertakenwithfinancialservicesproviders,government

ministriesanddevelopmentpartners.Itssuccessfulimplementationwillthereforedependonthecollaborationandpartnership

ofstakeholdersandwelookforwardtotheircommitmenttothisFSDP.TheroleofGovernmentanditsenablinginfrastructure

isvitalunderthisPlantoenablethefinancialsectortomeetthefinancingneedsofboth,ourpeopleandforeigninvestors.

“The underlying goal of the FSDP is to contribute more effectively to inclusive,

sustainable economic growth.”


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LastlyarobustmeasurementandmonitoringframeworkisvitaltothesuccessofthisFSDP.Icallonallstakeholderstoassist

withdatacollectiontofacilitateevidencebasedpolicymaking,implementationofrecommendationandimpactassessment.

Iwishallstakeholdersinthefinancialsectoreverysuccessintheirefforts.

Barry Whiteside

Governor

26 May 2017

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Executive Summary1. Fiji is an upper middle income country with a population of 871,3341andRealGrossDomesticProduct(GDP)percapita

estimatedatF$7,804.10,(US$3,722.60)in2016.Fiji’smajorexportsincludemineralwater,fish,sugar,gold,garments

andtimber.Ontheotherhand,Fiji’smajorimportsincludemachinery&transportequipment,mineralfuels,foodand

manufacturedgoods.In2017,Fiji’seconomyisestimatedtogrowby3.8percent.

2. Fiji’s financial system has developed significantly from its infancy stages in the early 1970s. Currently,theReserveBank

ofFiji2sitsattheapexofthesystem.Thebankingindustryconsistsof6commercialbanksand4creditinstitutions,the

insuranceindustryhas7generalinsurers,2lifeinsurers,4insurancebrokersand524agentsandthesuperannuation

industryconsistssolelyof theFijiNationalProvidentFund (FNPF). Thecapitalmarketcomprisesasinglesecurities

exchangewith19listedcompanies,2UnitTrusts,12investmentadvisors,3stockbrokersand3dealers,whilethenon-

bankfinancialinstitutions(NBFIs)consistsof2statutorylenders,9foreignexchangedealers,2moneychangers,aswell

as89co-operativesand21creditunions.Fiji’sfinancialsector isgovernedbykeylegislationsincludingtheReserve

BankofFijiAct1983,theExchangeControlAct1985,theBankingAct1995,theCompaniesAct2015,theFijiNational

ProvidentFundDecree2011,theInsuranceAct1998andtheFairReportingofCreditAct2016.

3. The focus of the FSDP is to strengthen the Fijian economy through financial sector deepening to contribute further

to inclusive and sustainable economic growth in Fiji. The FSDP recognises that there are current financing gaps

forkeysectorsincludingtheprovisionofGreenFinance.Thereisalsopotentialforgrowthinthevarioussectorsof

theeconomyinparticulartheareaofexportandimportsubstitutionincludingtheagricultureandenergysectors.It

identifiestheneedforfinancialservicesprovisiontoMSMEsandtheunderserved.

4. It is for the above reasons that this FSDP, which was developed through a consultative and collaborative process, has

been formulated to guide stakeholders’ efforts over the next 10 years. TheFSDPidentifies10keyareasorenablersof

growthas“Pillars”andarticulatesbroadstrategiesandrecommendationsthatwillpositionthefinancialsectortobea

catalystforeconomicgrowthanddevelopment.

5. The role of the Government in this FSDP is crucial. Its role inmacroeconomic stability is the cornerstone for a

strongandstable financial sector. It is alsovital that theGovernmenteffectivelyundertakes its traditional rolesof

maintaining legal and social frameworks, providing public goods and services, redistributing income and correcting

negativeexternalities.

6. The vision of this FSDP is “To Develop a Robust and Deep Financial Sector that will Stimulate Economic Growth”. By

2025,inpartnershipwiththeGovernmentandrelevantstakeholders,itisenvisionedthatFijiwouldachievefinancial

deepeningandarobustfinancialsectorthatissound,resilient,dynamicandinclusive.Thiswillcontributeandsupport

economicgrowth.Itwillalsorealisethecapabilitytoaccommodatetheneedsofbothdomesticandregionalclientele.

ThisvisionissupportedbythestrategiesandrecommendationscontainedinthisFSDPandanimplementationframework

thatisabletoadapttochangingeconomicandpoliticalconditions.

1 ReserveBankofFijiQuarterlyReview,March2017.

2 TheReserveBankofFijiisestablishedundertheReserveBankofFijiAct1983whilebanksandcreditinstitutionsarelicensedundertheBankingAct1995,insuranceunderwriters,brokersandagentsarelicensedundertheInsuranceAct1998.TheFNPFwasestablishedundertheFijiNationalProvidentFundAct1966whileallcapitalmarketintermediariesarelicensedundertheCompaniesAct2015.


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7. The FSDP will also assist the Government’s agenda for a financial hub andrepresents,intheinitialstages,abuilding

blockforthefinancialsector’scontributiontowardsthislong-termvisionoftransformingFijiintoaregionalfinancialhub

intheSouthPacific.

8. The successful implementation of the Plan is primarily dependent on continued collaboration with and a unified

commitment by all financial sector players towards the fulfilment of the FSDP Vision. Tothisend:

(i) ATaskforceshallbeformedtofacilitatetheoversightoftheimplementationoftheFSDP;

(ii) Working Groups along with technical committees shall be createdwhen andwhere needed to assist the

Taskforcewiththeimplementationandmonitoringprocess;and

(iii) TheReserveBankofFijishallbetheSecretariattotheTaskforce.

The implementation framework of this Plan includes the monitoring of appropriate and measurable indicators to

effectivelycaptureandevaluatetheprogressachievedforfurtherassessment.

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SECTION1

INTRODUCTIONANDBACKGROUND


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1.1 Introduction

1. Fiji’s financial sector has grown impressively since independence when players were limited and markets were in

nascent stages and highly regulated. The Reserve Bank of Fiji in collaboration with successive Governments has

spearheaded financial sector reforms thathaveallowed themarket todevelop,growand innovate inaderegulated

environment.PlayersandstakeholdersinthefinancialsectorhaveinvestedheavilyinFijiandhaveremainedcommitted

todeliveringproductsandservicesthathavehelpedshapeanddevelopFiji’sfinancialsectortoitscurrentstate.

2. Fiji’s financial sector now comprises a variety of players offering various products and services. These include the

ReserveBankofFiji,thebankingindustrywhichconsistsof6commercialbanksand4creditinstitutions,theinsurance

industrywhichhas7generalinsurers,2lifeinsurers,4insurancebrokersand524agents,thesuperannuationindustry

consistingsolelyoftheFNPF,thecapitalmarketcomprisingasinglesecuritiesexchangewith19listedcompanies,2Units

Trusts,12investmentadvisors,3stockbrokersand3dealers,NBFIsconsistingof2statutorylenders,9foreignexchange

dealers,2moneychangers,aswellas89co-operativesand21creditunions.

3. As at 31 December 2016, the size (gross assets) of Fiji’s financial services sector (excluding Reserve Bank) stood at

F$17.4 billion.3 Thisrepresented177.1percentofGDPandthefinancialandinsurancesectorasawholecontributedto

9.8percentoftheGDPin2016.Overthelastfiveyears,thefinancialsector’sgrossassetshaveregisteredanaverage

growthof9.1percentwithannualgrowthratesrangingfrom7.5percent(2012)to4.9percent(2016).

4. Along with this growth, the financial sector has become one of the most rapidly developing markets in the South

Pacific. Itisnotonlysecureandsoundwithwellmanagedfinancialinstitutionsandeffectivefinancialmarkets,buthas

remainedresilientdespitemanyeconomicandpoliticalshocks,includingthe2007-2008globalfinancialcrisis.

5. The aim of this Plan is to accommodate and enhance Fiji’s economic growth and development that is both inclusive and

sustainable. Itshallfocusprimarilyonthefinancialsectoranditscontributiontoandsupportofthedomesticeconomy.

ThePlanwillstrengthenandpositionFiji’sfinancialsectortomeetthefinancingneedsofthedomesticeconomyover

themedium-termto2025.

6. This Plan shall bring together all financial sector players, the Government and all other stakeholders to collaborate and:

(i) Addresstheobstaclesthatinhibitthefinancialsectorfrommeetingthefinancialintermediationneedsofall

playersintheFijianeconomysupportedbykeyfinancialsectorreformpillarsthatwillsupplementeconomic

growth;and

(ii) Implementactionitemswithinfeasibletimeframestoaddresstheaboveandsteerthefinancialsectortowards

thedesireddirectionofgrowthanddevelopment.

1.2 Financial Sector as a Catalyst to Economic Growth and Development

7. It is recognised that Fiji is at the threshold of a new stage of development. Therehavebeenpositivedevelopmentsin

recentyearswhichsignaltherighttimetocollaborateandpartnerwithbothindustryandnationalstakeholderstolaunch

thisFSDP.

3 ForthepurposeoftheFSDP,theexistenceoffinancecompanies(operatingundertheMoneyLendingAct1978),co-operatives,creditunions,microfinanceinstitutionsandinformalinsurersarenotedbutduetotheunavailabilityoffinancialinformation,thesefinancialserviceprovidersarenotincludedinthecurrentcomputationofthefinancialservicessector.

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8. First and foremost, Fiji has held a successful General Election in 2014 and now has a democratically elected Government.

Thepeacefultransitionhasbroughtaboutpoliticalstabilityandtheconfidenceoftheinternationalcommunityaswellas

domesticinvestors.There-engagementofgovernmentsanddonorpartnersisconduciveforacceleratingdevelopment

intheeconomy.

9. In addition, the continuous positive economic growth rate recorded from 2010 to 2016 with the last three years

growing at an average of 3.7 percent has signalled improved investor confidence. Thisunderscorestheneedforthe

financialsectortotakeintoaccounttheemergingfinancialneedsoftheeconomyandpositionitselftocontributein

sustainingpositivegrowthinthenext10yearsandelevatingittohigherlevels.

10. Government’s commitment via infrastructure spending, particularly, on new roads is enabling accessibility to markets

and increasing the potential for higher economic activity. Thisalongwithagrowingfocusonthedevelopmentofthe

MSMEsector,signaltheneedformoreinnovativeandconvenientfinancialandancillaryproductsandservices.

11. Fiji has the state of the art technology and electronic payments systems which have the potential to develop further

and enable influential changes in financial services delivery. It is important for the financial sector to leverageoff

thesenewtechnologiesandimproveefficiencytoenablewiderandhigheraffordabilityoffinancialservices.Thereis

generalconsensusthatfinancialtechnology(FinTech)willdefineandshapethefutureofthefinancialsectorinemerging

economies.

12. On the sectoral front, there are sectors4 that have the potential to grow further and increase and/or diversify Fiji’s

export base to strengthen our balance of payments. Growthinexportsandimportsubstitutionisafundamentalchange

requiredtoimproveourbalanceofpaymentspositionandthewealthofournation.Thefinancialsectorasawholemust

collaboratewithallstakeholdersinordertorespondtothisnationalneed.Inaddition,certainindustriesinthefinancial

sectorhaveexcelledintheextensionofproductsandserviceswhilstothershaveremainedcostlyandavailableonly

tocertainsegmentsoftheFijianpopulous.Financinggapsandappropriatefinancialproductsandservicestoaddress

these,needstobeidentifiedandprovidedforinordertoachievehighergrowth.

13. Government has successfully forged new international relationships and new trade partners. These, including the

Melanesian Spearhead Group (MSG) Trade Agreements coupledwith higher foreign direct investment and political

stability,indicatetheneedforimprovedefficiencyinfinancingasinternationaltradeincreases.

14. Employment is anticipated to increase inlinewithimprovedinvestorconfidenceandhigherforeigndirectinvestment,

growingworkopportunities fromseasonalworking schemesand tradeagreements. Theworkforcewill require the

financialsectortofacilitateeffectiveandefficienttargetedservices.

15. On the domestic front, changing demographics, a more educated workforce and the growing diaspora of Fijians working

overseas imply that the financial system has to respond to more sophisticated financial needs and wants including

remittances,Fiji’ssecondhighestforeignexchangeearner.

16. Furthermore, there is a need to align legislation, policies and procedures in both the financial sector and the real sector

to bring about synergies that enable the financial sector players to provide effective financial services to players in

the real sector. This alignment should address obstacleswhich include, but is not limited to, structure, ownership

andconcentrationswithintherespectiveindustriesinthefinancialsector,aswellaslowlevelsoffinancialliteracyand

competency,highcostofdoingbusinessandinformationasymmetryforplayersintherealsector. 4 Agriculture,forestry,mining&quarrying,renewableenergygeneration,manufacturing,andtourism.


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1.3 Role of Government in the Financial Sector Development Plan

17. The role of the Government in this FSDP is crucial. Itsroleinmacroeconomicstabilityisthecornerstoneforstability

inthefinancialsector.ItisalsovitalthattheGovernmenteffectivelyundertakesitstraditionalrolesofmaintaininglegal

andsocialframeworks,providingpublicgoodsandservices,redistributingincomeandcorrectingnegativeexternalities.

Inthisregard,theGovernmenthasformulatedaNationalDevelopmentPlanforFijiencompassingeconomic,socialand

environmentalgoals.TheFSDPwillplayacriticalroleincomplementingGovernment’ssuccessfulimplementationofits

nationaldevelopmentplansincludingtheGreenGrowthFramework.

18. In addition, the financial sector shall rely on continuous advice from the Government regarding their vision for priority

sectors and financial services requirements. Toprovidefinancialsolutionsneededtoboosttheseprioritysectors,these

mustbearticulatedandsharedwith financialsectorplayerswhocanthencollaborateandrespondtothe financing

needsthatarise.

19. In view of the above, the FSDP’s implementation framework shall include membership of Government ministries

and agencies in the Taskforce and its Working Groups. The implementation frameworkshallalso includecreating

awarenessofthelong-termagendaoffinancialmarketdeepening,establishingpartnershipsandongoingcollaboration

with relevantGovernmentministrieswho can drive reforms required to address important preconditions andwork

towards:

(i) Creatingafavourableandtransparenttaxregime;

(ii) Achievinggreaterregionalintegrationthroughtrade,investmentandlabourmobility;

(iii) Reducingcostandimprovingeaseofdoingbusiness;and

(iv) Improvingthequality,reliabilityandappropriatenessofphysicalinfrastructure(stablepowergeneration,robust

telecommunications,andefficienttransportationandpaymentandsettlementsystems).

20. This Plan will be supported by a strong implementation framework that is able to adapt to changing economic and

political conditions. The frameworkwillbedrivenbya robustandresponsivemonitoringandevaluationstructure,

strategic partnerships, and continuous consideration of lessons learnt. Itwill also include initiatives undertaken by

developedcountriesaswellasacommitmentbythesectortobethe leader intheregionforcreativethinkingand

innovativefinancialservicesandproducts.

1.4 Approach and Consultation Process

21. The FSDP was formulated through a consultative and collaborative process between the Reserve Bank of Fiji, financial

service providers, key departments and agencies of Government, other development partners, non-governmental

organisations and consumer advocates who are involved in facilitating and supporting economic development and

growthinFiji.

22. Adopting this consultative and collaborative approach was a critical prerequisite for an effective Plan. In order

tounderstand the current conditionsof the sector andeffectively chart an agreedway forward for its accelerated

development,consensusonasectorwidelevelonthecontentandthecommitmentofstakeholdersandfiscalpolicy

makerswereimperative.

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23. The consultation process involved three key steps:

(i) Marketconsultationletters;

(ii) Consultativemeetingswiththestakeholders;and

(iii) PeerreviewbytheInternationalMonetaryFund(IMF)PacificFinancialTechnicalAssistanceCentre.

Theprimaryobjectivesandexpectedoutcomesofthethree-stepconsultationprocesswere:

Core

Objectives

Toobtainthefollowinginformationfromstakeholders:

• Generalviewofthefinancialsystem;

• Stakeholders’viewondevelopingaFSDPforfinancialmarketdeepeningandstrengtheningofthedomesticeconomy;and

• ComprehensiveStrengths,Weaknesses,OpportunitiesandThreats(SWOT)assessmentofallindustriesinthesector.

TodecideonandprovideasoundbasisforthestrategiesandactionplanthatwillbeincludedintheFSDP.

Expected

Outcomes

Identifythedevelopmentopportunities/areasinthefinancialsector;and

FinaliseaFSDPforFiji that isacollaborativeproduct resulting fromthecontributionsofallrelevantstakeholders.

24. Supplementing the consultation process were:

(i) AreviewoftheFinancialSectorrecommendationsinFijiGovernment’sRoadmapforDemocracyand

SustainableSocio-EconomicDevelopment2010-2014;and

(ii) Researchonexperiencesofothercomparablecountriesandinternationalbestpractices.


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SECTION2

ECONOMICANDFINANCIAL

SECTOROVERVIEW

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2.1 Economic Overview

25. Fiji is an upper middle income country with Real GDP per capita estimated at F$7,804.10 equivalent to US$3,722.60

in 2016. Themainisland,VitiLevuwithmorethan10,400squarekilometresaccountsformorethanhalfofFiji’stotal

landareawhilethesecondlargestisland,VanuaLevu,covers5,500squarekilometres.

26. Fiji’s population is around 871,334. TheiTaukei,5makeupanestimated58.0percentofthepopulationwhile Indo-

Fijians andotherethnic communities6 comprise36.0percent and6.0percentof thepopulation, respectively. The

iTaukeicommunallyholdapproximately87.0percentofallland,theGovernmentholdsapproximately4.0percent,while

theremainderisfreeholdland.7

27. Fiji is predominantly a service oriented economy. The services sector include the wholesale and retail trade;

accommodation and food services; transport and storage; information and communication; financial and insurance

activities;realestateactivities;publicadministrationanddefence;education;humanhealthandsocialworkactivities;

professional,scientificandtechnicalactivities;administrativeandsupportservices;arts,entertainmentandrecreation

activities,andtheotherservicesactivitiessectors.

28. Fiji’s major merchandise exports include mineral water, fish, sugar, gold, garments and timber. Overthelastdecade

(2007-2016) the main traditional export of sugar has declined significantly while all other major categories have

expanded.Totalexports(excludingaircraft)increasedfromF$1,209.8millionin2007toF$1,936.3millionin2016.The

mainexportdestinationsareUnitedStates(US),Australia,NewZealand,China,UnitedKingdom,Japan,NewZealand

andtheSouthPacificIslands.

29. Fiji’s major merchandise imports include mineral fuels, machinery and transport equipment, food and manufactured

goods. Allcategoriesofimportsincreasedoverthelastdecade,withmachineryandtransportequipmentaccounting

forthelargestshare(30.4percent)in2016.Foodtogetherwithmanufacturedgoods(16.3percentand16.0percent

respectively)currentlyaccountforthelargestshareaftermachineryandtransportequipment.Totalimports(excluding

aircraft)increasedfromF$2,874.5millionin2007toF$4,838.9millionin2016.

30. Tourism is the largest foreign exchange earner and contributes to around 30.0 percent of GDP. In2016,Australiawas

thelargestsourcemarketwith45.5percentofallvisitorsfollowedbyNewZealand(20.7percent),UnitedStates(8.8

percent),PacificIslands(6.3percent),China(6.2percent)andContinentalEurope(4.0percent).Theindustryishighly

sensitivetoexternalanddomesticshocks.TourismearningswerearoundF$1,603.0millionin2016.

31. Economic growth over the past decade (2007-2016) comprised early years of volatile growth, followed by latter years

of consecutive positive growth, owing in part to a range of internal and external shocks. These include political

uncertainty,naturaldisasters,food,fuelandcommoditypriceshocksandtheglobalfinancialcrisis.Between2004and

2014,theFijianeconomygrewonaverageby2.0percentperyear.However,therehasbeenamarkedimprovementin

growthoverthelastthreeyearswhichaveraged3.7percentfrom2014-2016.

32. Foreign reserves have reached comfortable levels after the devaluation in 2009. Foreign reserves (ReserveBank

holdings)werearoundF$430.0millionatthebeginningofAprilbeforethedevaluationinthesamemonthin2009,

sufficienttocover1.7monthsofretainedimportsofgoodsandservices.Foreignreserveshaverecoveredtohigher

5 IndigenousFijians.

6 Europeans,Chinese,RotumanandotherPacificIslanders.

7 FijiFactsandFigures2011,FijiBureauofStatistics.


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levelssincethen,reachingF$1,921.2millionattheendof2016,sufficienttocover5.0monthsofretainedimportsof

goodsandservices.Improvementinforeignreservesoverthelastfiveyearswastheresultofhighertourismearnings,

inward remittances, other receipt accounts, offshore borrowing by Government, foreign investment and additional

StatutoryReserveAllocationbytheIMF.

33. Government’s net fiscal deficit has averaged around 2.0 percent of GDP in the last decade and has been financed

primarily through domestic and offshore borrowing. Inthefiscalyear2015/2016,thenetdeficitwasestimatedat1.6

percentofGDPwhilein2016/2017,thenetdeficitisbudgetedat4.7percentofGDP,includingestimatedassetsalesof

F$250.0million.

34. External risks to Fiji’s outlook include weak foreign demand arising from the lower global economic growth, a sharp

uptick in commodity prices from the current low, levels, appreciation of the US currency and weak foreign labour

markets. AslowdownineconomicactivityofourmajortradingpartnersistranslatedtoFiji’srealsectorthroughreduced

tradeandtourismflows.VolatilityincommoditypriceswillaffectFiji’stermsoftrade,pricesandbalanceofpayments,

whileastrongerUnitedStatesdollar(USD)willhaveimplicationsonforeigndebtrepayment.Inaddition,aweakforeign

labourmarkethasimplicationsontheinfluxofremittancestoFiji.

35. On the domestic front, given the improved growth outcomes since 2010 and the establishment of a democratically

elected Government, Fiji’s prospects have improved with increased resilience to deal with the downside risks. These

include the continued weak performance of exports relative to imports, slowdown in structural reforms, natural

disasters and political uncertainty. Increased donor funding, technical assistance and new bilateral relationships

are being established and is envisaged to address key structural challenges causing supply side constraints in

Fiji. These challenges include institutional red tape and bureaucracy resulting in higher cost of doing business;8

lowproductivity;landtenureissues;9lackofskilledlabour10inkeysectorsoftheeconomy;andinfrastructuralchallenges

(forexampleroads,airports,wharfs,andjetties).

36. In 2017, the economy is forecasted to grow by 3.8 percent. Themain drivers of growth are expected to be the

manufacturing;financial&insuranceactivities;construction;wholesale&retailtradeandtransport&storagesectors.

2.2 An Overview of Fiji’s Financial System

37. Fiji’s financial system consists of various types of financial institutions, financial markets and financial instruments

which interact to provide financial products and services within a well-defined legal framework. Fiji’sfinancialsector

isgovernedbykeylegislationsincludingtheReserveBankofFijiAct1983,theExchangeControlAct1985,theBanking

Act1995,theCompaniesAct2015,theFijiNationalProvidentFundDecree2011,theInsuranceAct1998andtheFair

ReportingofCreditAct2016.Thesectorisalsosupportedbyotherlegislationsrelatingtobankruptcyandsecurity.

38. As at 31 December 2016 the size of Fiji’s financial services sector (excluding Reserve Bank) depicted by the total assets

8 AccordingtointernationalDoingBusinessrankingsbytheWorldBank,Fiji’sannualoverallrankingrelativetoatotalof189countriesintheworld,deterioratedovertheyearssince2006whenitfirsttookpartintheWorldBanksurvey.Fiji’srankintheeaseofdoingbusinesshasstoodat84in2016.Forregisteringproperty,Fijiisranked55(54in2015)whilefordealingwithconstructionpermitsitstandsat100in2016(109in2015),forgettingcreditandelectricity,itstandsat78(71in2015)and79(75in2015),respectively.

9 Toassistinaddressinglandissues,theGovernmenthassetuptheCommitteeforBetterUtilisationofLand(CBUL)in2008andtheLandBankUnitin2010undertheLandUseDecree.

10Certainkeysectorsoftheeconomysuchasmining,garmentmanufacturingandthetransportindustrycurrentlyfaceshortageofindustryspecificskilledlabour.

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of financial institutions in the financial services sector stood at $17.4 billion.11 Thiscomprised174.8percentofGDP

andthefinancialandinsurancesectorcontributedto9.8percentoftheGDPin2016.Commercialbanksmakeupthe

largestportionofthesectorholding51.5percent,followedbytheFNPFwith31.5percent.Thecapitalmarketplayers12

comprise1.3percentoftotalsectorassetswiththerestoftheindustriescomprisingthebalance.

39. The financial markets in Fiji, namely money market, interbank market and the capital market have grown steadily over

the years. Although Fiji’s financial market is large in absolute value, it is still at a nascent stage of development. The

moneymarketoffersshort-termsecuritiesnamelyGovernmentTreasuryBills,StatutoryCorporations’promissorynotes

andReserveBankNotes.Inthelast15years,totalfundsraisedinthemoneymarketpeakedatjustoverF$7.0billionin

2002beforefallingtoaroundF$351.9in2016.Borrowingintheinterbankmarketisverylowandintermittent.Atotal

of$118.0millionwasborrowedintheinterbankmarketin2016lockingtheinterbankrateat0.90percent.Theissue

oflong-termbondsofGovernmentandStatutoryCorporationsdominatethecapitalmarket.Fijidollar-denominated

Governmentbonds issuedbytheMinistryofEconomymakeupasignificantproportion(90.0percent)ofthebond

market.Thesebondsareissuedwithstandardmaturitiesof2years,3years,6years,7years,10yearsand15yearsand

aresoldonatenderbasisbymeansofcompetitiveandnon-competitivebidding.OutstandingGovernmentbondsstood

atF$3.1billionattheendof2016andcomparestobankingsectorloansatF$6.0billion.

40. Most of the money market activity occurs in the primary market wherethesecuritiesarepurchaseddirectlyfromtheissuer

orregistrar(ReserveBank)actingonbehalfoftheGovernment.Securitiesareavailabletothegeneralpubliconatender

basis.Tradinginthesecondarymarketwhereinvestorpurchasesasecurityfromanotherinvestorratherthantheissuer

isminimal.

41. The payments system in Fiji is considered developed due to the introduction of state of the art electronic networks and a

real time gross settlement system. TheNationalPaymentSystemistheinfrastructureconsistingoffinancialinstitutions

andotherpaymentserviceproviders,payment instruments, rules,procedures,standardsandtechnicalmeanswhich

affectthetransferofmonetaryvaluesanddischargeofmutualobligationsinthefinancialsectorandeconomy.In2016,

Fiji’sRealTimeGrossSettlementSystem(FIJICLEAR)recordedatotalof115,298transactionsvaluedatF$105.6billion.

Agrowthof5.1percentwasrealisedintransactionvolume,whilethetotalvalueroseby4.8percentcomparedto2015

figures.Thisisattributedtoanincreaseinlargevaluepaymentsduring2016.

42. The cash and cheque payment systems are the traditional and dominant payment systems used in Fiji. Currencyin

circulationstoodatF$412.3millionattheendof2016.Thenumberofchequesprocessedbybankswasreportedat

5.1millionin2016.Asillustratedintheprecedingparagraphs,thefinancialsectorcontinuestodevelopandchurnsa

significantamountofcashflowsandpayments.

2.3 Past Reforms In Fiji’s Financial Sector

43. The sound and stable position of the financial sector and the reasonably well functioning markets have successfully

evolved over the past 4 decades since independence due to the sound management, innovations and continued

commitment of key stakeholders including financial institutions in Fiji. In addition past reforms are regarded as

instrumentalinshapingthecurrentfinancialsector.Keyhighlightsofthesereformsincludethefollowing:

11 ForthepurposesoftheFSDP,theexistenceoffinancecompanies(operatingundertheMoneyLendingAct),Co-operatives,CreditUnions,MicrofinanceInstitutionsandInformalInsurersarenotedbutduetotheunavailabilityoffinancialinformation,thesefinancialserviceprovidersarenotincludedinthecurrentcomputationofthefinancialservicessector.

12Thecapitalmarketplayerscompriseoftheunittrusts,stockbrokersandthestockexchange.


16

(i) EnactmentoftheFijiNationalProvidentFundAct1966;

(ii) EnactmentoftheCentralMonetaryAuthorityofFijiAct1973;

(iii) FijidollarpeggedtotheUSD,severingthefixedlinkwiththesterlingin1974;

(iv) FijidollarwasfixedinrelationtoatradeweightedbasketofcurrenciesofFiji’smajortradingpartnersin

1975;

(v) FirstissueofFijiDevelopmentBank(FDB)bondsin1976;

(vi) EnactmentoftheInsuranceAct1976;

(vii) SavingsBankofFijicommencedoperationsasafullcommercialbankin1976;

(viii) EstablishmentoftheUnitTrustofFijitoencouragesmallsaverstoparticipateinproductiveinvestmentsin

businessesandgovernmentsecuritiesin1978;

(ix) FirstissueofFijiElectricityAuthority(FEA)bondsandestablishmentoftheSuvaStockExchangein1979;

(x) RemovalofinterestceilingondepositsofF$250,000andoverwithamaturityofonemonthandoverthus

allowingmarketforcestodeterminetheratein1981;

(xi) IntroductionofnewinstrumentssuchastheFijiSugarCorporation(FSC)andFEAPromissoryNotes,and

thefirstissueofFDBbondsin1982.Orientationofpublicdebtpolicytowardsamoreflexibleandmarket

determinedregime(publictendersystem);

(xii) EnactmentoftheReserveBankofFijiAct1983;

(xiii) EnactmentoftheExchangeControlAct1985;

(xiv) Both thepost shipment rediscount facilityand forwardexchange facility fornon-traditionalexportson

SouthPacificRegionalTradeandEconomicCo-operationAgreementcountrieswereextendedtothesame

classofexportstotheEuropeanEconomicCommunityundertheLondonMetalExchangeAgreementin

1985;

(xv) IntroductionofAutomatedTellerMachines(ATM)intoFijiin1993;

(xvi) Enactmentof theBankingActand IntroductionofElectronicFundsTransferatPointofSale (EFTPOS)

machinesin1995;

(xvii) Introduction of Restricted ForeignExchangeDealers as newentrant into the banking systemandnew

financialsystemplayerin1996;

(xviii) EnactmentoftheCapitalMarketsDevelopmentAuthorityAct1996;

(xix) MovetoMagneticInkCharacterRecognition(MICR)encodedchequesissuedbythebankingindustryin

1999;

(xx) ReformoftheBankingSupervisionandExaminationDepartmentattheReserveBankin1999;

(xxi) SuvaStockExchangerenamedtoSouthPacificStockExchangein2000;

(xxii) EstablishmentofCreditReference/DataBureauin2001;

(xxiii) Establishment and launch of amodernised payment system in Fiji – FIJICLEARwhich is an automated

clearing systemwhichallowscommercialbanks to transact amongst themselvesand theReserveBank

electronicallyin2007;

(xxiv) CapitalMarketsDecree2009repealedCapitalMarketsDevelopmentAuthorityAct1996;

(xxv) Introduction of convertible notes and hybrid investment security on the South Pacific Stock Exchange

(SPSE)in2009;

17


(xxvi) IntroductionofmobilemoneybyMobileNetworkOperators(MNOs)in2010;

(xxvii) FNPFreformandFNPFDecree2011cameintoeffect;

(xxviii) AchievementofATMandEFTPOSinteroperabilityin2012;

(xxix) EnactmentofCompaniesAct2015;and

(xxx) EnactmentofFairReportingofCreditAct2016.

2.4 Key Highlights of Current Policy Initiatives and Reforms

44. On the back of the past reforms and the satisfactory performances of the financial sector, further key reforms are

underway. Keyhighlightsofthesereformsarediscussedbelow.

45. Successful implementation of first National Financial Inclusion Strategy (2009-2014). Financial inclusionhasbeen

akeyfocusforGovernment,theReserveBankofFijiandthefinancialsector.SupervisionPoliciesreleasedin2009

havebeenkeyinraisingawarenessandeffortsoflicensedinstitutions.Throughthecollaborative“NationalFinancial

Inclusion Taskforce” (NFIT)model, the target of “Reaching 150,000unbanked by 2014”was achieved in February

2014.InrecognitionofFiji’ssuccessinthisarea,theReserveBankreceivedtheAllianceforFinancialInclusion“Maya

DeclarationAward”in2013.ThesecondNationalFinancialInclusionStrategicPlan2016-2020hasbeenendorsedto

furtheradvanceourfinancialinclusionjourney.

46. Successful introduction of mobile money technology. TheReserveBankofFijiapprovedtheintroductionofmobile

moneytransfersystemsin2010.Thishascomplementedtheavailabilityoflatesttechnologiestoimprovepayments

inFiji.

47. Successful policy initiatives for improved Small and Medium Enterprise (SME) finance. TheGovernmentintroduced

theSMECreditGuaranteeSchemein2012.Thisinitiativewillbecomplementedbythe“SecuredTransactionsReform”

whichhas commencedwith the formationof theSecuredTransactionsReformTaskforceand thecompletionof a

proposedSecuredTransactionsBill.

48. Strengthening of the Credit Unions and Microfinance Institutions in the NBFI Sector. TheReserveBankhasembarked

onreformsfortheCreditUnionsectorbeginningwithlegislativereforms.WithGovernment,theReserveBankhasalso

contributedtothereformintheMicrofinanceInstitutionssector.

49. Against the backdrop of the FNPF Decree 2011, FNPF has undergone significant operational reformsaimedatprotecting

itssustainabilityandimprovingefficiencyandservicedelivery.

50. Under the FSDP, this work will continue along with the approved strategies for the other key focus areas.


18

FIJI’SFUTUREFINANCIALSECTOR

LANDSCAPE

SECTION3

19

FIJIFINANCIALSECTORDEVELOPMENTPLAN | 2016-2025

VISION

To Develop

a Robust and Deep

Financial Sector

that will

Stimulate Economic Growth

3.1 Vision


20

3.2 Fiji’s Future Financial Sector Landscape

51. AspirationtoVision:ThefollowingarethepremiseofouraspirationsforFiji’sfinancialsectorsoastoassistin “maintaining

and building a sound, dynamic and inclusive financial system that enables financial deepening to foster economic

growth and development”.

Sound Dynamic Inclusive

Financial Deepening

Economic Growth

Enab

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Lega

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Leg

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Env

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Tale

nt D

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Paym

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Syst

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NB

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and

OFI

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Fina

ncia

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nd C

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Pro

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MSM

E

Ban

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Supe

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Insu

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Capi

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21


Theseaspirationswillbecharacterisedby,butnotlimitedtothefollowingfeatures:

DEFINING THE ASPIRATIONS

Sound

• The financial sector is able towithstand financial shockswithoutmajor damage to the realeconomyandlossestothepublic.

• Theindustriesinthesectorremainstableandoperatingwithstandinganyadverseevent.

• Thefinancialsectortocollect,analyseanddistributeaccurateandtimelyinformationandadviceforbetterdecisionmakingbyeconomicagentsandthatsuchinformation/adviceisissuedwiththeappropriatebalanceoftransparencyandconfidentiality.

• Thefinancialsectorhasatransparentregulatorysystemthat implementsrobustsurveillance,regulatory and supervisory frameworks that are in line with international best practice butcustomisedtosuitthedomesticenvironment.

Dynamic

• Thefinancialsectorismoreefficientinitsallocationofcapitaltosupporteconomicgrowthbyimprovingwaystoborrowmoney,raisemoneyfornewventuresandfinancedaytodayneedsofabusinessalongwithwaystofinancelargeinfrastructureprojects.

• Thefinancialsectorprovideseconomicagentswithwaystoconsistentlygetaccesstoavarietyofinvestmentopportunitiesatfairandaccuratemarketpricesalongwithwaystoaccessbuyersandsellersforfinancialproducts.

• The financial sector facilitatesefficientpayments throughsafeandeasierwaysofpaying forgoodsandservices,transferringmoneydomesticallyandinternationally,andmakingpaymentswithoutcarryinglargesumsofcash.

• The financial sectorwill featurenew/specialistmarketplayers and is able to facilitate cross-bordertransactions.

Inclusive

• Thefinancialsectorprovidesarangeofaccessible,affordableandappropriatefinancialservicesandproductstoallFijiansandinparticulartothelowincomehouseholdsandthevulnerable.

• In addition, theprovisionof riskprotection, risk transfer anddiversification tomitigate risksduringunforeseencircumstances.

• Alevelplayingfieldthatpromotesresponsiblemarketconduct.

Financial Deepening

• Financialsectorandagentsareabletousearangeoffinancialmarketsforsavingsandinvestmentdecisions,includingatlongmaturities(access).

• Financial intermediariesandmarketsareable todeploy largervolumesofcapitalandhandlelargerturnover,withoutnecessitatinglargecorrespondingmovementsinassetprices(marketliquidity).

• Thefinancialsectorcancreateabroadvarietyofassetsforrisk-sharingpurposes(hedgingordiversification).Inotherwords,deepmarketsallowsaverstoinvestinabroadrangeofqualityinvestmentandrisk-sharinginstrumentsandallowborrowerstolikewisetapintoabroadrangeoffinancingandriskmanagementinstruments.

Economic Growth and Development

• Financialsectorgrowthcomplementsandpropelsrealeconomicgrowth.

• Thefinancialsectorisheavilyinvolvedinthechannellingoffinanceandservicesintokeyprioritysectors/industriesoftherealeconomy,therefore,resultinginincreasedandsustainedeconomicactivity.

• TheratiooftotalfinancialassetstoGDPcontinuestoincreaseonanannualbasistoreflectthesector’scontributionstowardseconomicgrowth.


22

52. With these aspirations in mind, the FSDP presents 10 pillars of reform which are strategic objectives that will need to

be addressed effectively over the next 10 years to fulfil the vision. These pillars are as follows:

• Pillar 1 –Ensureanenablingandsoundlegislativeandregulatoryenvironment;

• Pillar 2 –Enhancethedevelopmentoftalentedanddynamicserviceproviders;

• Pillar 3 –Promotetheadoptionofstateofthearttechnologiesformoreefficientpaymentandsettlementservices

(includingremittances)todrivefinancialsystemefficiency;

• Pillar 4 –Enhancethedevelopmentandcompetitivenessofnon-bankfinancial institutionsandotherfinancial

institutions;

• Pillar 5 –Promotesustainablefinancialinclusionandstrengthenconsumerprotection;

• Pillar 6 –CreateavibrantenvironmentforthedevelopmentandfinancingofMicro,SmallandMediumEnterprises;

• Pillar 7 –Enhancetheaffordability,dynamism,transparencyandefficiencyofFiji’sbankingindustrytoservice

domesticandregionalclientele;

• Pillar 8 –Introducecompetitioninthesuperannuationindustryandestablishacultureofretirementandlong-

termsavings;

• Pillar 9 –Provideaffordableriskprotectionandpromotethewidespreaduseofinsuranceservicesandproducts;

and

• Pillar 10 –BecomethepreferredcapitalmarketcentreintheSouthPacific.

53. Fiji’s financial sector needs to develop and adapt accordingly to the global financial sector revolution to appropriately

accommodate the current needs of the domestic clientele. In the longer term, italsoneeds toaccommodate the

regionalclientelepositioningFijitobecomeafinancialhubfortheSouthPacific.

54. The Plan contained in the following section provides recommendations of strategies that will contribute to the successful

realisation of the pillars and consequently the aspirations contained in the vision.

23


ACHIEVINGTHEVISION–PILLARSTODRIVE

CHANGE

SECTION4


24

4.1 Pillar 1 – Ensure an enabling and sound legislative and regulatory environment

55. The creation of a stable, deep and market driven financial sector through reform of legislations and regulatory

frameworks creates conducive business environment, allowingincreasedintermediationandinvestmentsinbusinesses

venturesandprojects. Reviewingarchaic laws, legalprocessesandproceduresensuringconsistency inapplication,

examiningaconducivetaxenvironmentandencouragingcontinuousdialoguebetweentherelevantstakeholdersare

someareasthatwillcontributetothatenvironment.

56. A sound legal basis is a prerequisite for the orderly working of the financial system. Financialsectorlawsmustfacilitate

orderlyfinancialmarketsandpaymentsystems,fair,responsibleandprofessionalbusinessconduct,prudentialregulation

andsupervision,toolsforcrisismanagementandprevention,financialsafetynetsanddeterrenceoffinancialcrimes.

57. The legislative and regulatory environment should facilitate the orderly introduction of new players, products, services

and markets, and allow the financial sector to innovate and deepen while ensuring safety and soundness of the system.

Newlawsandregulationswillbeenacted,existinglawsreviewed,licensingandprudentialframeworksdevelopedand

simplified,and industry supervisory frameworksstrengthened. Tocomplement this, fiscal and taxmeasureswillbe

reviewedtominimisemarketdistortion,providetherequired impetusandsupport formarket failuresandfinancing

gaps,andtointervenetocurbemergingrisks.

58. A number of aspects of the current stock of financial sector laws indicate regulatory gaps where the market has

innovated and operates without any regulation. Theseincludeclarityinrulesofenforcementofcontractsinvolving

themarketinfrastructureinstitutionssuchasexchanges,clearingarrangementsandoverthecountermarketswhich

arerequiredforcertaintytoencouragetradingof financial instruments. Insome instances,archaic lawsareviewed

asimpedimentstomarketentry,restrictiveintermsofbroadeningaccessor inhibitingthesustainableoperationsof

financialfirms.

59. In recognising the challenges above, this Pillar will focus on implementing strategies that are geared towards the policy

objective of establishing an enabling legislative and regulatory environment that safeguards the stability of financial

institutions and facilitates financial sector deepening and market-driven innovation as a catalyst for economic growth.

STRATEGIES RECOMMENDATIONS

1. EngagewithGovernmentandrelevantstakeholderstoreviewFiji’slegalandregulatoryframeworktomodernisefinancialsectorlawsandensuretheyallownewinnovationsfordevelopmentandgrowthofFiji’sfinancialsectorwhilepreservingfinancialstability.

a. Undertakeadiagnosticreviewofthefinancialsystemlegislative and regulatory framework i.e. regulatoryimpact assessment by independent organisation(s)andimplementkeyrecommendationsonthepreferredframeworkthatwillallowforthedevelopmentofthedomesticfinancialsector.

2. ReviewFiji’sfiscalandtaxregimestoensureanenablingpolicymixforgrowth,innovationanddevelopment.

a. Review the fiscal and tax regimes to ensure thatincentives are made more effective and marketdistortionsareremovedtosupplementGovernment’sgrowthpoliciesandencouragegrowthinthefinancialsector.

3. Encouragecontinuousdialogueondevelopmentamongtheindustry,regulators,government,privatesectorandotherdevelopmentpartners.

a. Collaboratewithrelevantstakeholderstoimproveeaseofdoingbusinessinthefinancialsector,includingtheJusticeDepartment to improve the transparencyandtime taken for court processes relating to financialsectordisputes.

b. Where required, align legislation, policies andprocedures.

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4.2 Pillar 2 – Enhance the development of talent management and dynamic service providers

60. Enhancing the skills and expertise of domestic human resources strengthens the development of the domestic financial

sector where service providers are able to improve internal organisational performance and introduce innovative

financialproductsandservices.Theexistingknowledgegapentailsbuildingupapoolofdomesticqualifiedprofessionals

focussingonacultureofqualityservicewhichreducesthecostsofsourcingexternalskillsandexpertise.

61. Safeguarding the successful implementation of strategies and recommendations that have been presented in this Plan

and achieving the Vision requires to a large extent the presence of a robust talent development framework. Human

resourcestransformideas intoactionand lift thequalityofservices inthesector. Investment inhumancapitalhas

beenproventopromoteandgenerategreaterefficiency,productivityandinnovationthatnotonlyfurthersdomestic

development, butwill prepare domestic financial sector players for business opportunitieswithin the South Pacific

regioninthelong-term.

62. In Fiji, there is a need to bridge the gap between the knowledge requirements of all financial sector industries with

what is acquired by graduates from/through tertiary institutions. Theestablishmentofarelevantprofessionaltraining

instituteneedstobeconsidered.Partnershipsandcollaborationbetweentheindustryandtheacademiatoaligntraining

anddevelopmentwith the requirementsof the industry is required. Greater involvementof financial institutions in

designingcurriculumforthesecondaryandtertiarylevelaswellasprovidingrealbusinessexposureandtrainingthrough

theprovisionofinternshiporgraduatetrainingtenurewillensurethatthehumancapitalneedsofthesectorarereadily

met.

63. This Plan also acknowledges that the current investment by the Fijian Government in the education sector shall result

in a more educated population that shall have sophisticated needs for financial products and services. Therefore,the

financialsectorwillneedtoinvestinprovidingcontinuousprofessionaldevelopmentopportunitiesforitsworkforceto

meettheevolvingskillsdemandoftheFijianpopulationbetween2016and2025.

64. There is also an evident need to groom strong leaders, via domestic and international training or secondment

opportunities, to meet the needs of an innovative and growing financial sector, and more importantly to conceive

and implement innovative outputs in Fiji. Industryspecificskillsandtheavailabilityofavarietyofconsistenttraining

opportunitiesare required to facilitate the introductionofnewplayers,products, servicesandmarketsanddelivery

channels.

65. To address the aforementioned opportunities, the strategies and recommendations outlined in the following table are

provided for implementation by relevant parties.


1. EnsurethatthehumancapitalinthefinancialsectorhasthecapabilitytoimplementanddrivethemainstrategiesofthisFSDP.

a. Raise awareness of financial sector developmentstrategies amongst financial sector stakeholders andaligntechnicalknowledgeandskillsthroughappropriatetraining.

b. Work in close collaboration with the Ministry ofEducationandtertiaryinstitutionstoprovideeffectivetrainingonthevariousindustriesinthefinancialsectorandfinancialsectorissues.

c. Explore the possibility of establishing a traininginstitution for Fiji’s financial sector with a view ofexpandingintoa‘PacificInstituteofFinance’.


26

2. Promoteandcultivateacultureofqualityserviceamongstallindustryplayers.

a. Advocateonserviceexcellence inthefinancialsectorandestablishrewardsandrecognitionprogramswithininstitutions, among industryplayers aswell as at thefinancialsectorlevel.

27


4.3 Pillar 3 – Promote the adoption of state of the art technologies for more efficient payment and settlement services (including remittances) to drive financial system efficiency

66. The National Payment System is a vital part of the financial infrastructure of a country and can be likened to the

bloodstream of an economy. Itincludesbothlargevalueandretailvaluepayments.Itsfailurecouldcontributetoa

systemiccrisisandtransmitfinancialshockstothefinancialsystem.Theestablishmentofanefficientpaymentsystem

willbechartedthroughanationalpaymentplanwherefinancialsectorservicesandprocessesareautomated,financial

transactionsareimmediateandfinancialservicesreachthewiderFijianpopulace.Anefficientpaymentsystemreduces

transactioncostsforbothserviceprovidersandconsumersandallowsfinancialtransactionsandservicestobeexecuted

moreeffectively.

67. The Fiji Interchange Network Bill is currently underway and is seen as an important development in the financial system.

Bankswillberequiredtolinkintotheinterchangenetwork,enablingallcardholderstodrawcashormakepayments

fromanyATMorPointofSalemachinethroughoutFiji,thusenablingandencouragingtotalinteroperabilityaswellas

reducedcostoninterchangefee.ThenetworkisdesignedtoallowthemanyformsofpaymentsystemsoperatinginFiji

toelectronicallylinktoeachotherthroughonenationalmedium.

68. Currently despite the presence of an electronic payments system, access and usage is still relatively low. There is

aneedtobuildawarenessandencourageshift inmindsetstoembracethischangeand increaseusageofthemore

efficientelectronicchannels.

69. A National Payment System that is well designed and managed will maintain financial stability by preventing or curbing

the spreading of financial crises. TheNationalPaymentSystemrequiresfurtherinnovationandimprovedefficiencies

toeffectivelysupportthepaymentneedsofsocietyinparticulartotheunderservedsegmentsintheislands,remote

communitiesandthepoor.

70. Further to efficient payments systems, the adoption of efficient technologies to improve business processes is another

area for reform. Itisenvisagedthatbusinessprocessesinboththefinancialsectorandtherealsector,willbeimproved

iftechnologicalimprovementsaremade.

71. To address the aforementioned challenges and accomplish the desired objectives articulated in this Pillar, the following

strategies and recommendations outlined in the table below will be implemented by the relevant parties.


1. DevelopaNationalPaymentPlantoincreasetheavailabilityandusageofcosteffectiveelectronicpaymentmethodsbyfirmsandhouseholdstoimprovevelocityofmoney.

a. Consult with all stakeholders to develop a NationalPayment Plan for Fiji to improve uptake of efficientpaymentandsettlementchannels.

b. Increase awareness and encourage the use ofconvenientandcheaperremittancechannels.

c. Encourage partnership between money transferoperators and financial services providers to developandintroduceremittance-linkedfinancialproductsandservices.

2. Promotetheuseofinnovativetechnologytoimproveefficiencyinthedeliveryoffinancialservices.

a. Engage stakeholders including the Government, todevelop and adopt innovative technologies for thepayment systems such as electronic documentation,onlineregistersanddatabases.


28

4.4 Pillar 4 – Enhance the development and competitiveness of non-bank financial institutions and other financial institutions

72. Strengthening NBFIs and Other Financial Institutions (OFIs) improves the institutions performances and services where

operational and environmental barriers to development are addressed. ThedevelopmentofNBFIsandOFIsenables

theseinstitutionstocomplementbanksfillingthefinancialservicesgapthroughenhancingfinancialinclusion,accessto

financeandMSMEdevelopment.Thisdevelopmentwouldbesupplementedbyarobustdatagatheringandmonitoring

framework.

73. OFIs comprise credit unions, co-operatives, finance companies and microfinance institutions, who serve important

niche segments in the financial services sector. NBFIsconsistingoftheFDBandHousingAuthority(HA)alsoserve

particularnichesegmentsofthemarket.

74. The two institutional groups vary in the type of financial products and services offered, scale and level of development.

Thesegmentsofthepopulationservedaremostlylowtomiddleincomeearnersandentrepreneurswhoareusually

overlookedbythebankingandinsuranceindustrieswhichincludestheruralandmaritimeareas.Thisthereforeserves

asalocomotiveforinclusiveeconomicgrowthanddevelopment.

75. The absence of supervision, proper legislation and regulations leads to the informality in the operations of OFIs. Asa

result,theprevalenceofweakgovernanceframeworksarefeaturesthatdistinguishthissectorandinhibittheirability

tocompeteoroperateatstandardsdisplayedbytheformalfinancialsystem.NBFIs,ontheotherhand,areformally

establishedundertheirrespectivelegislationsbutareinneedofsupervisoryoversightandinstitutionalstrengthening

anddevelopmenttobecomesustainableandtoexpandservicesandproductofferingstothepublic.

76. To address the above challenges and accomplish the objectives articulated in this Pillar, the following strategies and

recommendations outlined in the table below are provided for implementation by relevant parties.


1. Identifybarrierstodevelopmentandcollaboratewithstakeholderstoimplementeffectivesolutions.

a. Where relevant, stocktakewith relevant stakeholdersto map a way forward for the strengthening anddevelopment of credit unions, co-operatives,microfinanceinstitutionsandNBFIs.

b. Contribute to Government reforms on the role andservices of the FDB (including access to finance forMSMEs).

2. Developamonitoringanddatagatheringframeworktomonitorprogressanddevelopment.

a. Developoffsitemonitoringandonsiteframeworkwithrelevantregulators.

b. Strengthen and develop institutional capacity,governance, financial management advisory services,and operational funding to enable the provision ofeffectivefinancialservicestonichesegments.

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4.5 Pillar 5 – Promote sustainable financial inclusion and strengthen consumer protection

77. Financial inclusion is an important agenda for Fiji to ensure that the country has an inclusive financial system that serves

the needs of all and in particular, the low income households. Theprovisionofappropriate,affordableandaccessible

financialservicesandproductstothelowincomehouseholdsforsavings,credit,paymentsandinsuranceisessentialfor

inclusivegrowth.Atthesametime,consumerprotectionneedstobeembracedandenforcedintheeconomy.

78. The Fiji NFIT13

with the commitment of stakeholders has driven financial inclusion in the last seven years. Fijihasseen

asignificant increase inaccessibilityandusageoffinancialservicesandproductsbytheunbankedpopulation inFiji.

Thishasbeenachievedthroughanumberofinitiativesincludinganenablingregulatoryandsupervisoryenvironment,

development of innovative financial services and products, introduction of responsible financial inclusion through

financialliteracyandconsumerprotectioninitiatives,undertakingacomprehensivefinancialinclusiondataupgradeto

assistinevidencebasedpolicymaking,andcapacitybuildingofthemarketpractitionerswhoadvocatefinancialinclusion

intheirrespectiveinstitutions.

79. Through NFIT efforts, by 2016, the financial sector had reached 289,295 unbanked adults. The impact of these

initiativesissuchthatthenumberofCash-InandCash-Outaccesspointsper10,000adultsincreasedfrom6.73in2010

to21.41in2016.Ontheotherhand,thenumberofregulateddepositaccountsper10,000adultsincreasedfrom10,341

in2010to16,178in2016.

80. Whilst the collaborative model of NFIT has worked well, there are both demand and supply side issues which persist

and continue to inhibit comprehensive financial inclusion agenda. Onthedemandside,thereislow-mediumlevelof

financialliteracyandcompetenceamonglowincomehouseholdsinFijiandlackofawarenessonproductsandservices.

Duetoalackofunderstandingaboutthefinancialservicesandproducts,peoplearehesitanttoadapttochangesthat

canbettertheir livelihoods. There isalsoadependenceon informalsourcesofcredit. The lackoftransparentand

detailed information to support informeddecisionmaking and irregular incomepatterns also contribute to the low

uptakeoffinancialservices.

81. Over the years, the number of access points has increased in Fiji, however this has not translated into regular usage.

Thiscanbecontributedtotheexistenceofsupplysidebarrierswhichrangefromhighinterestratesonloansbutminimal

interestratesonsavings,inappropriateandlackofcustomisedproductsforthelowincomehouseholds,marketfailures

thatcontributetoinefficienciesandbarrierstoaccess.Thebarriersalsoincludelongdistancesfromformalfinancial

institutionsandthelackofappropriateinfrastructure.Notwithstanding,othermacroeconomicfactorsandthefactthat

thereislackofincomeinthehandsofhouseholds.

82. Fiji poses an issue of scale for the financial services providers (FSPs) as it is a small open economy with a population of

less than a million. Itisthusconceiveddifficultfortheinstitutionstorealiseeconomiesofscaleforthetargetmarket

sincedemandisnotsufficienttomeettheoperationalcostsofFSPs.

83. In light of the above, an evidenced based policy driven strategy is required to ensure that the financial sector works

better for all stakeholders. Therefore,aFinancialServicesDemandSideSurveyhadbeencarriedoutandtheresults

havebeen incorporated intothenewNationalFinancial InclusionStrategicPlan(2016-2020)which isenvisionedto

enablepolicymakerstoaddressthedimensionsusedtomeasuretheeffectivenessoffinancialinclusion.

13Anationalbodyresponsibletocoordinatesuperviseandmonitorthemedium-termstrategyforfinancialinclusioninFiji.


30

84. Over the next decade, financial consumer protection and education would receive greater recognition in contributing

towards a sound, stable and competitive financial structure. AsFijitransitstowardsfinancialsectorgrowth,thefinancial

sectorwillbecomemorecompetitivewithagreaterdiversityofintermediariesanddeliverychannelsandthiswillalso

entailagreaterdemandforappropriateconsumerprotectionandeducation.

85. In addition, an increased range of innovative financial products and services will be offered to meet the different

consumer demands and profiles. Inthisenvironment,strengtheningthefinancialcapabilityofconsumerswillcontinue

tobeanimportantprioritytosupportwellinformed,effectiveandresponsiblefinancialdecisions.

86. To address the aforementioned objectives of this Pillar, the following strategies and recommendations outlined in the

table below are provided for implementation by relevant parties.


1. Toimproveaccess,usageandqualityoffinancialproductsandservicestoenhancethelivelihoodsofFijians.

a. Implement National Financial Inclusion StrategicPlan (2016-2020) and put in place measurement,monitoring and evaluation processes and procedurespublicandprivatesectorcollaboration.

2. Developacomprehensiveplantoaddressconsumerempowermentandmarketconductinthefinancialsystem.

a. Review existing consumer protection policies andprograms and strengthen effectiveness of ConsumerProtection Framework for Fiji in close collaborationwithrelevantstakeholders.

31


4.6 Pillar 6 – Create a vibrant environment for the development and financing of Micro, Small and Medium Enterprises

87. MSMEs are critical to economic development and the resilience of the economy as these enterprises form the backbone

of economic activity and growth at the grass root level. TocomplementtheGovernment’sobjectiveofdeveloping

MSMEs,thispillarproposesaholisticandcoordinatedapproachtoenableimprovedfinanceandappropriatesupport

services.ThedevelopmentoftheMSMEsectorthroughincreasedfinancingandprovisionofimprovedsupportservices

andincentiveswillencouragemorebusinessstart-upsandexpansions.Thesegenerateself-employment,employment

ofwomenandyouth,increasingincomesandimprovinglivelihoodwhichinturnwillcontributetoeconomicgrowth.The

MSMEsectorinFijicurrentlycontributes12.0percentofGDP.

88. The National Centre for Small and Micro Enterprises (NCSMED) is mandated under the Small and Micro Enterprises

Development Act, with the role of promoting the establishment of MSMEs in the country. Governmentministriesalso

independentlycarryoutspecificprojectstailoredtoassistanddevelopruralbasedMSMEsandwomenentrepreneurs.

MeasurestodevelopMSMEsinthecountryhavealsobeenoutlinedinGovernment’sNationalDevelopmentPlan.

89. The NCSMED lacks the convening power as an apex body for SMEs in Fiji. It lacks coordinating authority and capital

resources. Thishastosomeextentrestrictedtheeffectivedeliveryofitsmandateandfulfilmentofitsstrategicobjective.

TheabsenceofaclearandtransparentnationalMSMEframeworkstronglysupportedbyGovernment,stakeholdersand

financialinstitutions,alsohindersdevelopmenteffortsandopportunitiesinthesector.Financialinstitutionsmaylack

appropriateknowledgeandskillsinlendingtoMSMEswhichisconsideredariskysector.Productsandservicesavailable

inthemarketarelooselytailoredtothefinancialservicesneedsofMSMEswhileentrepreneurslacktheabilitytoprepare

basicfinancialreportsandbusinessdocumentsthatarerequiredforfinancingproposals.

90. To support the development of the sector, commercial banks provide microfinance services including the provision of

loans to MSMEs. Currently,SMEloansbycommercialbanks,licensedcreditinstitutionsandtheFDBareguaranteedby

Government.UndertheScheme,Governmentwillguaranteetopay50percentoftheprincipaloutstandingondefaulted

SME loansuptoa limitof$50,000perbusiness. Informal financial institutionssuchascreditunions,unregulated

microfinanceinstitutionsandfinancecompaniesalsoprovideloanstotargetedsegmentsofthesector.

91. Prohibitive regulations and business rules applied to MSMEs need to be tailored to ensure it is conducive to the sector’s

development. Rulesdevelopedforinformalfinancialservicesprovidersshouldbeconducivetofacilitatetheprovision

offinancetothesector. Useful informationanddataonMSMEsaredifficulttoobtainandaccesssincethere isno

centralisedsourcetocontainallrelevantinformationofthesector.Theunavailabilityofinformationlimitsfinanciers’

intereststofinancethesectorandalsopossesschallengestotheformulationofeffectivepolicysolutionstodevelop

thesector.

92. Alongside the aforementioned challenges, high costs of doing business also hinder MSME development. Fijicurrently

ranks1484/189intheoveralleaseofdoingbusinessrankingswhichincluded166/189intheeaseofstartingabusiness,

78/189 on the ease of getting credit and 76/189 in trading across borders. These barriers toMSME development

discourageformationofnewMSMEsortheentryofexistingonesintolargermarkets.

93. To address the aforementioned challenges and accomplish the objectives articulated in this Pillar, the following

strategies and recommendations outlined in the following table are provided for implementation by relevant parties.

14Accordingto2015-2016DoingBusinessRankingsbyWorldBank.


32


1. ImproveaccesstofinanceforMSMEs. a. ReviewoftheSmallandMicroEnterprisesDevelopmentAct2002andinhibitionstocostofdoingbusinessinFiji.

b. Enact Secured Transaction legislation and implementSecuredTransactionFrameworkforFiji.

c. Exploreand implementalternative sourcesof financefor MSME, for example, SME trading board on theSPSE,venturecapitalfunds,crowdfunding,etc.

d. Enhance the reporting capacity of licensed CreditBureaus to undertake full reporting in line withinternationalbestpractice.

e. Contribute to the institutional strengthening forthe NCSMED or an alternative apex body for MSMEdevelopmentthroughthereviewofitsgovernanceandoperational framework including appropriate fundingandresourcing.

f. EstablisharobustSMEDatabaseandimpactassessmentframework.

g. Encourage and support business innovation throughentrepreneurshiptraining,mentoringetc.

2. ProvideaccesstomarketsforMSMEs. a. ProvidephysicalvenuesatminimumcostforMSMEstosellproducts.

b. Provide platforms to enable the marketing of MSMEproductsbothdomesticallyandinternationally.

c. Provideopportunitiesforvendorstointeractamongstthemselvesthroughasupplychainrelationandalsotoallowforbackwardandforwardintegration.

3. EngagestakeholderstoformulateaholisticandcomprehensivenationalMSMEdevelopmentstrategyforFiji.

a. Consult with Government tomap a way forward forthe engagement of stakeholders and formulationof the National Vision, Key Focus Areas for aMSMEDevelopmentPlantoaddress:

i) ProductsandservicesforMSMEs;

ii) Capacitybuildingandmentorship;

iii) Marketaccess;

iv) Adoption of technology to improve efficiencyandthecost/easeofdoingbusiness;and

v) Appropriate governance, monitoring andsupportingframework.

33


4.7 Pillar 7 – Enhance the affordability, dynamism, transparency and efficiency of Fiji’s banking industry to service domestic and regional clientele

94. An affordable and efficient banking industry ensures effective intermediation to the emerging and existing businesses,

and the priority sectors, to ensure their growth and the creation of more employment opportunities in the local

economy. Thebanking industryhasthepotential toevolvewiththechangingdynamicsoftheeconomytoensure

innovativebanking solutions areprovided thatmeet thedemand formoreeffective and inclusive financial services

provisionanddelivery.

95. The banking industry is core to Fiji’s financial sector with wide public acceptance and long operating history of sustained

profitability and stability. Institutionsintheindustryhavestrongbrandreputationsandoperationalpresenceinthe

regionandinternationally.Productsandserviceshaveprovidedadequatebankingsolutionsforbothhouseholdsand

firms,andstronglinkswiththeircommunitieshavebeenestablished.Theindustry’sriskmanagementframeworkis

consideredadequateduetosatisfactoryassetquality,liquidityandstrongcapitalbase.

96. The industry is largely dominated by international banking groups and adopts stringent and comprehensive group

risk management frameworks. TheimpositionofprudentialpoliciesandsupervisionbytheReserveBankhavealso

complementedtheimplementationoftheseriskmanagementframeworksandimprovedthegovernanceofthesmaller

andlocalinstitutions.Bankingoperationsaresupportedbyastronginformationtechnologyinfrastructureandbanks

inFijihaveadoptedawiderangeoftechnologicaladvancementsincludingFIJICLEAR,ATMandEFTPOSinterchange

network.However,challengesstillhindertheindustry’scompetitivenessandaffordability.

97. The industry has also been viewed as largely profitable and maintains high liquidity levels which can be productively and

effectively invested in emerging business sectors and niche sectors of the economy that demonstrate positive prospects.

Commercialbanks’efficiencyovertheyearsalsodemonstratesaneedfor improvementtoensuretransparencyand

affordability.

98. The provision of financial services to the priority sectors by the industry is limited by weak supporting mechanisms,

including the lack of accurate information about the priority sectors which makes investment and financing opportunities

in such sectors risky. Aframeworkforaccesstofinancefortheprioritysectorsislackingtoproperlyguideinvestment

activities inthesectors. Weakpartnershipandcollaborationbetweeninstitutions inthe industryrestrictssharingof

informationaboutclientsbankingwithmultipleinstitutionsandmeaningfuldiscussionofinitiativesthathavesystem

wideimplicationsthatcanbeotherwiseeffectivelyapproachedandmaximisedfromanindustryfront.

99. To address the above issues, the following strategies and recommendations outlined in the following table will need to

be undertaken by relevant parties.


1. Promoteaffordableandeffectivebankingservices.

a. Ensure that the banking business environmentinnovates and facilitates competition, and supportspriority sectors and local ownership, along withaffordabilityinprices,feesandcharges.

b. Supporttheintroductionofinnovativeandalternativebankingsolutionsthatwillmeetthefinancingneedsofretail aswell as corporate customers, including tradefinancingandvaluechainfinancingandgreenfinancing.


34

2. Establisheffectivesupportingframeworktoimproveaccesstofinance.

a. Developaninformationsharingframework(throughtheuseoftechnologyandmemorandumofunderstanding)for priority sectors to allow the industry to makeinformedriskassessmentsandriskpricing.

b. Examinethedevelopmentofanexport/importbanktosupportexpansionintrade.

3. Ensureindustrysupportineventoffinancialcrises.

a. Developafinancialcrisismanagementplanandexaminethepossibilityofadepositinsurancefortheprotectionofdepositors’funds.

35


4.8 Pillar 8 – Introduce competition in the superannuation industry and establish a culture of retirement and long-term savings

100. The superannuation industry plays a vital role in Fiji’s financial system. Inadditiontothecentralroleofguaranteeing

Fijiansanadequateandcomfortablestandardoflivingduringretirement,theindustryisalsoresponsibleforboosting

nationalsavingsandprovidingcapitalforfinancialmarketsandprivateequityinvestments.

101. The FNPF as a contractual savings scheme for workers in Fiji is well entrenched in the administrative environment of

firms in Fiji and is governed by a well-established legislative and regulatory framework. Thecollectionofcontributions

hasworkedwellwithpooledsavingsfrommembers’contributionsprovidingsignificantlytolocalinvestmentandthe

long-termfinancingneedsoftheeconomy.Intherecentpast,theindustryhasundergonesignificantlegislativeand

operationalreformsaimedatprotectingtheFNPF’ssustainabilityandimprovingefficiency.

102. While the FNPF has served Fiji’s financial system adequately over the last five decades, there are a number of issues

pertaining to the industry and Fiji’s financial system which is a challenge and needs to be addressed. TheFNPFisthe

onlyplayerinthisindustryandtheentranceofnewplayerswouldincreaseinvestmentsinsecurities,realestateand

otherinvestmentassetstogeneratemorereturnsfortheindustryandmembers.Thisisenvisagedtoencouragelarger

nationalsavingstofundinvestments,promotinggreatereconomicgrowth.TheFijiNationalProvidentFundDecree2011

doesnotpermitcontributingmemberstoinvesttheircompulsoryretirementsavingsinalternativeproductsormanaged

fundsotherthantheFNPF.Therefore,theindustrylackscompetition,depthandconsumerchoice.

103. This Pillar will focus on elevating the competitiveness of the superannuation industry by implementing strategies

geared towards increasing the depth of the industry and the uptake of retirement savings by the populace through the

introduction of new types of players, distribution channels, products and services for pre- and post-retirement needs.

104. In recognising the challenges above, the policy recommendations to be addressed by relevant parties are presented in

the table below.


1. InculcateacultureofsavingsforretirementamongstallagegroupsinFiji.

a. Increase advocacy for the importance of long-term/retirementsavingsthroughsynergiesandcollaborationwithstakeholders.

2. SupplementthecompulsorypensionSchemeanddevelopavibrantprivatepensionindustry.

a. Work with the Government to develop incentives topromotesavings.

b. ExploresuitableapproachestoallowfortheparticipationofotherprovidersandplayersinFiji’ssuperannuationindustry and subsequently implement a feasible roadmap.

c. Introduceinnovativeproductsandplayerstocaterforthe retirement savings needs of Fiji’s workforce andothervoluntarycontributors.


36

4.9 Pillar 9 – Provide affordable risk protection and promote the widespread use of insurance services and products

105. The insurance sector plays a fundamental role in the development of an economy. Itprovidesasafetynetforthe

investmentsofpolicyholdersandhelpsinthemanagementofrisksthroughrisktransfer.Astheeconomygrows,sodo

theinherentriskstherein.Adeepandactiveinsurancemarketisthereforevitalasitcontributespositivelytoeconomic

growthbymeetingfinancial losses,rebuildingbusinessesandprovidingconfidencefor long-terminvestments inthe

economy.InsurancepenetrationinFijiisrelativelylow.Thisisattributedtoanumberofresonatingfactorsincluding

thelackofappreciationofriskandriskplanning.

106. The widespread use of affordable insurance products and services expands the insurance safety net coverage to the

populace, increasing risk protection for insured individuals and businesses. Italsomitigatesriskstolendersoffering

credittoindividualsandbusinesses.Thecreationofavibrantinsuranceenvironmentencouragesfinancialprotection,

safeguardingtheinsured’swellbeingandthegrowthofbusinesses.

107. Presently, the insurance regulatory framework is accommodative and robust with many strong elements that ensure a

strong risk and compliance framework. Thisleadstoafinanciallystrongindustryprotectingtheinsuredpopulacewhich

isstrengthenedfurtherwithstrongreinsuranceprotection.

108. All insurers, whether they are subsidiaries of overseas entities, branch offices or local insurers, maintain fully operational

local offices in Fiji. Thisbenefitsthedevelopmentagendabyprovidingamoreflexibledecisionmakingframeworkfor

product innovation.Over the lastdecade, thecollaborationbetween the regulatorand the industryhasbeenakey

strengthforthefinancialsectorasawhole.

109. The impediments for further growth in the insurance industry are both supply-side and demand-side challenges. Some

ofthekeysupplysidebarrierspertaintoaffordabilityofinsuranceservicesandproducts.Thereisalackofqualified

stafftoaddressspecialisedneedsofthis industry. WithFijibeingasmalleconomywithapopulationof lessthana

million,theinsurablepopulationistoosmallthusscalebecomesanissueduetocosteffectiveness.Thereareother

globalphenomenasuchas,climatechangeanddisasterriskmanagementthathaveanadverseeffectontheinsurance

industryaswell.

110. On the other hand, demand side barriers relate to the lack of knowledge and understanding of insurance among Fijians

generally and in particular among the low income households. Also,duetolackofdisposableincome,itisverydifficult

forindividualsandhouseholdstomeettheregularinsurancepremiumpayments.

111. In view of the above, this Pillar recognises the importance of developing the industry to accommodate the needs of the

market. Withtheevolvingneedsofbusinessesandcustomersalike,thereisaneedtoconstantlyadapttothechangesin

themarket.Theserangefrominnovativedistributionchannelstoarangeofproductsandservicesfordifferentsections

of thepopulation. Thepolicy recommendations tobeaddressedby relevantpartiesarepresented in the following

table.

37



1. Inculcateacultureofriskawarenessandplanningamonghouseholdsandfirmsthrougheducationandawarenessprogramstoimprovetheuptakeofinsurance.

a. All relevant stakeholders to develop and implementawareness programs on the importance of insuranceand managing risk associated with economic loss,takingintoaccountrisktolerancelevels.

2. Deepentheinsurancepenetrationbyprovidingabroadrangeofproductsatcompetitiveandaffordableprices.

a. Introduce innovative andaffordableproducts, playersthrough an inclusive insurance carrier and deliverychannelstoincreasetheuptakeofinclusiveinsurance.

b. Increase and strengthen the capacity of insurers towriteriskscurrentlynotinsuredlocally.

c. Examinealternativeriskpoolingmechanismstoreduceoreliminateriskforcriticalsectorsthatformalinsurersdonothavecapacitytounderwrite.

d. Encourage collaboration with relevant stakeholdersthrough public-private partnerships to reduce riskandpremiums,e.g.enforcementofengineersbuildingcode,etc.

e. Strengthenthecapacityof localunderwriterstowritenon-traditional risks such as political risk, suretybonds, and credit guarantee insurance to protect Fijibusinessesthatexpandorareinvolvedinexport.


38

4.10 Pillar 10 – Become the preferred capital market centre in the South Pacific

112. A thriving and efficient capital market will contribute to equitable and sustainable economic growth in Fiji. Itassists

inthecreationandexpansionofbusinessesbychannellingsavingsorsurplusfundsfromsaverstobusinesseswhich

requirefundsfordevelopmentandgrowththuscreatingemploymentandincreasingwealth.Fiji’scapitalmarketlacks

depthandliquidity,bothintheprimaryandsecondarymarkets.

113. Whilst Fiji’s capital market has been able to provide a small range of products to investors and allow local businesses

to access capital, there are many issues besetting Fiji’s capital market. Theseincludesmallretailinvestorbase,limited

financialproducts,illiquidstockmarket,hightransactioncosts,lackofawarenessofthecapitalmarketandinconsistent

applicationofpolicybyregulatoryagencies.Thereisalsoaneedforfinancingoflargeprivatesectordrivenprojects

fundedwithlong-termfinancinginstrumentswhichareusuallyofferedbythecapitalmarket.

114. In response to these challenges and the important role that a thriving capital market plays in the financial hub agenda,

the Reserve Bank established the Capital Market Advisory and Development Taskforce (CMDT)in2010andcommitted

resources towards formulating a development blueprint for the future of Fiji’s capitalmarket – the Capital Market

DevelopmentMasterPlan2016-2025.TheCMDTcomprisestheGovernoroftheReserveBankastheChairman,the

PermanentSecretaryforEconomyandcapitalmarketexpertsfrompublicandprivatesectors.

115. The Master Plan identifies five policy objectives or strategies to bring about major changes in Fiji’s capital market to

(i) ensure that our capital market is well positioned to support economic growth and (ii) transform into the “Preferred

Capital Market Centre in the South Pacific”.

116. BeingthepreferredcapitalmarketcentremeansthatcompaniesandinvestorsinFijiandotherPacificislandcountries

willlooktoFijifirstasaplacewheretheycanefficientlyraisefundsforbusinessdevelopmentatthelowestcost,be

subjecttoafavourabletaxregimeandhaveaccesstoapoolofsuitablyqualifiedcorporateadvisorsandinvestment

managersaswellassafeandfavourableinvestmentopportunities.

117. To address the aforementioned development areas through the identification and implementation of specific action

items, the CMDT has established the following Working Groups comprising national policy makers and market

practitioners:

(i) CapitalMarketAwarenessandCapacityBuildingWorkingGroup;

(ii) CapitalMarketLegislativeandRegulatoryEnvironmentWorkingGroup;and

(iii) CapitalMarketIndustryDevelopment(Products/Players/Infrastructure)WorkingGroup.

118. Accordingly, the policy recommendation to be addressed by relevant parties is presented in the following table.


1. DevelopanddeepenFiji’scapitalmarketasanalternativesourceoffinanceandinvestment.

a. Implement annual work plans formulated from therecommendationsoftheCapitalMarketDevelopmentMasterPlan(2016-2025).

39


INSTITUTIONALARRANGEMENTSFORMONITORINGAND

EVALUATION

SECTION5


40

5.1 National Financial Sector Development Taskforce

119. To facilitate the oversight of the implementation of the FSDP, a Taskforce shall be formed. ThisTaskforcewillinclude

high level representatives of Government, the industry, regulators and identified leaders/professionals to ensure

thoroughoversightoftheimplementationismaintained.KeypositionssuchasGovernoroftheReserveBankofFiji,

PermanentSecretaryforEconomy,ChiefExecutiveOfficeroftheFNPFandChairpersonsoftheAssociationofBanksin

Fiji(ABIF),InsuranceCouncilofFiji(ICF),FinanceCompaniesAssociation(FCA),ForeignExchangeDealersAssociation

(FXDA)shallbemembersoftheTaskforce.

5.2 Working Groups and Annual Work Plans

120. To facilitate an effective implementation process Working Groups along with technical committees shall be created

when and where needed. Termsofreferencesandannualworkplansshallbeprepared,implementedandreviewed

annuallytoensurekeyperformance indicatorsareachievedorcorrectivemeasuresundertaken. Representativeson

WorkingGroupsshouldalsoincludeappropriatelevelsofauthorityinkeyorganisationsatExecutiveManagementlevel

toensuredecisiveaction.Donorrepresentatives,privatesectorrepresentativesandnon-governmentorganisationswill

alsobeincluded.

Working Group Infrastructure Development

Working Group Awareness Financial

Competency

Working Group Market

Development

Working Group Legislative & Regulatory Framework

National Financial Sector Development Taskforce

Governor

Technical Committee

E.g Banking, Insurance

Technical Committee E.g Other

technical areas

41


5.3 Secretariat

121. The Reserve Bank of Fiji shall be the Secretariat to the Taskforce tofacilitatethesmoothoversightandcoordinationof

theframeworkfortheimplementingagencies.ThesecretariattoWorkingGroupsshallbedeterminedbythetermsof

referenceoftherespectiveWorkingGroups.

5.4 Monitoring and Evaluation Framework

5.4.1 Development Indicators

122. To determine whether the proposed FSDP is contributing to or has successfully led to the achievement of its intention

toassistin“maintainingandbuildingasound,dynamicandinclusivefinancialsystemthatenablesfinancialdeepeningto

fostereconomicgrowthanddevelopment”,itisessentialtoestablishdevelopmentindicatorsthatwillmeasureprogress

toenableconsistentmonitoringoftheeffectoftheFSDP.

123. To this end, the implementation framework of the FSDP shall include the development of indicators to capture the

progress achieved. Industryspecificdevelopmentindicatorsmeasuring‘Size/Depth’,‘Access’,‘Efficiency’and‘Stability’

willbedevelopedtoaugmentthemonitoringoftheFSDP.The2025targetsforeachindicatorshallbedevelopedby

theReserveBankofFijiinconsultationwithrelevantindustriesandtobeapprovedbytheTaskforce.

5.4.2 Mid-Term Review and Reporting to Government

124. A mid-term review by the Taskforce would be undertaken to gauge implementation progress of the FSDP.Theoutcome

ofthereviewwouldbereportedtotheGovernmentthroughtheMinistryofEconomy.

5.4.3 Other Independent Assessments

125. In addition to the internal monitoring framework under this Plan, periodic independent assessments by other

development partners will be requested. ThesecouldincludetheIMF/WorldBankFinancialSectorAssessmentProgram,

AsianDevelopmentBank(ADB)DevelopmentProgramAssessment,andothersasdeemedappropriatebytheTaskforce.


42

SUMMARYOFKEYFSDPRECOMMENDATIONS

SECTION6

43


6.1

Top

25 R

ecom

men

datio

ns b

y 20

25

KEY

PIL

LAR

REC

OM

MEN

DA

TIO

NR

ESPO

NSI

BLE

PA

RTY

TIM

ELIN

E (T

ERM

)

SHO

RT

(20

16-

2019

)

MED

IUM

(2

020

-20

22)

LON

G

(20

23-

2025

)

Pilla

r 1:

Establishanenablingandsound

legislativeandregulatoryenvironment

1.Undertakeadiagnosticreviewoffinancial

systemlegislativeandregulatoryframework

andimplementkeyrecommendationsonthe

preferredframeworkthatwillallowforthe

developmentofthedomesticfinancialsector.

TechnicalCommittee–ReserveBank,

OfficeoftheAttorneyGeneral(OAG),

ABIF,FCA,FijiRevenueandCustoms

Authority(FRCA),FijiCommerce

Commission(FCC),ConsumerCouncil

ofFiji(CCoF),privatesectorplayers,

developmentpartners

2.Reviewthefiscalandtaxregimestoensure

thatincentivesaremademoreeffectiveand

marketdistortionsareremovedtosupplement

Government’sgrowthpoliciesandencourage

growthinthefinancialsector.

ReserveBank,MinistryofEconomy

(MOEc),ABIF,FCA,FRCA,ICF

Pilla

r 2:

Enhancethedevelopmentoftalent

managementanddynamicservice

providers

3.Raiseawarenessoffinancialsectordevelopment

strategiesamongstfinancialsectorstakeholders

andaligntechnicalknowledgeandskillsthrough

appropriatetraining.

ReserveBank,ABIF,FCA,tertiary

institutions

Pilla

r 3:

Promotetheadoptionofstateoftheart

technologiesformoreefficientpayment

andsettlementservices(including

remittances)todrivefinancialsystem

efficiency

4.Engagestakeholderstodevelopandadopt

innovativepaymentsystemstechnologiessuch

aselectronicdocumentation,onlineregisters

anddatabases.

ReserveBank,ABIF,FCA,MNOs,private

sectorplayers,developmentpartners

5.Increaseawarenessandencouragetheuseof

convenientandcheaperremittancechannels.

ReserveBank,ABIF,FCA,FXDA,Money

TransferOperators(MTOs),MNOs

6.Encouragepartnershipbetweenmoneytransfer

operatorsandfinancialserviceprovidersto

developandintroduceremittance-linked

financialproductsandservices.

ReserveBank,ABIF,FCA,MNOs,MTOs

Pilla

r 4:

Enhancethedevelopmentand

competitivenessofnon-bankfinancial

institutionsandotherfinancialservice

institutions

7.Stocktakewithrelevantstakeholderstomap

awayforwardforthestrengtheningand

developmentoffinanceinstitutionssuchasthe

FDB,creditunions,co-operatives,microfinance

institutionsandNBFIs.

Government,technicalcommittee

(ReserveBank),OFIs


44

KEY

PIL

LAR

REC

OM

MEN

DA

TIO

NR

ESPO

NSI

BLE

PA

RTY

TIM

ELIN

E (T

ERM

)

SHO

RT

(20

16-

2019

)

MED

IUM

(2

020

-20

22)

LON

G

(20

23-

2025

)

Pilla

r 5:

Promotesustainablefinancialinclusion

andstrengthenconsumerprotection

8.ImplementtheNationalFinancialInclusion

StrategicPlan2016-2020andputinplace

measurement,monitoringandevaluation

processesandprocedures.Fosterpublicand

privatesectorcollaboration.

Government,ReserveBank,NFIT

9.Reviewexistingconsumerprotectionpolicies

andprogramsandstrengtheneffectivenessof

theConsumerProtectionFrameworkforFijiin

closecollaborationwithrelevantstakeholders.

Government,ReserveBank,private

sectorplayers,CCoF,FCC

Pilla

r 6:

Createavibrantenvironmentforthe

developmentandfinancingofMicro,

SmallandMediumEnterprises

10.ReviewoftheSmallandMicroEnterprises

DevelopmentAct2002andinhibitionstocost

ofdoingbusinessinFiji.

ReserveBank,MinistryofIndustry,

TradeandTourism(MITT),ABIF,private


11.ConsultwithGovernmenttomapaway

forwardfortheengagementofstakeholders

andformulationoftheNationalVision,Key

FocusAreasforaMSMEDevelopmentPlanto

address:

•ProductsandservicesforMSMEs;

•Capacitybuildingandmentorship;

•Marketaccess;

•Adoptionoftechnologytoimprove

efficiencyandthecost/easeofdoing

business;and

•Appropriategovernance,monitoringand

supportingframework.

MITT,ReserveBank

12.EnactSecuredTransactionlegislationand

implementSecuredTransactionFrameworkfor

Fiji.

ReserveBank,Government,ABIF,

privatesectorplayers

13.Providephysicalvenuesatminimumcostfor

MSMEstosellproducts.

14.Provideplatformstoenablethemarketing

ofMSMEproductsbothdomesticallyand

internationally.

15.Contributetotheinstitutionalstrengtheningof

theNCSMEDoranalternativeapexbodyfor

MSMEDevelopmentfollowingthereviewof

theSmallandMicroEnterprisesDevelopment

Act2002,itsgovernanceandoperational

frameworkincludingappropriatefundingand

resourcing.

MITT,ReserveBank,NCSMED,

developmentpartners

45


KEY

PIL

LAR

REC

OM

MEN

DA

TIO

NR

ESPO

NSI

BLE

PA

RTY

TIM

ELIN

E (T

ERM

)

SHO

RT

(20

16-

2019

)

MED

IUM

(2

020

-20

22)

LON

G

(20

23-

2025

)

Pilla

r 5:

Promotesustainablefinancialinclusion

andstrengthenconsumerprotection

8.ImplementtheNationalFinancialInclusion

StrategicPlan2016-2020andputinplace

measurement,monitoringandevaluation

processesandprocedures.Fosterpublicand

privatesectorcollaboration.

Government,ReserveBank,NFIT

9.Reviewexistingconsumerprotectionpolicies

andprogramsandstrengtheneffectivenessof

theConsumerProtectionFrameworkforFijiin

closecollaborationwithrelevantstakeholders.

Government,ReserveBank,private

sectorplayers,CCoF,FCC

Pilla

r 6:

Createavibrantenvironmentforthe

developmentandfinancingofMicro,

SmallandMediumEnterprises

10.ReviewoftheSmallandMicroEnterprises

DevelopmentAct2002andinhibitionstocost

ofdoingbusinessinFiji.

ReserveBank,MinistryofIndustry,

TradeandTourism(MITT),ABIF,private


11.ConsultwithGovernmenttomapaway

forwardfortheengagementofstakeholders

andformulationoftheNationalVision,Key

FocusAreasforaMSMEDevelopmentPlanto

address:

•ProductsandservicesforMSMEs;

•Capacitybuildingandmentorship;

•Marketaccess;

•Adoptionoftechnologytoimprove

efficiencyandthecost/easeofdoing

business;and

•Appropriategovernance,monitoringand

supportingframework.

MITT,ReserveBank

12.EnactSecuredTransactionlegislationand

implementSecuredTransactionFrameworkfor

Fiji.

ReserveBank,Government,ABIF,


13.Providephysicalvenuesatminimumcostfor

MSMEstosellproducts.

14.Provideplatformstoenablethemarketing

ofMSMEproductsbothdomesticallyand

internationally.

15.Contributetotheinstitutionalstrengtheningof

theNCSMEDoranalternativeapexbodyfor

MSMEDevelopmentfollowingthereviewof

theSmallandMicroEnterprisesDevelopment

Act2002,itsgovernanceandoperational

frameworkincludingappropriatefundingand

resourcing.

MITT,ReserveBank,NCSMED,

developmentpartners

KEY

PIL

LAR

REC

OM

MEN

DA

TIO

NR

ESPO

NSI

BLE

PA

RTY

TIM

ELIN

E (T

ERM

)

SHO

RT

(20

16-

2019

)

MED

IUM

(2

020

-20

22)

LON

G

(20

23-

2025

)

Pilla

r 7:

Enhancetheaffordability,dynamism,

transparencyandefficiencyofFiji’s

bankingindustrytoservicedomesticand

regionalclientele

16.Ensurethatthebankingbusinessenvironment

facilitatescompetition,supportsprioritysectors

andlocalownership,alongwithaffordabilityin

prices,feesandchargestomeetthefinancing

needsofretailandcorporatecustomers,

includingtradefinance,valuechainfinanceand

greenfinance.

WorkingGroupSub-Committee

(ReserveBank),ABIF,FCA,FRCA,FCC,

CCoF,OAG,legalfraternity,private

sectorplayers

17.Developaninformationsharingframework

(throughthe

use

oftechnologyand

memorandumofunderstanding)forpriority

sectorstoallowtheindustrytomakeinformed

riskassessmentsandriskpricing.

Government,ReserveBank,ABIF,FCA,


18.DeterminethedevelopmentofaRoadmapfor

SustainableDevelopmentFinanceintheFijian

FinancialSector.

Government,ReserveBank,ABIF,

developmentpartners

19.Developafinancialcrisismanagementplanand

examinethepossibilityofadepositinsurance

fortheprotectionofdepositors’funds.

Government,ReserveBank,ABIF,FCA

Pilla

r 8:

Introducecompetitioninthe

superannuationindustryandestablisha

cultureoflong-termsavings

20.Exploresuitableapproachestoallowforthe

participationofotherprovidersandplayersin

Fiji’ssuperannuationindustry.

Government,ReserveBank,FNPF,ICF

21.Introduceinnovativeproductsandplayersto

caterfortheretirementsavingsneedsofFiji’s

workforceandothervoluntarycontributors.

Government,ReserveBank,FNPF

Pilla

r 9:

Provideaffordableriskprotection

andpromotethewidespreaduseof

insuranceservicesandproducts

22.Allrelevantstakeholderstodevelopand

implementawarenessprogramsonmanaging

riskassociatedwitheconomicloss,takinginto

accountrisktolerancelevels.

Government,ReserveBank,ICF,private


23.Introduceinnovativeproducts,playersand

deliverychannelstoincreasetheuptakeof

insuranceservices.

ReserveBank,ICF,privatesectorplayers

24.WithregardstoDisasterRiskManagement,

examinealternativeriskpoolingmechanisms

toreduceoreliminaterisksforcriticalsectors

thatformalinsurersdonothavecapacityto

underwrite.

Government,ReserveBank,ICF,

developmentpartners

Pilla

r 10

:

Becomethepreferredcapitalmarket

centreintheSouthPacific

25.Implementannualworkplansformulatedfrom

therecommendationsoftheCapitalMarket

DevelopmentMasterPlan(2016-2025).

Government,ReserveBank,SPSE,

CMDT,privatesectorplayers,capital

marketplayers


46

ABIF AssociationofBanksinFiji

ADB AsianDevelopmentBank

ATM AutomatedTellerMachine

CBUL CommitteeforBetterUtilisationofLand

CCoF ConsumerCouncilofFiji

CMDT CapitalMarketAdvisoryandDevelopment

Taskforce

EFTPOS ElectronicFundsTransferatPointofSale

FDB FijiDevelopmentBank

FCA FinanceCompaniesAssociation

FCC FijiCommerceCommission

FEA FijiElectricityAuthority

FIJICLEAR ReserveBankofFiji’sRTGSPayment

System

FINTECH FinancialTechnology

FNPF FijiNationalProvidentFund

FRCA FijiRevenueandCustomsAuthority

FSC FijiSugarCorporation

FSDP FinancialSectorDevelopmentPlan

FSPs FinancialServicesProviders

FXDA ForeignExchangeDealersAssociation

GDP GrossDomesticProduct

HA HousingAuthority

ICF InsuranceCouncilofFiji

IMF InternationalMonetaryFund

MICR MagneticInkCharacterRecognition

MITT MinistryofIndustry,TradeandTourism

MOEc MinistryofEconomy

MNOs MobileNetworkOperators

MSG MelanesianSpearheadGroup

MSMEs Micro,SmallandMediumEnterprises

MTOs MoneyTransferOperators

NBFIs Non-BankFinancialInstitutions

NCSMED NationalCentreforSmallandMicro

EnterprisesDevelopment

NFIT NationalFinancialInclusionTaskforce

OAG OfficeoftheAttorneyGeneral

OFIs OtherFinancialInstitutions

RTGS RealTimeGrossSettlement

SME SmallandMediumEnterprise

SPSE SouthPacificStockExchange

SWOT Strengths,Weaknesses,Opportunitiesand

Threats

US UnitedStates

USD USdollar

Acronyms

RESERVE BANK OF FIJI

Postal:Private Mail Bag, Suva, Fiji

Telephone:(679) 331 3611

Facsimile:(679) 330 2094

Email:[email protected]

Website:www.rbf.gov.fj

fiji financial sector development plan 2016-2025...providers TABLE OF CONTENTS FIJI FINANCIAL SECTOR...

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