Scoping for the design of an interoperable shared agency network for delivery of digital financial services in Solomon Islands

Background

The Central Bank of Solomon Islands (CBSI) was established in 1983 under the Central Bank of Solomon Islands Act 1976, amended in 1985 and in 2012 under the central bank act of November 2012. The CBSI is the Apex financial body in the country and center of the banking and financial system in the Solomon Islands. The CBSI exercises discretionary control over the Country’s entire monetary system and performs other duties that include formulation and implementation of the country’s monetary policies, maintaining price stability, supervision of Financial Service Providers (FSPs), deepening and strengthening of Financial inclusion, amongst other duties.

Through its direct outputs, coupled with results from its FSP partners, significant progress has been done by the CBSI in meeting its obligation for financial inclusion. Today, financial inclusion in Solomon Islands has progressed overtime, with achievement of its objectives specified under the National Financial Inclusion Strategy 1 (2011-2015) which focused on ‘access to financial services’. In 2015, a second National Financial Inclusion Strategy (NFIS 2) with a focus on ‘usage of financial services’ was developed, resulting into a roadmap, designed to advance financial inclusion in the next Five (5) years for the period 2016-2020.

Under the NFIS 2, two macro indicators and goals were established to be achieved.  In addition, six Strategic Objectives and several Key Result Areas (KRAs) were also set to guide the CBSI in achieving financial inclusion in Solomon Islands. The two macro indicators and goals are;

By 2020:

• 300,000 (of which 150,000 women) adults will be active users of formal or semi-formal financial accounts (including accounts at MFIs and savings clubs).

• 90% of the population will have a financial service access point one hour of ordinary travel from their home.

To help achieve the above, the CBSI made a specific objective into the NFIS 2, seeking to deploy and pilot an interoperable shared agency network for all FSPs in the Solomon Islands. This objective (specified under KRA 2 of the NFIS 2) was prime to meeting the above two mentioned goals.  

Solomon Islands has four active commercial banks that deliver formal financial services through 14 bank branches that are present in only four (4) provinces (4 in Western, 1 in Malaita, 1 in Guadalcanal and 9 in Honiara). In recent times, the financial sector has witnessed commercial banks close some of their bank branches because of little or no profitability realized, coupled with the high set-up and operational costs involved to maintain their operations.  

Of the four (4) active commercial banks, two (2) have deployed independent agency networks that have approximately 300 agents in total. Most of these agents are spread out in the capital Honiara and a few other provincial capitals such as Auki, Gizo, Munda, and Kirakira. These FSPs use a combination of POS and Mobile-enabled banking technologies to offer a variety of financial services through their agency networks. The services offered on agency networks include cash-in and cash-out, person-to-person transfers, bill payments, and remittances.

Recent months have seen an entry of other, non-bank entities, such as the Solomon Postal Corporation, in a partnership with BibiMoney commenced preparations to launch a mobile money wallet service. This, of course will necessitate for an agent network. Through its youSave scheme, the Solomon Islands National Provident Fund (SINPF) also commenced with building and using an agent network to receive long-term savings from the informal sector workers, who are predominantly unbanked and underbanked. It is further anticipated that MNOs will soon deploy mobile money services and therefore a need to build an agency network for delivering such services.

However, even with the growing need and urgency to use agency networks by FSPs, the permeation of agents into both the urban and rural remote areas continue to be challenging. According to the NFIS 2, Solomon Islanders endure six (6) hours of travel to access a financial access point, partly due to the difficult terrains, but majorly due to the lack of financial access points, specifically outside of the capital Honiara.

In locations where agents are present, the majority are of low level of quality, with most of them lacking adequate liquidity to manage customer’s needs. This is majorly resulting from agents splitting the available working capital (there is non-exclusivity of agents) in an effort to service each FSP’s liquidity requirements.

Solomon Islands has difficult terrains and It is no surprise that setting up an agency network, meeting its liquidity needs, monitoring and supervision is a costly venture for FSPs to undertake, develop, maintain and supervise on an individual venture model, and thus the need for an interoperable shared agency network. The CBSI is aware of these challenges and thus envisages the deployment of an effective, structured, quality, shared agency banking network infrastructure across the country and later shift the focus for FSPs from using distribution strength as a competitive advantage, to product and service differentiation.

To realize this initiative, the CBSI has partnered with the UNCDF-PFIP to conduct a scoping mission. The recommendations from this report will be implemented (1st in a pilot phase) with CBSI, FSPs operating within the Solomon Islands and donor partners such UNCDF-PFIP, Strongim-bisnis  (http://strongimbisnis.com.sb/ ), among others.

Duties and Responsibilities

The following will be the scope of this assignment;

1. Conduct a detailed analysis (SWOT) of current agency network plans of FSPs in the Solomon Islands, an analysis of the existing agency infrastructure, locations and spread of agents, capacity for expansion/scale to reach rural remote areas, products and services offered at agent levels, customer experiences with using the existing agent networks, pros and cons of the structural designs of these agent networks, agent trainings , agent’s capacity and capability to effectively serve customers, deployed route to market strategies, among others.

2. Conduct a technology assessment of the existing agency infrastructure, IT systems and software that are currently available as well as upcoming projects related to the same (e.g. national payments switch), and further investigate for technology infrastructure, costs and designs that will be prerequisite for the deployment of a shared agency network (e.g. bilateral interchange vs national payment switch).

3. Conduct a stakeholder’s workshop to discuss and attain concessions and commitments on ownership and responsibilities of a potential shared agency network, its operational management at both back and front-end, admission to pricing of transactions, revenue sharing, methodology for utilizing and redeployment of the current infrastructure (e.g. POS machines), agree on business logics and settlements, agree on business requirements, agree on the front-end (customer) acquisition, agree on tentative targets for the shared agency network, risks and fraud, among others.

4. Through individual or/and stakeholder meetings/interviews, conduct a study for possible business models that can be considered for the deployment, operational models and management of the shared agency network.

Timeframe

The consultancy is planned for a total of 35 working days covering both in-country and home based.

• 2 days of desk research, preparation, initial calls/discussions with UNCDF-PFIP and CBSI

• 15 days of conducting in-country studies, stakeholder engagements and analysis

• 5 days for workshop preparation, actual workshop consultations, compiling, analyzing workshop feedback and incorporating them into the draft report

• 5 days for analysis and submission of initial findings to CBSI and UNCDF-PFIP

• 3 days for draft report submission

• 5 days for submitting final report after incorporating feedback from CBSI & UNCDF-PFIP. From the receipt of draft report UNCDF-PFIP will take 2 weeks to provide responses.

Deliverables

The main deliverables from each of the aforesaid activities will be as follows:

1. A detailed report covering

   1. Areas on the current agency network plans of FSPs, the existing agency infrastructure, locations and spread of agents, capacity for expansion/scale to reach rural remote areas, products and services offered at agent levels, customer experiences with using the existing agent networks, pros and cons of the structural designs of existing agent networks, their route to market strategies, among others

   2. Technology assessment of the existing agency infrastructure, IT systems and software that are currently available. And an assessment of the prerequisite and additional technologies and technical requirements to consider. This will be accompanied with a detailed overview of financial investments for required changes to technology infrastructure.

2. A workshop stakeholders report covering concessions on areas mentioned in point 3 of scope section

3. Based on point 1 and 2 draft implementation plan that includes time frames for the interoperable shared agency network, detailing areas that include, but not limited to;

• Implementation support for the entire project – directed to CBSI, UNCDF-PFIP and Strongim-bisnis for piloting and proof of concept

• Acquisition and deployment of the required technologies (agency banking and devices) to facilitate shared back-end infrastructure.

• Strategic and operational level training of key staff

• Strategic support (Technical Assistance) required to implement

• Implementation support required for the adopted Route-To-Market (RTM) strategy, Standard Operating Procedures (SOPs)

Reporting and Coordination

The consultant will work closely with the CBSI Deputy Governor, Manager of NFIU and will report to the UNCDF-PFIP Country Technical Specialist.

Competencies

Competencies and Experience

• Proven experience in similar assignments of designing, planning and developing shared agency networks and

• At least seven years of experience in mobile and/or digital financial services in developing countries. Pacific experience is desirable

• Strong analytical and communication skills besides good report writing skills

• Must be able to bring the strategic and operational thought leadership while working on partnerships

Required Skills and Experience

Education

At least a Masters Degree in Business Administration or Economics or related discipline

Technical proposal 70%

1. Experience of similar assignments of shared agency or/and Interoperability and minimum qualification of Masters Degree in Business Administration or Economics - 30%

2. Proposed methodology/approach - 30%

3. Knowledge of DFS, Mobile money, Agency networks and mobile banking - 10%

Financial proposal 30%

Others

All applications must be clearly marked with the title of the consultancy and submitted by 5.00pm, 20th December 2018 (Fiji Time) electronically to etenderbox.pacific@undp.org .

For further information concerning this Terms of Reference, please contact Shobna Singh, Programme Associate, PFIP, UNDP Pacific Office on email: shobna.singh@undp.org

• Incomplete applications will not be considered, and only candidates for whom there is further interest will be contacted.

Response email cannot exceed 10MB.

Application procedure:

Please combine all your documents (Signed P11/CV, Technical Proposal, Confirmation of Interesta and submission of financial proposal form, etc into one (1) single PDF document as this system only allows to upload maximum one document, failure to combine all document in one will be considered as incomplete and proposal will not be accepted”. You can email etenderbox.pacific@undp.org to request for these templates.