A survey conducted in February 2016, reveals Tonga has a level of financial inclusion comparable with the rest of the Pacific region, particularly Samoa.
Only 41% of Tongan adults have a bank account.
The results are contained in the Financial Services Demand Side Survey Report that was released by Tonga Governor of the National Reserve Bank of Tonga, Sione Ngongo Kioa and the Pacific Financial Inclusion Program (PFIP) this week.
The study found that 34% of Tongan adults are completely excluded from financial services, with another 14% only accessing informal financial service instruments such as savings clubs, shop credit, moneylenders, or hire purchases.
Those more likely to be financially excluded are low-income earners, casual income-earners and most of the residents of Ha’apai.
Unlike other Pacific Island countries, there is no apparent gender gap in bank account ownership, and neither does age appear to be a factor for account ownership.
Remittances are an important source of income for many Tongan adults, with 70% reported receiving remittances in the last year. Remittances and mobile money transactions show similar trends towards meeting immediate needs.
Similarly, many Tongans do not feel the need for insurance coverage.
Financial transactions are heavily cash-based, with the majority of Tongan adults (with the exception of the public sector) receiving income in cash.
Nearly all Tongans pay utility and school payments with cash instead of using digital channels such as bank transfers, debit cards or mobile money.
The report also highlights that 63% stated saving geared towards everyday expenses and social obligations, rather than saving for long term goals such as housing, business, asset accumulation or education. Tongans rely heavily on informal savings and credit, with 46% of Tongan adults saving at home and 23% using savings clubs.
Governor Kioa said “The report identifies the challenges and barriers that are faced by our people with regards to accessing financial products and services, as well as the type of products and services that are in demand. These findings provide great insights into how to bridge the gap between the formal and informal sectors to ensure inclusive economic growth for Tonga. I do hope that the result of the demand side survey would help improve financial inclusion in Tonga.”
Tonga is the fifth Pacific Island Regional Initiative (PIRI) member to conduct a financial inclusion demand-side survey (DSS), after Fiji, Solomon Islands, Samoa and Vanuatu. The DSS initiative is an important first step in the journey to incorporate data into policymaking and evaluation, by providing an evidence-base to the understanding of financial access usage and quality in the Pacific. It aims to gather insights into the needs of Tongans pertaining to financial services. Formal financial inclusion is widely accepted as contributing significantly to sustainable economic growth and the reduction of poverty.
The Financial Services Demand Side Survey for Tonga was led by the National Reserve Bank of Tonga and Tonga Department of Statistics. The survey was made possible through financial support from the New Zealand Government’s Ministry of Foreign Affairs and Trade via the Pacific Financial Inclusion Programme, and the Alliance for Financial Inclusion.