Port Villa, Vanuatu, September 8, 2021- Vanuatu's credit reporting regime will be modernized and strengthened under reforms that will also improve access to finance for micro small and medium-sized enterprises (MSMES), providing vital support amid the economic impact from the COVID-19 pandemic.
Under an agreement between the Reserve Bank of Vanuatu (RBV) and International Finance Corporation (IFC), a member of the World Bank Group, the country's credit reporting and legal framework will be enhanced. The changes are expected to unlock credit for individuals, as well as MSMEs which are vital incubators of jobs and drivers of economic growth.
The reforms will bolster the Vanuatu Credit Bureau and the country's credit reporting system, boosting the ability of borrowers to demonstrate their credit worthiness and assist credit providers in making sound assessments of credit applications. The Vanuatu Credit Bureau currently stores information of negative credit history or payment defaults. Under the new reporting guidelines, it will record good credit behavior.
These reforms will help lower the cost of credit for credit providers. With providers able to reduce the costs of reviewing applications, more borrowers will be able to borrow funds at lower costs.
"Adopting such comprehensive credit reporting will finally complete Vanuatu's credit infrastructure and pave way for the country to move away from just reporting only on negative credit behavior that relies on code of conduct and without legal foundation to include positive payment histories and other relevant publicly available data," said RBV Governor Simeon Athy. "For our MSME sector, it means better access to finance, which is currently a significant constraint for them."
IFC will also provide advisory support in the development of the legal framework needed for the implementation of a comprehensive credit reporting system in Vanuatu.
"Our work in Vanuatu is part of a broader IFC effort in the Pacific to create stronger financial systems that better serve people," said IFC Country Manager for Australia, New Zealand, Papua New Guinea and the Pacific Islands, Thomas J. Jacobs. "This is an important development for Vanuatu's credit market that will be beneficial to the private sector especially during this time when we are facing the impacts of the COVID-19 pandemic."
IFC's work towards an expansion to comprehensive credit reporting in Solomon Islands and Vanuatu is supported by the governments of Australia and New Zealand.
IFC's work in Vanuatu is guided by the Pacific Partnership. Australia, New Zealand and IFC are working together through the Partnership to stimulate private sector investment and reduce poverty in the Pacific.
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information, visit www.ifc.org.