Vanuatu: Expansion of Rural Financial Services

Sovereign Project | 46509-001

Summary

Impact. The expected impact of the proposed S-CDTA is a growth in financial inclusion in Vanuatu, particularly in rural areas. This will be measured by the increase in the number of people with accounts in Vanuatu.

Outcome. The expected outcome of the S-CDTA is the improved operational performance of VANWODS. This will be measured by the decrease in the operating expense ratio of VANWODS.

Methodology and Key Activities. ADB's assistance will support VANWODS to upgrade its institutional capacity (including human resources and technology) and governance arrangements. It will have the following key outputs:

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Project Name Expansion of Rural Financial Services
Project Number 46509-001
Country Vanuatu
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8336-VAN: Expansion of Rural Financial Services
Technical Assistance Special Fund US$ 225,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Finance - Inclusive finance
Gender Equity and Mainstreaming
Description

Impact. The expected impact of the proposed S-CDTA is a growth in financial inclusion in Vanuatu, particularly in rural areas. This will be measured by the increase in the number of people with accounts in Vanuatu.

Outcome. The expected outcome of the S-CDTA is the improved operational performance of VANWODS. This will be measured by the decrease in the operating expense ratio of VANWODS.

Methodology and Key Activities. ADB's assistance will support VANWODS to upgrade its institutional capacity (including human resources and technology) and governance arrangements. It will have the following key outputs:

Output 1: Appropriate IT system is identified and implementation is supported. The S-CDTA will assess VANWODS' existing IT system and future requirements to identify a suitable system on the market that ensures sufficient capacity for growth of its operations, caters for a potential partnership with NBV, and enables the reporting required by management and the Reserve Bank of Vanuatu. Once a suitable system is selected, the S-CDTA will support the implementation, in particular through supporting the migration of data to the new system and capacity building of staff.

Output 2: Strategic and managerial capacity of VANWODS senior management is improved. Support will be provided to the management and board of directors of VANWODS to facilitate the introduction of international best practice microfinance standards and to ensure that the organization adheres to local best practise standards of internal audit and prudential supervision. A capacity building needs assessment will determine current weaknesses and design a prioritized capacity building plan. Areas requiring immediate support will be addressed through workshops and on-the-job training for selected senior staff. As part of the output, the S-CDTA will support the management and board of directors to review the strategic plan of the organization and to identify additional areas where VANWODS requires support to effectively implement its mission.

Output 3: Products and services are reviewed and revised as necessary. The S-CDTA will review the current products and services through a product demand and client satisfaction survey. Based on the results of the survey and a product costing exercise, adjusted or new products will be developed and tested.

Project Rationale and Linkage to Country/Regional Strategy

This small-scale capacity development technical assistance (S-CDTA) is included in ADB's Vanuatu Country Operations Business Plan 20132015. It is consistent with ADB's Vanuatu Country Partnership Strategy 20102014 and ADB's Pacific Approach 20102014.

As an archipelago of 83 islands, 67 of which are inhabited, Vanuatu faces challenges to provide access to financial services to the majority of its 250,000. Based on 2011 figures, it is estimated that only 19% of the population has access to formal or semi-formal financial services. Approximately 75% thereof live in rural and remote areas. The services of the four commercial banks (ANZ, Westpac, BRED, and National Bank of Vanuatu (NBV)) concentrate on urban centres and leave rural areas mainly without banking facilities.

The primary non-bank financial institution providing savings and loan services outside the urban centres is the Vanuatu Women's Development Scheme (VANWODS), albeit on a small scale. VANWODS is a non-profit microfinance institution with a mission consistent with ADB's financial inclusion objectives. VANWODS is a valued brand name in Vanuatu and enjoys strong support from local communities and in particular women's groups. It has great potential to further expand access to financial services in rural and remote areas since its target clientele is low-income women or informal women businesses, the majority of whom are currently financially excluded. Its mission is in line with the government's priorities and action agenda. VANWODS will need assistance to cope with increasing demand for services and subsequent challenges of growth.

VANWODS was established by the then Department of Women and Culture in 1996 with funding and technical support from the United Nations Development Programme. The member-based organization was registered under the Charitable Organisations Act in 2003, and is registered with the Financial Services Commission. It provides microfinance services to rural women based on a modified Grameen Bank model. Since 2008 it has had ni-Vanuatu management and has grown to service (with loan and savings products) almost 7,000 women through 4 branches in 4 provinces (Efate, Espiritu Santo, Malekula and Tanna). From 2001, savings customers grew from 430 to 6,133 (2012) and respectively borrowers from 430 to 3,987 (2012). The savings volume reached VT262 million or $2.9 million equivalent at the end of 2012. Loan amounts are small (up to Vt 250,000 or $2,750 equivalent) with a flat interest rate pricing base, and reached a total volume at end 2012 of VT286 million or $3.1 million equivalent. VANWODS has reached the stage where it needs to upgrade its institutional capacity and governance to support further expansion and to operate on a financially sustainable basis. Additionally, opportunities have arisen to develop technological partnerships (i.e. with NBV ) and to use new technologies, such as branchless banking, to more cost efficiently increase outreach in remote and rural areas.

Impact
Project Outcome
Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services

The S-CDTA will finance international consultant services for a total of 7.25 person-months. The consultants will be selected and engaged on an individual basis in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). The proceeds of the S-CDTA will be disbursed in accordance with the Technical Assistance Disbursement Handbook (2010, as amended from time to time). The seminars and workshops will be administered by the consultants.

Outline terms of reference for consultants

1. Objectives and Scope

The Pacific Liaison and Coordination Office of the Asian Development Bank will coordinate the TA. The required areas of expertise for the international experts include, but are not restricted to: information and telecommunication technology, international best practices in microfinance and rural finance, institutional capacity development, training, product development, demand surveys and analysis. More detailed terms of reference will be formulated at a later stage prior to the recruitment of consultants.

2. Terms of References

A. Microfinance Information Technology Specialist (international, 4 person-months, intermittent)

The expert will conduct a thorough assessment of the existing IT system and develop the scope for the needed IT system which would ensure sufficient capacity for the growing organization and cater for a potential partnership with National Bank of Vanuatu. The recommendations will have to be made within VANWODS available budget. The suggested solution or recommended MIS (anticipated to be an off-she-self solution with little need for adaptation) needs to account for VANWODS delivery model (group-based lending) and management's reporting needs as well as Reserve Bank of Vanuatu reporting requirements. The expert will support the implementation of the software in consultation with the software firm and will develop an implementation plan, considering timeline, human resource constraints, transfer and migration of data. The expert will need to have in-depth experience with small-scale microfinance IT systems and respective issues and challenges.

B. Microfinance Institutional Development Specialist (international, 3.25 person-months, intermittent)

The expert will build the capacity of management and staff on operational matters. This includes a capacity building needs assessment to determine current weaknesses and design a capacity building plan. It will require an institutional assessment to identify weaknesses and prioritize areas with immediate support needs together with the management. This will happen in conjunction with the IT specialist. An envisaged priority area will be the introduction of international best practices in microfinance for governance, performance monitoring, efficiency and product delivery. The expert will conduct a product demand survey with existing clients of VANWODS. Based on the results and a product costing exercise the expert will decide with the management on refinement of products. As part of the review of products and services, the expert will support the management and board to review the strategic plan of the organization and to identify additional areas where VANWODS would benefit from donor support to effectively implement its strategic plan. The expert is required to have in-depth operational microfinance experience as well as gender expertise.

Procurement Procurement of goods and services will be undertaken in accordance with ADB's Guidelines (2010, as amended from time to time).
Responsible ADB Officer Sabine Spohn
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Liaison and Coordination Office in Sydney, Australia
Executing Agencies
Ministry of Finance & Economic ManagementP.M.B. 058
Port Vila
Vanuatu
Timetable
Concept Clearance -
Fact Finding -
MRM -
Approval 15 Feb 2013
Last Review Mission -
Last PDS Update 30 Apr 2013

TA 8336-VAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
15 Feb 2013 - 15 Feb 2013 30 Sep 2014 30 Sep 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
225,000.00 0.00 0.00 0.00 0.00 0.00 225,000.00 15 Feb 2013 56,924.95

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