In the past few years, Samoa has seen the emergence of a new banking system with a focus on credit access. This comes after years of financial hardship and a shrinking economy. According to a 2016 report, no new loans had been issued in Samoa in roughly five years. Major financial cornerstones like the Bank of Hawaii had backed out of the country. In desperation, and on the margins of the mainstream economy, Samoa adopted a public banking system.
The Landscape of Samoa’s Credit Sector
The financial services sector in Samoa encompasses a wide range but is mostly limited to urban areas. The industry has four major commercial banks: two foreign banks and two regional banks. However, the domestic credit market is controlled by Public Financial Institutions. Samoa National Provident Fund holds 22.6 percent of the market; another key player, The Development Bank of Samoa, holds a 10.3 percent share. Much of the success of credit access in Samoa can be attributed to the Central Bank of Samoa. It acts as a regulator and has enforced progressive strategies that have expanded financial services and inclusion.
However, 49 percent of Samoans are outside of the formal financial market. Public constraint has often been attributed to a cash-heavy informal economic sector and inadequate access to distribution points throughout Samoa. The World Bank and The International Finance Corporation have identified Samoa as a struggling credit environment, but policy improvements seek to target these issues.
Somoa’s First Credit Bureau
In 2015, Samoa launched its first Credit Bureau financed by The International Finance Corporation. Its intention was to bring efficiency and transparency to the money-lending market. This was a milestone for Samoa’s financial system, which was historically reliant on cash. It helped many different parties by providing confidence to lenders as borrowers built up their credit profiles. The Credit Bureau was fundamental in establishing a credit infrastructure in Samoa. Backed by the Data Bureau and the largest financial firms in Samoa, technological advancements such as cloud storage and information sharing among banks allowed credit footings to grow. The new technologies meant that lenders could deliver financial services at significantly lower costs to expand credit access to broader segments of the economy.
Expanded Credit Access
Domestic credit to businesses has grown by roughly 60 percent since the mid-1980s. The Strategy For The Development of Samoa, intended for the years 2016 to 2019, outlined plans to increase inclusivity to vulnerable groups and help end all poverty in the region.
Supported by the public domestic credit market, economic resilience accompanies private sector investment and development initiatives to expand credit access. Agriculture and fisheries are especially important to Samoa’s rural economic growth and development. The Development Bank of Samoa finances agriculture through the Agricultural Competitiveness Enhancement Program and Agribusiness Development Program. The Agribusiness Programs, Development Bank and Business Enterprise Center provide increased technical and financial support services for small business development.
Samoa has already left the list of the most undeveloped countries and is on its way to sustainable economic growth. With the continued implementation of credit and financial services aimed at the most vulnerable populations, Samoa has seen growth in per capita GDP of roughly $6,000 USD in 2017, up nearly $500 USD since 2015.
While extreme poverty does not afflict the region, 20 percent of the Somoa’s population lives under the poverty line and struggles to obtain secure employment. The majority of this population lives in rural areas, lacking access to the resources available in urban areas. With the addition of these financial services aimed at reaching underserved communities and the larger rural economy, many industries are growing and the country is opening new doors for its people. As credit access in Samoa continues to spread, the economy and individual prosperity will also blossom.
– Joseph Ventura