The Solomon Islands looks to cell phone airtime to build financial inclusion
The Solomon Islands
Located in the Pacific, is a country comprised of 6 major and 900 smaller islands. Islanders primarily depend on agriculture, limited mining activities and tourism for their livelihood. Forests cover a vast majority of the country’s islands rendering them difficult to traverse. Inadequate banking infrastructure and the geography of distant islands hinder the growth of the financial activities required to lift the population of 600,000 above the poverty line. Informal financial activities prevail, making the population vulnerable to economic shocks and unable to plan for their future.
Francina is a housewife. She works menial jobs part-time to make extra cash to spend on her children’s school fees and books. She is unable to hold on to the money she earns as it gets quickly consumed by non-essential expenses. Francina wishes a bank were nearby for her to deposit the money into savings.
Lloyd is a boatman. He toils hard, ferrying passengers to the nearby islands. He deals with cash throughout the day, but by the nightfall, none is left in his hands. He succumbs to his peers to lend them money or spends it on entertaining them. Lloyd wishes the banks stayed open late at night for him to deposit money into his savings.
People like Francina and Lloyd represent 75% of the population who are informal workers in the Solomon Islands. They are not integrated into the island’s formal economy and are left vulnerable to economic conditions. UNCDF’s Pacific Financial Inclusion Program (PFIP) has long realized this need and in 2017 assisted the National Provident Fund of Solomon Islands (SINPF) to start an informal workers’ pension fund called “youSave“. Under this scheme, informal workers can voluntarily deposit money into their interest-bearing pension fund with the facility to withdraw up to 50% of the deposited sum up to four times per year.
While this is intended to integrate the informal workers into the mainstream economy, access remains the biggest hurdle in its successful adoption.
How to provide better digital access to the “youSave” product when the country does not have advanced digital infrastructure? After the initial consultations involving the country’s two mobile operators, National Provident Fund and Central Bank – PFIP thinks the answer may be in the air – what about the use of mobile airtime?
PHB was eager to engage in this interesting hypothesis and set out to assess the feasibility to use mobile airtime top-up credit to save money into the “youSave” account. Sanjay Shah from PHB Development leads the team with the experience of having built other collaborative digital finance models in South Asia. The idea is simple and makes practical sense but – if this is so simple and elegant – why has it never been done before? With the support of the Central Bank of Solomon Islands (CBSI), it was time to uncover a payment instrument for financial inclusion that may have been hiding in plain sight.
Sanjay arrives in the beautiful pacific islands to find plenty of challenges before him. He has the mammoth task of getting all stakeholders to agree on appropriate marketing, budgets, settlement of accounts, common technical protocols, and service fees. Getting the MNOs to agree and implement the same USSD codes would lay the infrastructure for a seamless service offering. Then there is the larger question of making the service affordable to the consumer. The final concession from all stakeholders to lower their fees in order to lower the cost to the customer paved the way for the feasibility of such a model to use the airtime credit for savings to pension funds.
Having championed the feasibility of such a concept, PHB advanced the design of the pilot with a human-centred approach, focused on building a system that can meet the needs and abilities of the islanders such as Francina and Lloyd. They are not sophisticated or savvy users. They have a relatively low education level and use simple handsets. It was identified that having the same USSD short-code, menu and SMS format would greatly simplify the user experience across the two different mobile networks.
Sanjay is continuously harvesting new discoveries on the ground-based on the realities of the users – to prepare and enhance the pilot. After 11 months of hard work, the “youSave LoMobile”* pilot was ready for launch. The newly recruited and trained Ambassadors are ready and eager to hit the local markets and nearby villages to enrol members. The Ambassadors are equipped with the knowledge to enrol and teach the members how to use the service using the simplest of simple mobile phone.
An encouraging result emerges in the first three months after the launch of the pilot. Seven thousand members are actively using the system. These members now perform about 200 transactions per day with an average transaction size of SI$35 (Approx. US$ 4). The preliminary enrolment and engagement figures give a lot of confidence of the suitability of the system to reach more of the Islands 400,000 informal workers.
With the launch of this service, the Solomon Islands is a step closer to providing financial inclusion and digital empowerment to its citizens. Sanjay reiterates “The innovation here is not technology or a new app; it is rather in the business model. Firstly, the central bank and their willingness to accommodate the service within their regulatory framework. Additionally, with the MNOs willingness to collaborate – whereas normally they would be strictly competitors. Thirdly, the willingness of the tax authority to grant a waiver of the GST that is paid on airtime – but should not logically apply to pension savings. Each of these is a significant achievement, and the project could not scale without each of them succeeding.” These public-private partnerships are examples of how PHB can support the building of inclusive digital economies where everyone can participate.
Francina now frequently saves money into her youSave account using the LoMobile service. She feels confident to have saved the money required to pay for her children’s school fees. Lloyd is equally excited for his future too; he intends to find a bride and settle down as he is now able to plan for his future with the knowledge of his growing nest egg. For Lloyd and Francina, youSave LoMobile puts their future in their own hands.
* youSave LoMobile – Local term is used for marketing this service. “LoMobile” means from your mobile.
Read how the Solomon Islands responded to financial and social emergency unleashed by COVID-19.
Read a related story on how Airtime top-up services are used for micro-insurance and micro pension.