Case Studies

The Pacific Private Sector Development Initiative (PSDI) is working to increase access to finance for small and medium-sized enterprises (SMEs) in the Pacific, including through the implementation of innovative financing mechanisms. As part of this, PSDI published a policy paper and is supporting the Reserve Bank of Fiji to develop a new access to business funding bill, which establishes the foundations for innovative financing mechanisms, including crowdfunding and an SME small-scale offers regime.

SMEs require access to finance to start, grow, and operate their businesses. However, accessing finance is difficult for many Pacific SMEs, which are constrained by onerous credit requirements, limited equity financing options, and a perception that small-scale lending is riskier and costly. The resulting financing gap ultimately hinders broader economic growth, job creation, and productivity.

Innovative financing mechanisms (IFMs), including small-scale offers regimes and crowdfunding, can lower barriers and provide more options for Pacific businesses seeking finance. IFMs offer more safeguards and structure than the informal funding through personal networks that is common in the region but without the constraints of traditional debt and equity financing, such as long processes and requirements that are difficult to meet.

PSDI in fiscal year 2024 (ended 30 June 2024) published a policy paper for Pacific policymakers regarding how these innovative financing mechanisms can be harnessed to support Pacific businesses. The paper, Innovative Financing Mechanisms in the Pacific, examines the potential benefits and issues to consider around implementing these mechanisms in the region, considering the unique nature of Pacific economies.

The paper identified Fiji and Papua New Guinea as having easier pathways than other Pacific countries to implement IFMs because of their existing securities laws, which can be built upon or amended, and the higher rates of financial literacy and awareness.

In Fiji, PSDI is supporting the Reserve Bank of Fiji to develop and implement a new access to business funding bill. The bill removes restrictions in Fiji’s regulatory framework and establishes the necessary foundations to enable IFMs with comprehensive investor protection arrangements, including crowdfunding, peer-to-peer lending, and an SME smallscale offers regime.

Through the access to business funding bill, PSDI is strengthening Fiji’s framework around small-scale offers to increase their utility as a financing mechanism. The bill also allows for regulated crowdfunding by introducing licensing requirements for crowdfunding platform service providers.

PSDI supported the Ministry of Trade, Co-operatives, Small and Medium Enterprises and the Reserve Bank of Fiji with a series of stakeholder consultations on the proposed bill to help make it more responsive to Fiji’s financing needs. The consultations involved SMEs, private sector peak bodies, superannuation funds, credit unions, development institutions, and government agencies. Participants’ feedback and recommendations were taken into consideration when updating the bill.

For Fijian businesses, the access to business funding bill will help create lower-barrier methods of accessing the finance they need to grow their business and drive economic growth, employment, and productivity. The bill was passed by the cabinet and submitted to Parliament in 2024. 

"IFMs can really broaden the options available to Pacific businesses seeking finance. They offer more safeguards and structure than the informal funding through networks and family connections that is common in the region, but without some of the constraints of traditional debt and equity financing, like the requirement for collateral, equity thresholds, and credit history, along with long processes, and high transaction costs. We’re really pleased to see that the Government of Fiji is considering implementing such regimes," said Jeremy Cleaver, PSDI Senior Finance Specialist.

This case study is taken from the PSDI FY2024 Annual Progress Report. Read the full report here.