FijiCoin

INTRODUCTION
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable.” - Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.

Defying predictions, the World Bank reports that global remittance flows have proved to be resilient during the COVID-19 crisis. In 2020, officially recorded remittance flows to low-and-middle-income countries reached $540 billion, only 1.6 percent below the $548 billion seen in 2019.

Remittances have become an important consumption smoothing mechanism for the recipient households and, as such, they form an increasingly important (private) element of global social protection systems. With an increased desire for migrants to support their families back home and the economic conditions in host countries proving favourable (e.g: stimulus packages), paired with shifts in flows from informal to formal channels (from hand-carry cash to digital remittances),  the flow of global remittances to low-and-middle-income countries is expected to reach $565 billion by 2022.

THE PROBLEM IN THE SOUTH PACIFIC
As countries across the globe focus on the health and safety of their citizens and economic recovery, and Non-Governmental Organisations (NGO's) strive to meet the United Nations Sustainable Development Goals (SDG), the tiny archeplago nations in the South Pacific are often overlooked or deprioritized when it comes to expediting tangible, achievable solutions, to real-world, and sometimes life-threatening problems.

As we enter an age of rapid acceleration and transformation, Fijians and Pacific Islanders who are the most vulnerable to the impacts of adverse macro and micro economic conditions are left behind. But the situation remains, that Pacific Island countries and territories (PICT) share a strong reliance on the remittances sent by the Pacific diaspora community.

In 2018, Fiji, Tonga and Vanuatu recorded a combined remittance intake of more than USD$500 million. In Tonga, remittances represent a value equivalent to 42% of GDP - the highest propotion in the world. In Fiji, with the Tourism Industry (and the foreign tax earnings if brings, at a halt), remittances now play an even more critical role in the economy's foreign tax earnings, equating to roughly 7% of GDP.

However, the South Pacific is far from the SDG of less than 3% transaction costs. For instance, the average cost for sending NZD$200 from New Zealand to Tonga was almost 10% in the second quarter of 2020. Likewise, the average cost of sending AUD$200 from Australia to the Solomon Islands was 12%. Using traditional banks is even costlier with the transaction cost fee and FX margins reaching up to 18%.

STRUCTURAL BARRIERS
Many of the traditional Remittance Service Providers (RSP), owned by global chains who had branches in Fiji have now closed and the wider South Pacific region is at a distinct disadvantage in making remittances more affordable and accessible.

There are limited transaction channels in non-urban areas and the limited knowledge of how to use digital financial channels encourages people to follow their peers to the remaining RSP cash branches, who maintain abhorrent FX rates and transaction fees, alongside traditional banks.

The overall remittance volume in PICTs is low (less than 0.20% of global volume) and there is little incentive for low-cost international service providers to service these markets.

The digital payment infrastructure of these countries is still in it's infancy and offers limited options to both senders and receivers. However, recently several private sector fintech solutions have emerged that offer faster and cheaper remittance services. Vodafone's MPAISA and Digicel's MyCash in Fiji, M-Vatu/ M-Tala in Vanuatu/ Samoa respectively, TBD's Ave Pa'anga Pau in Tonga, KickEx Pacific in Samoa and Digicel mobile money in Tonga. These companies use digital technologies to offer low-cost services where money can be received using mobile phones.

With limited options and capability, the end-user is left with a poor selection of remaining (and expensive) RSP's, TelCo's and banks to choose from.

SIGNS OF OPTIMISM OR A FUNDAMENTAL NECESSITY?
Despite these barriers, the fundamental need for remittances remains. Fiji registered the highest monthly inflow in a decade, receiving USD$24 million in July 2020. This trend continued with another record of almost USD$33 million in October 2020.

THE SOLUTION
Built on the Stellar network, we would like to develop a new pathway for remittances into the South Pacific. A pathway that removes the need for traditional intermediaries and one that gives frictionless access to global financial systems to those who are often forgotten. We call it, FijiCoin (working title).

FijiCoin will be a FIAT-collateralized stablecoin, pegged against the Fijian Dollar. An anchor for a remittance pathway built on the stellar network.

We hope to develop a remittance pathway that allows users to send/ receive money into Fiji and the South Pacific from account-to-wallet, wallet-to-wallet and wallet-to-account that is faster, cheaper, easier and more secure, using Stellar.

We are in discussions with the Reserve Bank of Fiji (Central Bank) and are eligible to submit an application to their FinTech Regulartory Sandbox. They will be a key stakeholder in allowing us to tokenize the Fijian FIAT (discussions ongoing).

By removing the traditional barriers of sending and receiving remittances to loved ones, our aim is to help fight poverty through enhanced financial inclusion and to improve lives and livelihoods of Fijians and South Pacific Islanders.