The National Bank of Vanuatu (NBV) has been a leader in its push to provide bank services to Vanuatu's rural people. Innovative technological approaches, including mobile banking, brought savings and credit to some of the most remote communities in the country.
Port Vila, Vanuatu - Harry Nikiau lives on Vanuatu's southern island of Tanna. One year after opening a grocery store on his family's land not far from Lenakel, Tanna's main commercial center, he wanted to expand his business, but was afraid his lack of collateral would get in the way.
"I had just opened my retail shop," said Nikiau. It was 1993. "I didn't have a lot of assets to show as collateral."
Fortunately, the National Bank of Vanuatu (NBV) was in the midst of expanding its services in remote islands like Tanna. Nikiau met with John Paton, NBV's microfinance officer in Tanna. "John had faith in my business and offered me a small loan."
Since then, ADB has supported NBV to offer more rural loans, and borrowers like Nikiau have benefited. Nikiau has taken out three or four more loans, according to Paton, and has graduated to a full commercial lending customer.
Today, Nikiau's store has diversified into hardware, vehicle spare parts, and fuel, and operates timber and rice mills and a real estate business. He has 15 people on his weekly payroll. "I don't think I would have been able to grow and expand my business without that first NBV loan," he said.
Nikiau is steps ahead of many of Vanuatu's rural people, who - confronted with the absence of a local bank and vast distances to the nearest one - often choose to hide cash at home.
Bob Hughes, the managing director of the National Bank of Vanuatu (NBV), calls it the "Milo tin deposit." People resort to depositing money in empty tins of Milo, a chocolate flavored health drink, and burying the tins near their houses.
Not only can it be insecure, Milo tin banking can harm the bills. "A lot of these (buried) notes are damaged, faded or worn out completely," explains John Aruhuri, head of rural banking for NBV, who has watched people dig up Milo tins for cash.
Photos of money damaged from Milo tin deposits are published in a manual that Aruhuri and his 14 microbank officers now use in a financial literacy program, launched by NBV in May 2010. "Using pictures of these damaged notes, we are telling our people that banking under the mattress or in the garden should not be encouraged at all. It is best that they put their money into a bank account."
In remote areas, where teachers must make expensive, time-consuming trips to the nearest NBV branch to collect their salaries, and where credit - if it exists - is largely outside the financial sector, levels of financial literacy remain low.
An education program, sponsored by the Commonwealth Secretariat and ADB, is teaching people to take advantage of better business and banking practices.
ADB granted USUS$600,000 to the Government of Vanuatu to improve rural people's access to financial services. The grant, which forms part of NBV's overall rural outreach effort, is an extension of a successful project that expanded rural and microfinance services in Vanuatu from 2004 to 2006.
Since the launch of the financial literacy program, NBV's microfinance officers have been busy conducting training throughout Vanuatu. "Our microfinance officers start from the branch locations and then slowly move around the island into the more remote communities," said NBV's John Aruhuri. The bank also runs a bi-weekly radio show about financial literacy on Radio Vanuatu.
"There seems to be a lot of appreciation for the banking advice and education we offer," said Aruhuri. "People now understand the logic of saving, and that in order to access credit, one has to first open a bank account."
But Milo tin depositors will continue to exist if people in remote communities can't access the bank. In response, NBV managing director Bob Hughes and his team are establishing more NBV branches outside Port Vila. NBV now has 154 specially trained microfinance officers at its branches across Vanuatu.
Stretching NBV's financial net across the archipelago is a challenge that Aruhuri said ADB helped resolve. ADB provided a technical assistance grant to NBV to design a rural finance product for pilot testing in rural areas, and a second grant to expand access to finance and introduce viable economic opportunities and income-generating activities.
In 2008, ADB funding helped NBV introduce a mobile-phone banking system that served rural communities beyond the reach of NBV branches. Over the nearly 2 years since this initiative began, NBV has effectively explored and used available technologies, implementing satellites and solar power in many of the rural branches.
In addition, NBV has identified "flexible" options for collateral that credit applicants can use to guarantee their loans. "If they have cash in their bank account, that's a good security in the first instance," Aruhuri said. "We also look at moveable assets such as generators, chainsaws and portable sawmills, fridges, and furniture. The amount of collateral needed depends on the size of loan."
Rutha Wilson is the owner of Havannah Block Factory, a backyard concrete-block making business located at her village of Tanoliu, which is covered by the North Efate branch of NBV.
Inspired by a desire to provide her children with a proper education, Wilson began to bank her money. Her goal was to save enough to get the credit she needed to grow her business.
For John Kanas, microfinance officer at NBV, Wilson is one of NBV's best clients. She took a microloan of vatu (Vt) 83,000 (about US$835) last year and repaid it 12 months later. "Rutha was good with her repayments. Whenever she was ready, she would telephone me to come and bank her money," he said.
When she started her business in 2006, Wilson and her two older brothers did everything from purchasing cement and carting sand and coral from the beach in front of the village to mixing and casting concrete blocks.
Four years later, the business employs four young men at the backyard factory in Tanoliu, each earning Vt1, 200 (US$12) a day for a five-day week.
Aruhuri is impressed with Wilson's determination as a young entrepreneur. "She is very strategic," he said. "Havannah is a fast growing area with lots of coastal land sales and a lot of home construction taking place. The central government now wants to build a port too, so the demand for construction materials like concrete blocks will surely hit the roof."