Electronic Banking to Bring Financial Services to Vanuatu's Rural Areas

MANILA, PHILIPPINES - Rural areas in Vanuatu, out of normal reach of bank branches, will soon enjoy access to modern banking services thanks to funding support from Japan and the Asian Development Bank (ADB) that will bring electronic banking and card-swipe technology as close as the local shop.

National Bank of Vanuatu (NBV) clients in rural areas will be able to use a plastic card with a magnetic strip to gain access to many financial services using electronic funds transfer point of sale (eftPOS) cards, or SmartCard technology. The technology will allow bank customers to have access to savings accounts, make deposits and withdrawals, or transfer money.

“This new branchless banking system will give many people in rural areas access to modern financial services for the first time,” said ADB Project Team Leader, Milovan Lucich. “These services will help people living in Vanuatu’s remote villages participate in sustainable, income-generating activities that contribute to economic growth.”

Many rural households in Vanuatu are without access to secure and convenient financial services. In some remote areas, government workers and teachers who receive salary payments into their bank accounts must make expensive, time-consuming trips to the nearest NBV branch to collect their money. Local farmers have resorted to burying their money in cans in the ground rather than face long trips to town to deposit money. The new electronic banking system will provide local access to secure and convenient banking services.

“The new technology allows us to provide a range of services aimed at meeting rural clients’ banking needs and could be a model for expanding access to financial services throughout the Pacific,” says Bob Hughes, Managing Director of NBV. “Once the system is established, we hope to use it to help facilitate microfinance loans.”

The Japan Special Fund is providing a $600,000 technical assistance (TA) grant that will be managed by ADB. NBV will provide $150,000 to complete the funding. The TA is an extension of a successful rural microfinance outreach ADB/NBV project that supported the expansion and scaling up of rural and microfinance services in Vanuatu in 2002-2006.

The business model will use bank agents, such as local store owners, in rural communities who will be provided with the necessary technology and communications equipment to help the rural population open savings accounts and use account transaction facilities. At present, only 13% of the rural adult population have bank accounts, and an estimated 92,000 need financial services.

Vanuatu is the third poorest country in the Pacific with a rising poverty index of 24.7, placing it 49th out of 102 developing countries and areas, based on a 2006 United Nations Development Program Human Development Report. The country has experienced rapid population growth and, until recently, a long period of sluggish economic performance. As a result, the current real per capita income is lower than it was 20 years ago.