Questions are being raised about the management and security of depositors’ funds in a savings and loan cooperative in Vanuatu.
In an Order dated September 28, 2017, Finance Minister Gaetan Pikioune placed the APMA Financial Investment Centre, or AFIC, under the supervision of the Financial Institutions Act, specifically referencing Sections 43-49 of the Act.
This is the second ministerial order referencing AFIC and the Financial Institutions Act. It was issued on the recommendation of the Reserve Bank of Vanuatu, which acts as Financial Regulator.
The specific reference to sections 43 to 49 may give pause to AFIC’s management and depositors alike.
Section 43 mandates the Reserve Bank of Vanuatu to exercise its powers and functions under this Part for the protection of the depositors of licensees.
Section 44 requires that institutions operating under the Act must have sufficient assets to meet their liabilities. Section 45 mandates the Reserve Bank to intervene if a financial institution is conducting unsound or unsafe practices.
Section 46 deals with the regulators duty to intervene in case of insolvency. It enables the RBV either to direct the institution to follow its instructions, or to appoint someone to do so.
Section 47 allows the RBV to apply for court-ordered supervision of an institution.
Sections 48 and 49 refer to the appointment and cessation of a court-appointed manager, and the powers given to that person.
The Daily Post submitted a number of written questions to the Reserve Bank Governor, asking why these specific sections of the Act were referenced, why the order was being issued at this time, and whether the RBV intended to act pursuant to any of these sections. No response was available at print time.
AFIC is a savings and loan cooperative.
Savings and loan cooperatives typically operate under the supervision of the Department of Cooperatives, but they are subject to more rigorous regulation if their funds in management exceed VT10 million. The coop is run by Pentecost island native, Barnabas Tabi, a popular and charismatic man, widely regarded by Ni-Vanuatu as a champion of financial inclusion.
According to officials, his savings and loan cooperative has approximately 25,000 fully vested depositors, and another 30,000 or so partially vested depositors. Savings and loan cooperatives are overseen by the Department of Cooperatives. Saving and loan by laws stipulate that depositors must deposit a minimum balance of 10,000 vatu for a period of one year before they can access financing from the coop. Mr Tabi has been wildly successful with bringing in depositors. In February, he claimed that AFIC was gathering 50 new members every day. This may be due to promised interest rates of 30% and even 50%.
How he intends to afford these rates is unclear. In fact, it’s not even clear where all the money is. Of four commercial banks in Vanuatu, three deny doing any business whatsoever with AFIC. The fourth would neither confirm nor deny any relationship with AFIC.
But officials, speaking on condition of anonymity because of the sensitivity of the issue, confirmed that the saving and loan operation had no deposits in any of the four financial institutions.
Concerning foreign investment or financing, Mr Tabi told the media, “We dont solicit nor borrow money from outside Vanuatu”.
One ministerial advisor claimed to have seen a cash box with a large sum of cash inside the savings and loan premises. Officials stated that their primary concern in the short term is simply guarding depositors’ money against misfortune such as fire or natural disaster.
In late July, the Vanuatu Daily Post reported that it was alleged that... the AFIC branch called Ennar [on Pentecost island] was where all money is kept and was a high risk to possible frauds and that peoples’ funds were not safe. Ennar is the headquarter of AFIC, therefore funds can be held at its branch but are being audited and currently monitored by Vila branch, AFIC responded.
But there are many unanswered questions about the organisation itself. Savings and loan operations are required to operate under the oversight of a managing committee or board of directors, but senior officials indicated that AFIC had yet to institute one as late as last week.
In mid-February, a ministerial order was issued placing AFIC under the supervision of the Reserve Bank of Vanuatu, the countrys financial regulator. This is standard procedure for savings and loan operations with over 10 million vatu (about $117,000) funds in management. Mr Tabi suggested to the media that the move was motivated by foreign influences.
Savings and loan cooperatives are designed to be small-scale, community-based operations providing access to small amounts of capital. With tens of thousands of members, AFIC’s reach extends across the country, with a large percentage of the income-earning population invested.
Assuming a 10,000 vatu baseline deposit, the AFIC may have hundreds of millions of vatu of cash on hand.
AFIC was set up within the principles of Kingdom Dynamic which translates into the so easy, go easy approach, Mr Tabi told the Vanuatu Daily Post in February. He concluded, AFIC cannot be shaken.
Senior government officials and members of the financial community are hoping that’s true. With the savings of a large percentage of the population of Vanuatu at stake, any change in AFIC’s fortunes could have far-reaching effects.