DPM KAMIKAMICA’S ADDRESS AT THE ACCESS TO CAPITAL PRESS CONFERENCE

Governor of Reserve Bank of Fiji,

Permanent Secretary for Finance, Strategic Planning, National Development and Statistics,

Permanent Secretary for Trade, Co-operatives, Small and Medium Enterprises and Communications

Members of the Media,

Bula Vinaka and very Good morning to you all.

Thank you for joining us today.

It is an exciting initiative that will shape the future and development of MSMEs in Fiji, in December last year, the Cabinet had endorsed the need for a new legislation to introduce, implement and regulate new financing alternatives for raising capital or funds.

WHAT ARE THE PROPOSED FINANCING ALTERNATIVES?

Globally, it is a well-documented fact that businesses both Micro Small Medium Enterprises (MSMEs) and Large struggle to access finance.

Access to finance for MSMEs has undoubtedly been a challenge and despite incentives offered by the Government, the issue persists. Currently, funding’s through commercial banks which do not offer MSME friendly or MSME tailored products and services such as lower interest rates, collateral – free and unsecured lending, to name a few.

Furthermore, the cost of borrowing for MSMEs is high and collateral requirements are stringent – often making it unviable and difficult for MSMEs to access finance.

There is currently no formalised or regulated process for connecting venture capital and other private investors to MSMEs. This means these potential funds are not easily made available to MSMEs who need them.

In Fiji, it is estimated that the financing gap for MSMEs is around $2.2 Billion. But we have a robust, vibrant and innovative entrepreneur in Fiji who cannot access capital easily.

Therefore, it is through this Bill that is proposed that new forms of raising capital, which is either through equity or debt, be introduced in a regulated manner. These financial regimes are:
Small Offers
Equity Crowdfunding
Peer to Peer Lending
I will now briefly attempt to explain these 3 regimes of raising capital.

Small Offers – Small-scale offers (or “small offers”) regimes enable companies to raise funds through a limited number of investors without the costly and onerous disclosure obligations, which are required when making a public offer to invest in securities. Essentially, investors targeted here are friends, families, and those familiar with the business such as customers, suppliers, and soft business network.

For instance, in Australia and New Zealand, under small offers, a company can offer shares in its company to raise capital up to $2 million from a maximum of 20 investors over a 12-month period.

Equity Crowd Funding – Under the crowdfunding model, large groups of people contribute money towards a campaign to fund a project or business in return for rewards. Whilst there are various models for crowdfunding, for the purposes of the Access to Capital Bill – this will be limited to commercial and economic purposes.

Crowdfunding generally driven by three main participant groups: (i) the initiator of the project who is proposing the idea or project to be funded, (ii) the funders who support the idea, and (iii) the moderating organization (intermediary) that connects the parties.

Peer to Peer Lending – is when entities raise funds through debts which is facilitated through a licensed intermediary. These occurs when lenders or individuals are willing to lend their funds to business proposals and earn an interest when loans are repaid.

Ladies and Gentlemen,
In light of the above and that the traditional financing landscape is evolving, the Fiji Government believes that embracing alternative financing is key to addressing the challenges and opportunities that lie ahead. This initiative aims to explore novel ways of funding projects, fostering collaboration, and ultimately enhancing the overall resilience of MSMEs in Fiji.

SUGGESTED APPROACH – HOW WILL IT WORK?

I suppose the next question people may have been how will this be done.
There are 3 parties involved in the in raising funds either through debt or equity.

First is the business raising funds. Second is the investors or lenders. And Third party is the intermediary that will facilitate the raising of capital through a platform.

Obviously, there will need to be some regulatory oversight. Hence the Reserve Bank of Fiji will be regulating and licensing the intermediary and who will facilitate the fund raising.
But this is risk-based financing, meaning with the disclosures provided by the business – the investors decide how much they are willing to invest or lend.

WHY IS THIS IMPORTANT?

Aims to reduce the financing gap, and reduces pressures on Government funding through grant

Stimulate private sector investment and innovation

Provides financing to the businesses in Fiji that can generate economic activities which has multiplier effect such as employment creation, improve livelihoods etc.

Raising funds in a regulated and protected manner

This regime under the proposed approach offers investor protection and also screens the business, particularly MSMEs

Full disclosures and transparency from the business and investors/lenders.

WORKING GROUP

Discussions and industry consultations on the draft legislation are to be carried out by the Working Group.

The Working Group comprises of the Ministry of Trade Co-operatives Small Medium Enterprises and Communications, Ministry of Finance, Reserve Bank of Fiji, Office of the Solicitor – General and Asian Development Bank to obtain views from MSME stakeholders and general public to introduce alternative financing that would essentially assist MSMEs in accessing to finance.

In fact, ADB has released a policy paper that recommends on introduction of innovative financing in the South Pacific. The paper covers what we intend to do in Fiji. We thank ADB in their support so far in the process.

On behalf of the working group, we invite members of the public, relevant industries, non-government organisations, communities and other stakeholders to the nationwide participate in public consultation to introduce new alternative financings – small offers and crowdfunding for micro, small and medium enterprises (MSMEs) in Fiji.

Ladies and Gentlemen,

It is an exciting initiative that will shape the future and development of MSMEs in Fiji. In December last year, the Cabinet had endorsed the need for a new legislation to introduce, implement and regulate new financing alternatives to MSMEs. Discussions and industry consultations on the draft legislation are to be carried out by the Working Group.

PUBLIC CONSULTATIONS

Ladies and Gentlemen,

We value transparency, diversity of perspectives and open dialogue. Consultations will be carried out in two – folds whereby the working group will engage with the focused groups such as Industry bodies, bankers, Fiji Commerce and Employers Federation and Capital Market stakeholders to name a few, and hold public consultations from 9 to 16 February 2024.

The time and dates for the public consultations in various locations are as follow:

We encourage individuals, organizations, and experts from various fields to actively participate and share their insights.

We will also be uploading the key documents and the information package an for better understanding of the proposals which can be found on the Ministry’s website under MSME Fiji page.

Ladies and Gentlemen,
The consultations period will extend over two weeks. We will be accepting feedback, suggestions, and concerns until Monday, 19 February 2024, including through our email on support@mcttt.gov.fj

Following this period, the working group will analyse the input received and incorporate valuable insights into the final proposal.

Ladies and Gentlemen,

There is no doubt that MSMEs need better access to finance and to have private sector led investments in this space. The Ministry had spent more than $100 million in grants for MSME development. This initiative would also ease pressure on public finances which can be prioritised in other areas of national development.

In closing, our commitment to innovation and progress has led us to explore innovative financing solutions that will drive sustainable development in MSMEs.

Your participation and feedback are crucial to shaping its success.