ADB Expanding Rural Microfinance Opportunities in Vanuatu
MANILA, PHILIPPINES - ADB, in partnership with the National Bank of Vanuatu (NBV), has successfully pioneered a project to create sustainable, profitable rural micro-lending in Vanuatu, to be expanded in 2007. Two technical assistance grants amounting to US$500,000 provided by ADB in 2002-2006 supported the expansion and scaling-up of rural microfinance services. The project shows that microfinance can be commercially viable using an approach that builds on local systems. ”This approach is an innovative one, and the results reflect that the demand for this product is real and growing,” says Naomi Chakwin, Regional Director of ADB’s Pacific Liaison and Coordination Office. “This initiative has resulted in some villagers getting access to finance for the first time. The challenge is to continue expanding.” The rural microfinance project involved NBV lending officers traveling sometimes 2-3 hours to remote villages by motorbike. They met with potential borrowers, detailed their applications, and identified their assets. The role of village chiefs is a key feature of the project. The chief’s certification of an applicant’s integrity and community standing is needed before a loan is approved. The chief’s assurance acts as collateral support and traditional custom enforcement helps keep loan payments up to date in the village. If community members fail to pay back loans without reasonable cause (e.g., natural disaster), the village faces the possibility of losing access to credit. This system ensures that outstanding microfinance loans to NBV remain current. Approved loans are used in many areas of village life. Some 43% of the loans disbursed in 2005 went into small trade, mostly small village shops; 30% into agriculture, livestock and fisheries; 15% into the services sector; and 11% into small manufacturing such as dress-making and bakeries. As of September 2006, NBV had approved about 1,480 loans, amounting to US$1.92 million. “The rural microfinance product has performed very well in terms of outreach and sustainability,” says NBV’s Managing Director Bob Hughes. “Loan repayment has been good, considerably better than loan products in the corporate or retail sectors. ADB’s technical expertise, and NBV’s strong ownership and management of the project have been a winning combination.” He adds that the product has become a self-sufficient pillar of the bank’s operations. “Close scrutiny of the loan portfolio has been instrumental,” he says. “Only 4.4% of it is in arrears of 30 days or more and only one loan has been in arrears for 60 days or more.” The next phase, which begins in 2007, will explore options for further expanding the reach of rural finance in Vanuatu using new technologies. Vanuatu is one of the poorest countries in the Pacific, with weak private sector investment resulting in increasing unemployment and low economic and social development. Vanuatu has a small population of about 209,000 people spread over an archipelago of more than 80 islands. More than 78% of the country’s population lives in rural areas mostly in the outer islands. Access to financial services has been severely limited as lenders operate in a high risk environment, and there is a narrow range of financial services and loan products, including microfinance. Access to finance is further constrained by the limited network of bank branches due to geographical difficulties, poor road infrastructure and unreliable shipping services. About ADB | 
News and Events 
Top of page
