Financial Crime World

Samoan Financial Sector Faces Challenges Amid Uncertainty

The financial sector in Samoa faces significant challenges despite its relatively small size. With total assets estimated at around SAT 20 million, the sector is struggling to overcome various obstacles.

Offshore Financial Sector

The offshore financial sector in Samoa is limited in scope and has seen a decline in assets from US$112 million in 2005 to US$54.4 million mid-2014. The seven licensed banks operating in this sector are:

  • Six banks that serve their group members only
  • One bank affiliated with an investment adviser

Insurance Sector

The insurance sector in Samoa is small, with total assets corresponding to about 5 percent of GDP and premiums at 1.2 percent of GDP in 2013. There are five active licensed insurance companies in the country, with non-life insurance accounting for 85 percent of premiums.

Money and Capital Markets

Money and capital market activity in Samoa is extremely low. The Central Bank of Samoa (CBS) issues securities, but they are low-yielding and mainly bought by commercial banks. There is no secondary trading, and inter-banking activity is limited.

Access to Finance Remains a Challenge

Access to checking or savings accounts in Samoa is nearly universal, but access to credit remains a significant constraint for small and medium-sized enterprises (SMEs). According to a 2009 survey:

  • 51% of SMEs had a loan or line of credit outstanding
  • 16% identified access to finance as a major constraint

To address this issue, the government provides incentives to banks to increase credit to SMEs through the Small Business Loan Guarantee Scheme. The scheme, managed by the Small Business Enterprise Centre (SBEC), provides a loan guarantee for participating banks and has a fund totaling SAT 8.5 million.

Risks and Vulnerabilities

The Samoan economy has faced a series of large exogenous shocks in recent years and is gradually recovering. However, the financial sector remains vulnerable to risks and uncertainties. The IMF has urged the government to take steps to address these vulnerabilities and ensure the stability of the financial sector.

Specifically:

  • A thorough review and reform of the SBEC could strengthen the scheme
  • There are no clear eligibility criteria for the scheme
  • The coverage ratio is very high at up to 100%
  • Payout for non-performing loans is very favorable for the banks

By addressing these vulnerabilities, the government can help ensure the stability of the financial sector and support economic growth in Samoa.