MICROCAPITAL BRIEF: Central Bank of Solomon Islands, IFC Developing Comprehensive Credit Reporting System to Boost Financial Inclusion of Individuals, MSMEs

The International Finance Corporation (IFC), a member of the World Bank Group, recently signed an agreement with the Central Bank of Solomon Islands (CBSI) that is intended to improve the country’s “credit reporting legal framework,” promote financial inclusion and protect the credit reputations of borrowers during the COVID-19 pandemic. As part of the effort, CBSI will begin supervising the Solomon Islands Credit & Data Bureau (CDB), and IFC will assist the credit bureau in implementing “comprehensive credit reporting.” This type of reporting includes collecting and sharing data on successful payments by individuals and companies.

According to CBSI Governor Dr Luke Forau, “It is important that financial institutions remain robust and make informed decisions especially at a time when we are facing a crisis brought on by COVID-19. Shifting to Comprehensive Credit Reporting will complete the nation’s credit infrastructure, which currently only includes reporting on negative credit behavior…”.

Meanwhile, “regulated financial institutions will be mandated to participate in [the credit reporting program], ensuring widespread uptake and stronger credit data.” In theory, this will reduce lenders’ cost of reviewing credit applications, thus increasing the flow of credit to consumers as well as micro-, small and medium-sized enterprises.

Solomon Islands CDB is a unit of CDB, which is based in Papua New Guinea and is owned by 11 financial institutions. Solomon Islands CDB has 13 participating members as of 2020. The cost for low-volume users is SBD 2,500 (USD 300) to join plus SBD 1,500 (USD 180) per year and SBD 20 (USD 2.50) per inquiry.

Established in 1983, CBSI seeks to promote financial inclusion and ensure the efficiency of the country’s monetary system. Its tasks include managing monetary policy, issuing and regulating currency, supervising banks, enacting foreign exchange policies, and managing international reserves.

IFC offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2019, it reported total assets of USD 94.3 billion.

The World Bank Group is a multilateral organization whose goal is “to end extreme poverty and promote shared prosperity in a sustainable way.” As of 2019, it has 189 member nations. The group encompasses (1) the International Bank for Reconstruction and Development and the International Development Association, which make up the World Bank; (2) IFC; (3) the Multilateral Investment Guarantee Agency; and (4) the International Centre for Settlement of Investment Disputes. During the 12 months ending June 2019, the World Bank Group disbursed funds totaling USD 49.4 billion.

By Jessica McLeod, Research Associate

Sources and Additional Resources

IFC press release
https://ifcextapps.ifc.org/ifcext/pressroom/ifcpressroom.nsf/vwAllDocumentsByUNID_NL/FBEB58DF1CFB75198525858B0009F49E?opendocument=

CDB homepage
https://www.cdb.com.pg/

CSBI homepage
http://www.cbsi.com.sb/

CSBI Annual Report 2019
http://www.cbsi.com.sb/wp-content/uploads/2020/05/CBSI-Annual-Report-2019_FINALL.pdf

CBSI “Quarterly Review,” March 2020
http://www.cbsi.com.sb/wp-content/uploads/2020/06/Q1-MARCH2020.pdf

IFC homepage
https://www.ifc.org

World Bank Group homepage
https://www.worldbank.org/

World Bank Group annual reports
https://www.worldbank.org/en/about/annual-report/world-bank-group-downloads

Previous MicroCapital article on IFC
https://www.microcapital.org/microcapital-brief-ipak-yoli-bank-of-uzbekistan-ifc-collaborate-to-manage-currency-risk-increase-local-currency-financing-for-smes/

Previous MicroCapital article on CBSI
https://www.microcapital.org/microcapital-brief-cbsi-sinpf-launch-lomobile-offering-digital-access-to-yousave-accounts-for-self-employed-workers-in-solomon-islands/