The tragic aftermath of Fiji's most powerful storm - Tropical Cyclone Winston - demanded an emergency financial response.
Just over a year ago, TC Winston killed 44 people and affected more than 40 per cent of the Fijian population, leaving many living in tents.
The country's biggest financial institution, the Fiji National Provident Fund, allowed members to withdraw $F1,000 each to deal with immediate hardship, plus up to $F5000 for home repairs, which saw an outflow of about $F276 million in just six weeks.
Many people queued at FNPF in the wake of the disaster. SOURCE: provided.
But this involved more than 182,000 paper applications –about 3 per cent of GDP - processed manually, with cheques issued and cashed by the ANZ. It involved filling in forms and then queuing when people were – understandably - impatient to pick up their money.
Koroi (RIGHT) attending to an FNPF member in Suva. SOURCE: provided.
The FNPF's chief operating officer, Jaoji Koroi, says managing the crowd was the first priority, with some expressing their frustration by breaking locks and plate glass.
"There was a huge expectation from the public, people were using the political system to ease their frustrations and to express concern at the delays," he told BlueNotes.
"We needed to collaborate with people. We used Vodafone to manage the back end [and] we used ANZ to assist us in the payments, which allowed us to deliver."
Koroi, a quiet, thoughtful man, says the experience reinforced the need for a transition to digital transactions is a high priority for the FNPF after an IT system change in the last two years.
He says FNPF should be able to disperse funds electronically with fund members able to withdraw cash from ATMs in the required amounts, rather than carrying around $F1,000 in cash.
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In a national emergency like TC Winston, a hardship payment could possibly be dispersed to all accounts, with members able to return the money if it is not needed.
The ANZ's Country Head in Fiji, Saud Minam, says his bank has embarked on the shift to digital but is working to take customers with them.
Last year, the ANZ cut the charge for non-customer using its ATMs from $F1.50 to 50 cents, which is significant in a country where the minimum wage is $F2.32 an hour.
For its part, the FNPF still recorded a strong result in 2015-16, increasing net operating profit by about 25 per cent to almost $F332 million and members' funds rising by 3.1 per cent to $F4.4 billion.
Indeed, the FNPF is a whale in Fiji's sophisticated but not overly deep financial pool. For example, the Suva-based South Pacific Stock Exchange has just 18 listed companies.
One of these companies, Amalgamated Telecom Holdings, which is a subsidiary of FNPF, accounts for about 41 per cent of the SPSE's market capitalisation of $F1.3 billion while the top five companies account for about 82 per cent.
The FNPF operates a defined contribution superannuation scheme for retiring workers at age 55 and life insurance (death benefit) to members. The Fund's 406,000-plus members make an 8 per cent contribution and employers 10 per cent.
Crowds waiting for FNPF funds. SOURCE: provided.
The Asian Development Bank says the FNPF has "vast funds" at its disposal through its legal monopoly over compulsory long-term savings, with the Fund holding about one third of the country's gross assets and being a key financier of government debt.
The Fund's investments overseas are subject to approval from the Reserve Bank of Fiji, which takes account of the prevailing foreign reserve outlook.
The ADB says the Fund's investment portfolio comprises between 70 to 75 per cent in government securities.
"Funds that are not in the form of government bonds are channeled into domestic tourism and real estate projects,” the group says. “The FNPF is also an active buyer of government assets divested through privatisation."
But this emphasis on local investments in tourism-related projects on can cause problems or require the Fund to support national economic priorities.
In years past, the FNPF had troubles with a resort/real estate project at Natadola, which has been written down by almost $F82 million.
The project was later re-started and housing blocks now on sale, allowing it to claw back some of the write-downs.
Koroi says the FNPF has historically taken a conservative approach on investment, but is looking to build up its offshore investment from about 11 per cent now to between 20 to 25 per cent.
"The majority of our assets are still tied with government bonds and interest-type securities,” he says.
“For funds like us to be able to make the returns that members expect, we need we need to take on a bit more risk. But our investment universe in Fiji is very limited."
"There are very limited choices that can suit our long term investments and also give good returns and protect our members. If we want to invest offshore, we have to get approval from the Reserve Bank."
However, Koroi says the Fund will also focus on its social security role through the payment of annuities, health and medical benefits, and retirement homes.
The Fund, which is celebrating its 50th anniversary, introduced a new scheme in 2012 after having what the Prime Minister describes as a "wake-up call".
Previously, members were able to access 25 per cent of their balance as annual payments while being able to use 22 grounds for withdraw up to two thirds of their balance before age 55, for everything from weddings to housing.
A new actuarial-based pension scheme was introduced and members on the old annual payments arrangements were allowed to take out their money in full or join the new scheme.
The grounds for withdrawals were cut to about five (while allowing for national emergencies like TC Winston after board approval).
Koroi says without such dramatic changes, the Fund would have run out of reserves by 2026 and by 2056 would have been relying on cash flow.
"There was a major outcry from the public,” he says. “We're fortunate we able to proceed in 2012 … I think people understand why it needed to be done."
"Obviously, everybody in Fiji has got a stake in the business, so everybody will have a view on what we do."
Koroi says the old rules on withdrawals contributed to the problem. Members were reaching 55 years with low account balances, with about 40 per cent of working Fijians who retire over the next five years having balances lower than $F10,000.
Now, 70 per cent of their balance is preserved until retirement.
"Before, members could access up to two third of their balances," he says. "People were looking at this as working capital or their overdraft facility, which is really the wrong mindset."
"We want 80 per cent of our members at least to reach retirement with $60,000 to $70,000 in the next 10 to 15 years."
The issue of funding decent retirement is an issue for all countries, including Australia and New Zealand. But Fiji and other Pacific nations face the added challenge of bringing more citizens into the formal economy, with an estimated 35 per cent of Fijians not having a bank account or using informal services.
The big issue is how Fiji can increase employment and wages, as the number of job seekers joining the labour market every year outweighs the number of new jobs.
There are problems with informal work and under-employment, and with university-educated job seekers struggling to find work, while there is a shortage of workers with trades and technical training.
Meanwhile, there is the cultural custom of kerekere, borrowing from kinfolk without an obligation to repay the loan. This works both ways, in a family member can expect to receive support as will give it. But it can work against individual savings.
As things stand, remittances sent home by Fijians working abroad are worth almost $F500 million a year, which includes members of the military on UN peacekeeping missions, as well as private citizens employed in Australia, New Zealand and elsewhere.
The good news is the Fijian government's financial inclusion taskforce, chaired by Reserve Bank Governor Barry Whiteside, is making steady progress and providing a model for many developing nations to follow.
Starting out four years ago, Whiteside and his colleagues set a target of reaching half of the estimated 300,000 Fijians who were excluded from the formal economy. They achieved that milestone with time to spare.
But about 27 per cent of Fijians, or about 166,000 people, still do not have a bank account while nine per cent (around 55,000 people) use informal sources as such savings clubs, moneylenders or hire purchase from shops. Just 12 per cent of the population have insurance cover.
Under a new five-year plan, Fiji aims to increase the number of adults with access to formal financial services from 65 per cent of the population to 85 pfmirer cent, some 130,000 people, of whom at least half will be women.
The last point is important because Fiji lags on financial inclusion for women and rural dwellers, although it does better than other Pacific countries like the Solomon Islands and Samoa and is well of ahead the Philippines and Indonesia.
The Reserve Bank's manager of financial system development, Christina Rokoua, says the first stage of the work was to give access to services, which might mean a ‘mobile wallet’ for electronic payments or using a microcredit provider.
The second stage focuses on "meaningful usage", which can be an increase in savings over time for a low-income family or an insurance policy to provide a safety net in times of crisis.
These programs are backed at the grassroots by financial education in schools and by the MoneyMinded financial literacy program run by ANZ in villages and among small traders.
The government is increasingly using electronic payment for welfare and for land-leasing payments, which is increasing the number of bank accounts.
There are already success stories like Miriama Tawalovo (pictured above) who started out running a roadside juice stall. She borrowed $F200 in micro-finance for a juice cooler and later expanded to a handicraft stall for tourists.
After further MoneyMinded training, she opened a mini-mart in her village, started exporting handicrafts, bought a pig farm and won the Reserve Bank's microfinance entrepreneur of the year award in 2014.
Fiji is now a leading player in the Alliance for Financial Inclusion, hosting that body's Global Policy Forum last September, which was attended by representatives from 114 countries.
As part of the push Fiji has signed the Maya Declaration to develop sustainable business models to mitigate climate change.
Financial literacy programs like MoneyMinded are run in some Fiji villages. SOURCE: provided.
The Reserve Bank's Christina Rokoua explains: "Green finance and financial inclusion overlap because the poor and the low-income are the most vulnerable to climate change and would be hit hardest."
The upside is many small steps can add up to major advances. And one of the biggest steps is financial empowerment of women.
Mark Skulley is one of Australia’s most-respected business journalists, a veteran of more than two decades at Fairfax Media including The Australian Financial Review. This piece is the third in a three-part series on Fiji. You can read the first piece HERE and second HERE.
BANNER IMAGE: Momi Bay Development (Marriott), Fiji
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.