(Session V)

ANZ and UNDP

Banking & Educating
the Un-banked but Bankable in the Pacific
Commentary by Carolyn Blacklock
Regional Executive, Banking the Unbanked in the Pacific
ANZ Banking Group Limited

Introduction
Economic empowerment; bottom of the pyramid; sustainable livelihoods;
microfinance, development actor are these really the domain of a
commercial bank?
Two years ago at ANZ we may not have been familiar with the power of
these words nor understand that the un-banked were an opportunity; but
we do understand that as a leading bank, continual innovation and
meaningful relationships with communities is essential to sustainable
success. We now have a simple, successful story to share with you on how
we and our partners at UNDP, have turned words into action and banked the
un-banked but bankable in Fiji and the Pacific.
I am going to give you (i) an overview of our programme, then tell you (ii)
what we have learned so far, and (iii) share with you our financial indicators
and our findings on how we are changing lives and finish up with some
thoughts about (iv) how we at ANZ see the future for banking the un-banked
but bankable.
But before we begin, just who is this ANZ Bank?
ANZ is Australias third largest bank, has 31000 employees represented in 27
countries. It is the largest bank in the Pacific and New Zealand and the
leading Australian bank in Asia. Our market capitalisation is approximately
USD$40billion and we have assets of around USD$320billion. We have been
operating since 1835 and have won Bank of the Year in Australia for the past
six years. We are a traditional mainstream bank servicing retail, small
business, the corporate sector and multi-national institutions and
governments.

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Overview of the Programme

In 2004 there were 400000 people, almost half Fijis total population, with
no access to banking services. Most of these un-banked people lived in
remote and rural areas. ANZ decided to find out how banking services might
be delivered. Lacking reliable statistical data, we sat on the village mat and
asked our future customers whether they wanted a bank, what did they
understand banking was, what they would use a bank for etc. We quickly
understood that a bank that came to them, a mobile bank and financial
education, had to be a large part of the answer.
Our next step was to approach the UNDP who were very willing to research
and design a simple, in-village financial literacy programme. Our
partnership, formalised via a Memorandum of Understanding, simply states
the responsibilities of each party and the ethos of our joint programme.
Each organisation is responsible for the costs in relation to each initiative
and there is no sponsorship of each others responsibilities. Sharing of
information has been the greatest benefit of the partnership.
Our competency based model relies on all parties doing what they do best
ANZ doing the banking via mobile banking trucks; UNDP doing the capacity
building financial literacy programme; villagers taking an enthusiastic
approach to saving for their future; the central bank providing a conducive
policy environment; local Police assisting in community engagement and the
cash in transit provider supplying guards and purpose built mobile bank
units. The list goes on.
I can share with you what ANZ knows so far about providing inclusive
financial services in the Pacific.
What we know so far
1. Simply transplanting traditional banking models and delivery channels
into Bottom of the Pyramid markets does not work, new thinking is
required.
2. An organisational culture that supports innovation and boldness is
essential.
3. This is work for a deep listening bank, a bank that wants to empower
and engage to create broad based prosperity. This suits ANZ our
strategy for many years has been to Grow the Pie, that healthy
countries = a healthy ANZ business. We have always been interested
in how we can contribute to vibrant economies, now we are at the
grass roots, making it happen with mobile banking. Helping our
customers and countries is not simply good corporate social
responsibility; it is the core of smart business strategy.
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4. The cornerstone of increasing access to finance is to provide simple

financial education. UNDP researched, designed, facilitated and
funded the financial literacy programme and ANZ did the same for
the banking programme. We are convinced that one programme
without the other is basically useless. Our partnership with the UNDP
is honest, forthright, transparent and very valuable.
5. Recruiting the most passionate, community minded bankers is critical
to momentum and success. Our team of 15 in Fiji and six in the
Solomon Islands are extraordinary. They travel for hours each day
over roads that dont even resemble roads at times, lunch breaks are
sporadic and often not until late in the day if at all. They make
decisions with little or no support from a central office as there is
generally no electricity or telecommunications in these sites. They
are leaders in their communities. They are diligent on risk and
compliance matters, lenders, personal bankers, advisors on savings
plans and presenters at school and community events. Another
essential ingredient is that the team must be flexible, they are
pioneers and continually face changes to the way we do things in for
greater customer satisfaction, increased earnings but always with
their eyes firmly focussed on banking the un-banked.
6. Relying on the traditional village system has mitigated the
operational risk of banking in remote places. When we are in the
village the village protects us. The percentage of our Microloan
portfolio at risk is less than 2%.
7. A competency-based model, where each member of the solution has a
role and responsibility rather than one organisation trying to
dominate and control, works best.
8. There will be mistakes and failures. Resilient leadership is necessary.
Financial Measurements
Financial rewards, sustainability and profitability take time to emerge. Our
business in Fiji has been operating for 17 months and the financials are
strengthening rapidly. We chose to take the seldom-used savings first, loans
second model of microfinance our interest income has had a twelve-month
lag effect.
The loans programme was introduced after savings was firmly established.
To date, USD $2million has been saved by our customer base of 54,000.
Funds under management and the number of customers continue to rise
steadily each month. 400 MicroLoans with a total portfolio outstanding of
USD$200,000 and this after only five full months of offering the product. To
be eligible for a MicroLoan, our customers must be regular savers for six
months and have the support of their community head person - chief, priest
or provincial council manager. No other security is taken.
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Financial measurements cont

Each mobile banking unit has its own profit and loss and balance sheet two
are very close to break-even, another two will be there by early 2007 and
the last two should be by late 2007.
We can currently serve each customer via mobile banking, in a sparsely
populated rural environment, for less than USD$12 per annum. Now that is
really allowing us to begin to redefine who is bankable? If we can serve
customers for say $10 per annum it is not unreasonable to think that every
person, even those who earn $2 per day, will be able to pay $10 per annum
in bank interest or fees to enable the bank to be break even is a good start
to sustainability.
So can ANZ change people lives?
People who save regularly tend to have a good view of themselves and see
opportunities rather than obstacles. They contribute on-time and regularly
to the social capital that is so important in village life. This in turns seems
to lead to an increase in community worth. New projects are common in
villages that once had little or no new developments. Savings alone can
change peoples lives. For instance weather catastrophes, prevalent in the
Pacific, wreak havoc on subsistence communities, destroying crops that take
weeks sometimes months to recover and produce food again. Having savings
enables these same cyclone and flood devastated communities to bounce
back quicker from disasters. They have sufficient funds to provide basic
food and other essentials to their families and extended community. This
means little or no reliance on aid agencies and government, a significant
sense of pride.
The ANZ MicroLoan product enables regular savers an opportunity to access
small amounts of credit USD$50 - $1000 that can make a big difference.
Recently I travelled to Namasimasi Village in the interior of Fiji and met a
man called Peniasi who originally took out a MicroLoan of $200 just a few
months ago. He is now on his third MicroLoan and has over $2500 in savings.
I asked him how he had managed to pay his loans off so quickly and
accumulate so much in savings from a place as remote as Namasimasi?
Well, before ANZ I had nowhere to save so I just sort of spent the
money I earned from the farm on all sorts of silly things. Then I
started to save with ANZ and with my first MicroLoan I was able to
pay some boys from the village to clear the land I have and then
plant more dalo. I now employ two men full-time to help me work my
extended farm and have more than tripled the sales from my land.
With my next loan I want to buy a truck so that I can transport my
dalo and other farmers dalo down to Suva.

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Peniasis answer really sums up for me the reason why ANZ Rural Banking has
touched the hearts and minds of so many in Fiji; we have simply unleashed
the potential that has been dormant. The poor are not poor because they
have no resources, nor because they do not want to work; they are poor
because they lack services that we in the developed world take for granted.
ANZ providing banking services really is changing the lives of many.
As a parent I can understand the joy and dedication of mothers and fathers I
have met in rural Fiji who thank me for bringing savings products to them.
Now they can save for their childrens school fees. A mother can buy
medicine for her sick child because she has some savings.
We have also teamed up with doctors and nurses from Australia who,
together with local medical professionals travel with us to remote
communities. Our spare seats in the trucks are making a difference. What
other services can we provide as the only organisation regularly travelling to
these remote communities.
The future
The journey to redefine bankable is near - our cost to serve can be
pushed lower and lower. Innovations in technology and product are in
development. Over six million people in the Pacific could become customers
of a bank that is prepared to create banking solutions that enable them
trusted access to their money, has simple but useful products and also
teaches them about money and helps them make sound financial decisions.
We continue to perfect our proposition and increasingly become facilitators
of development; to work with communities, government and donor agencies
and increase infrastructure in remote communities, improve health and
access to education. Unleashing the potential of rural areas in the Pacific is
a large and daunting task but absolutely necessary if developing countries
are to evolve to financially independent nations. We look forward to playing
our part.
We are confident that our programme is sustainable. The longer-term
proposition is promising. Children who save now with ANZ are likely to
remain with ANZ; MicroLoan customers that establish small and medium
enterprises will always remember the bank that gave them their first start.
The future cont
Leadership at ANZ has been instrumental in why it was ANZ, not another
commercial bank, to bank the un-banked and it is leadership that will
continue to enable my team to continue to pursue the question of how to
bank the un-banked but bankable. John McFarlane, ANZ CEO of ten years
recently said that
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A company needs to stand for something beyond making money and

maximising returns for shareholders. Essentially it needs a higher
purpose that says what it stands for and to serve a broader group of
stakeholders (customers, suppliers, staff, community, governments as
well as shareholders). This guiding purpose should become the
guiding principle that governs all decisions within the firm.
What ANZ has done, nor what my other commercial bank colleagues have
shared with you this morning, will be enough to bank the un-banked
globally. It is a good start but more needs to be done. It would seem
imminent and urgent for commercial banks and NGOs, donor agencies and
government to join together to create a truly sustainable and inclusive
banking environment for the un-banked; only then can banks be credited
with significantly raising growth, alleviating poverty and expanding
economic opportunity. Thank you.

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