Cash remains the preferred method of payment in the Solomon Islands and a lot of it has to do with the nation’s archaic financial architecture. Even transfers between banks are done manually by issuing cheques and this gives rise to countless errors.
As of October 1, the National Payments Act has come into force and this has been done to reform the Solomon Islands financial payment system towards one that is more electronic, while driving economic development and making everyday banking transactions easier.
This move is expected to enable the increased use of electronic payments. The step was undertaken in consultation with the Central Bank of Solomon Islands (CBSI), which is set to increase access to affordable digital payment services, reduce reliance on cash and drive broad-based financial inclusion across this Pacific Islands nation where many adults do not have access to a bank account.
Solomon Islands Minister for Finance and Treasury Harry Kuma said the new measures helped create the conditions for sustainable, broad-based economic growth, benefitting businesses and individuals.
The reform paves the way for Solomon Islands to adopt an electronic funds settlement process, replacing a system by which transfers between banks is done manually using cheques. The current manual system is highly inefficient and can result in significant delays in clearing funds which hampers everyday commerce and economic activity.
“This crucial legislation will enable Solomon Islands to benefit from a modern, resilient financial system, with a more efficient, safe and transparent approach. It will enable the Central Bank to better protect consumer, and will enable Solomon Islands’ banks and financial institutions to offer better products and services,” said Dr Luke Forau, Governor, CBSI.
“The next step in this important program will be to develop regulations and modern electronic payment system infrastructure which will in turn help us enhance our capacity to monitor systemic risk and increase access to improved financial services for businesses and households.”
IFC, a member of the World Bank Group, with the support of the governments of Australia and New Zealand as well as the World Bank, has provided technical expertise to the CBSI in relation to this landmark reform.
This latest development follows similar reforms undertaken by central banks in Papua New Guinea, Fiji, Samoa and Vanuatu that promote responsible and inclusive digital financial services in the Pacific.
“Our payment systems work in Solomon Islands and will help increase access to electronic payment services for people who have simply been missing out on the offerings by banks and other financial providers. It helps strengthen the legal framework for the national payment system and will enable modern payment systems infrastructure that delivers safe, and reliable digital payment and remittance transactions at lower cost,” said Judith Green, IFC Country Manager for Australia, New Zealand, Papua New Guinea and the Pacific Islands.
“At a time when Solomon Islands has been hit hard by the pandemic and is on the global frontline of climate change, these crucial building blocks of financial inclusion will enable people throughout the nation to benefit.”
The ongoing reform program, overseen by the CBSI, will see further regulations and policies developed and an Automated Fund Transfer system established to enable digital payments.