SINPF revolutionizes access to credit with digital ‘nano loan’

Honiara, Solomon Islands – The Solomon Islands National Provident Fund (SINPF) is set to pilot a digital ‘nano loan’ product, supported by the UN Capital Development Fund (UNCDF) under the Solomon Islands-Australia partnership, to provide low-cost and instant financing to assist the country’s low-income households to access credit and achieve their financial goals.

A ‘nano loan’ is a small and short-term loan ranging from SBD $50 to $2000 used to cover urgent expenses, such as medical bills, school fees, household repairs, or small investments by MSMEs, with repayment terms of up to 90 days.

The Australia-UNCDF-SINPF project was born out of the 2022 Pacific Islands Fintech Innovation Challenge in Singapore, where Central Bank of Solomon Islands Governor Luke Forau was a judge. Product development will be led by India-based LendTech firm Yabx.

With this project now being launched, Governor Luke Forau said: “Solomon Islands is an archipelago with a dispersed population living across hundreds of islands. We have to leverage technology to achieve the targets set out in our National Financial Inclusion Strategy (NFIS-3). One of those targets is to roll out a nano loan service to expand access to credit. As a regulator, we welcome innovations that contribute to achieving our country’s financial inclusion goals.”

The nano loan project builds on the success of YouSave Lo mobile, a voluntary pension contribution product for the informal sector also supported by Australia through UNCDF, that was launched in 2020. SINPF’s new lending company, Solomon Finance Limited (SFL), will offer nano loans from July 2023 through YouSave’s USSD portal (*673#). Using AI technology, nano loan applications will be assessed based on a user’s savings history with YouSave. The more a user saves with YouSave, the higher the nano loan they automatically qualify for.

SINPF General Manager and CEO Mike Wate said: “At the NPF we are happy with the success of YouSave, as we see more individuals voluntarily saving with the Fund for their old age. We are constantly working to improve the value proposition to our YouSavers. This nano loan service will offer a safety net when YouSavers face unplanned expenses, while always ensuring that their savings are safely invested to guarantee an interest to the savings and a pension for their old age.”

The Australian High Commissioner, Rod Hilton, said that supporting better access to finance, especially for women and people in rural areas, is an important priority under the Solomon Islands-Australia economic partnership.

“Australia is proud to invest in this project with SINPF which will allow all Solomon Islanders to save, provide more for their families and create jobs. We know there are micro business owners in rural areas who will be able to invest using these nano loans. Innovations like this are how we reach the furthest parts of the country and grow the economy and jobs for everyone,” Mr Hilton said.

Loan applications and approvals will happen instantly through the mobile phone. Once approved, the funds are immediately transferred to users’ mobile money accounts through a service that will be launched by Our Telekom in May, also with support from UNCDF and Australia. Loans can also be cashed out with Our Telekom’s registered mobile money agents across the country.

UNCDF Regional Lead, Neha Mehta said: “Under the Pacific Digital Economy Programme, we are committed to building an open digital payment ecosystem that removes structural barriers towards financial inclusion. Our work in Solomon Islands is testimony to that, where we can see innovative financial services now becoming a reality for many”.

Added UNCDF Solomon Islands Country Coordinator, Sam Mulawa: “Banks decide to give somebody access to credit based on their ability and willingness to repay the loan. Without any financial transaction history, you get a low credit score. That is why banks find it hard to approve loans to the underbanked and the unbanked. This project uses technology to assess alternative data for credit scoring: an individual’s savings behavioral patterns with YouSave. This is key if we are going to extend access to credit and financial inclusion to groups like women, youth, the disabled and MSMEs. Imagine applying for a loan without any paperwork and getting it on your mobile phone within 60 seconds. All by dialing *673#.”

Nano loans have the potential to transform the economy in the Solomon Islands by empowering microentrepreneurs in the informal sector and people living in rural areas with a quick and affordable way to access financing. This increased access to finance will assist Solomon Islanders to expand their enterprises, and in turn boost the local economy by generating revenue, employment, and other benefits for the community.

As part of Australia’s economic partnership with the Solomon Islands Government, this project is implemented by UNCDF under the Pacific Digital Economic Programme (PDEP). PDEP is jointly implemented by UNCDF, the UN Development Programme (UNDP), and the UN Conference on Trade and Development (UNCTAD).

 

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