For many in the Solomon Islands and more so in the rural areas, cash is a very modern instrument.
Just until a generation ago, many Solomon Islanders were comfortable dealing with informal values of exchange- root crops, livestock, shell money, copra, cocoa and the like.
Cash became sought after only after some daily wants could no longer be met through in-kind items.
For example if one wanted to buy a match box, sugar, tea, noodles or pay school fees, cash came into play.
So much so that cash is very prevalent all over the country and is the most common form of financial instrument.
In well-developed financial systems as it exists in the modern world, there are other instruments like cheques, debit or credit cards, banking through mobile phones, internet and many such technology driven initiatives that are used for financial transactions.
Use of electronic cards (debit or credit) to make payments while buying goods from shops or for services like in a restaurant, airline etc. is very common in developed and developing countries.
Even in the Solomon Islands, these are becoming increasingly visible although largely in Honiara only.
The use of electronic financial instruments and transacting through electronic channels is commonly referred as Digital finance.
There are several advantages and benefits to using digital financial services, some listed below;
- Safe and reliable. By replacing cash with electronic cards (debit or credit) risk of loss by theft or negligence is minimized. However sophisticated electronic frauds are now occurring that users need to be aware of. Instead of carrying around bulky wallets, one can carry around one or few cards. This is especially relevant when one needs to carry lots of money
- Cash in the form of paper money has a finite life time. The Government or the Central Banks need to keep printing currency notes and this costs a lot given that they are sourced from overseas.
- All digital transactions are properly recorded and therefore brings in transparency into the financial system. Reduces incidences of fraud or malpractice
- Digital transactions can happen efficiently and quickly. It is possible to transact over the internet or mobile phones cutting across distances, thereby reducing transaction time and costs. Even now many rural Solomon Islanders send cash through boats to their relatives or for business purposes.
- Digital financial services has the potential to improve supply chain management especially around agriculture value chains thereby benefiting rural people.
In the Solomon Islands, many payments to Government by individuals and businesses are done by cash.
The most common example is the payments for motor vehicle licences and business licences that have to be done in the only counter in Honiara.
No wonder there are long lines of people waiting to do these payments every day. Same is the case for payments to utilities like electricity and water.
Besides being inconvenient to people, huge cash that is handled at these counters.
If only there were electronic channels available to make these payments, there would be less crowd at these counters, less waiting time and people can otherwise use their time productively.
Also people in the provinces would benefit immensely by not having to visit Honiara for their transactions and could do it over electronic channels.
Coming from India, I have seen the transition from a cash based to a digital society, all in the last decade.
While this is still work in progress especially in rural areas, Indian economy is now driven by e-commerce and internet based transaction platforms.
In India, banking services through digital channels has enabled financial services to proliferate into rural areas thereby assisting rural people to access the formal financial system.
Rural farmers are now able to sell their produce to buyers who send them money through electronic channels thereby reducing transaction time and costs.
In my opinion, the shift to digital finance is one of the reasons for the Indian economy leapfrogging into consistent high growth rates and making giant strides in poverty alleviation, economic and social empowerment of poor people.
It may be many more years for Solomon Islands to become “digital” due to several factors including infrastructure, awareness levels of people and availability of reliable service providers.
However, it is noteworthy and heartening to note that efforts are underway to improve the footprint of digital finance in the country through the advent and roll out of mobile and branchless banking since the last few years.
Commercial banks are now recording increasing number of transactions over the electronic channels although these are for relatively easier options like airtime top up, checking balances and money transfers.
There are several transactions that can be digitized and that could potentially lead to a “Cash Lite” society.
I am excited about some of the emerging prospects in this area, going by my experience of working in this sector and certainly look forward to bringing together multiple stakeholders in our endeavor to making the financial landscape in the Solomon Islands a little more “Digital”.
KRISHNAN NARASIMHAN*
Financial Inclusion Specialist
UNCDF
*Views and opinions expressed by the author are personal and do not represent that of UNCDF/PFIP. For feedback or suggestions readers can email the author at: [email protected]
