THE Board of the Central Bank of Solomon Islands at its meeting on April 20, 2017 approved a banking and credit institution licence to two new applicants namely; Banque Régionale d’Escompte et de Dépôt or Banque Populaire incorporated in Solomon Islands as ‘BRED Bank Solomon’ and Bank South Pacific (BSP) incorporated as ‘BSP Finance (SI) Limited’.

Initially granted an interim licence on May 27, 2016, BRED Bank Solomons now has a full licence to conduct banking business services in Solomon Islands.

On the other hand, BSP Finance (SI) Limited was granted a full licence to operate a credit institution.

Whilst the news is sinking in, some met it with jubilation and others with skepticism. This article wishes to highlight an observation that is worth discussing. That is, there are no private domestic nor a public (government supported bank) commercial bank operating in the banking sector of Solomon Islands besides the superannuation National Provident Fund (SI), Development Bank of Solomon Islands (defunct) , National Bank of Solomon Islands (NBSI acquired by BSP) and the many credit unions if you like.

This is concerning as it implies that we still depend on foreigners (foreign financial institutions) to be in charge of our finance and economy subtly. Whilst we keep striving for greater independence and less dependency, one development aspect we must be cautious about and should be able to control is our money. The moment we can direct and take charge of our finance is the time we can claim independence to a certain degree.

On that note, we all understood globalisation of economies, greater global integration and global capital flows as realities of the world we live in today, but the vision here to see a certain level of financial control and pride retained by our own people. This is the very essence of the dictum ‘thinking globally and acting locally’.

Hence the question, why can’t we have our own public bank or private-public domestic bank?

The simplest and straightforward answer is, we are inundated and overwhelmed with neo-liberal policies of the Washington Consensus aggressively promoted by the Western world, World Bank(WB) and the International Monetary Fund (IMF) for privatisation of financial institutions as a one-size-fit-all development model for developed and developing countries. This is no good for our country.

History has it that public banks have played significant role in the developments of now advanced economies such as the United States, United Kingdom, Germany and other European and Asian countries. Today public banks are still common around the world especially in developing and newly-developed countries. Globally there are around 40 percent of banks still publicly owned and these countries mostly survived the 2007 credit crisis.

Prominent development economics of the 1950s and 1960s such as Alexander Gershenkron, Arthur Lewis, Gunnar Myrdal and others have literatures’ advocating state’s key role in the banking sector. Government can participate in banking in a number of ways; by directly providing subsidies, by partnering with domestic private banks (public-private partnership) and or outright ownership. The State through participation in the banking sector thus promotes government’s development and political goals. Political goals here are not synonymous with corruption. We can control that by proper regulations.

In that light, a least developed country like Solomon Islands with less developed financial markets or more generally less well-functioning banking institutions should be encouraging more active participation of governments in the banking sector.

In that manner, in development theory, all else equal, subsequent financial benefits and economic development, factor accumulation, and particularly productivity growth are results of state’s participation in the banks sector.

On that note, I acknowledged recent scholars who researched and wrote against governments involvement in the banking sector. For example Professor Daniel Carvalho of Southern California University wrote about the consequences of government control over banking which can lead to greater political influence over decisions in the real economy. Corruption is the underlying argument by such scholars. Such fear I believe can be averted as mentioned above-proper regulations.

I also note scholars like La Porta, Lopez-De-Silanes and Shleifer who wrote an influential paper in the Journal of Finance (2002), arguing that public ownership of banks is associated with lower GDP growth. They also cited a World Bank policy research report that noted “whatever its original objectives, public ownership tends to stunt financial sector development, thereby contributing to slower growth.”

In refuting the above claim, German scholars Tobias Korner of Ruhr Graduate School in Economics and Isabel Schnabel University of Mainz showed in their own 2010 research that the above relationship reached by WB, IMF and La Porta et al. does not hold true for all countries. I personally agree with the German scholars.

Public ownership, Korner and Schnabel wrote “is harmful only if a country has low financial development and low governmental institutional quality. The negative impact of public ownership on growth fades quickly as the financial and political system develops. In highly developed countries, they found no or even positive effects. Therefore policy conclusions for individual countries are likely to be misleading if such heterogeneity is ignored”.

Today in the United States of America, on the subnational level, authorities and citizens are exploring ideas to establish state-owned banks. In Colorado for example, a group of nonpartisan state citizens are proposing for the amendment of their constitution to enable the establishment of the Bank of Colorado(BCO), which they modeled after the Bank of North Dakota (BND). State and local business revenues would all be required to be deposited in BCO rather than in Wall Street Banks.

According to ‘Rocky Mountain Public Banking Institute’ BCO will be required to lend money in the state for sustainable infrastructures, agriculture, commerce, industry, education, public health, safety, housing and other beneficial purposes. This is exactly what I’m envisioning for Solomon Islands and Guadalcanal in particular.

Please note that such ideas are not new to us Solomon Islanders, and that we are on par with citizens of Colorado and Dakota and many others around the world in our line of thinking.

In 2012 the influential Malaita Ma’asina Forum (MMF) proposed for establishment of a bank for the people of Malaita. According to MMF president Mr. Charles Dausabea, this is one area the national and provincial governments have utterly overlooked. The idea was to give Malaitans the opportunity to access finance and for them to be involved in the domestic economy of Malaita. Their direct contributions towards local economy will have a positive impact on the national economy in general.

Mr Martin Housanau -appointed researcher-for MMF commented in 2012 that, “in order to have a strong national economy and Malaita economy, we must have our own financial institution “ He furthered that this would enable Small and Medium Enterprises (SME) to flourish, economic development and major projects such as the Auluta, Bina Harbor and Waisisi to eventuate successfully. This I subscribe to.

Then again in 2013, MMF president Mr Dausabea and General Secretary Charles Ashley call on then Prime Minister Gordon Darcy Lilo to a establish public bank for Solomon Islands. Their statement expressed that we have little to no say in how the current foreign commercial banks are structured and operate in Solomon Islands. “We know well the commercial banks are here to serve their own foreign interests and overseas bosses. Our way forward in to start our own bank” and I could not have agreed more.

Last year’s (2016) Guadalcanal Dialogue and Leaders Summit, we had it during our discussions and in the resolutions for inclusive and sustainable socio-economic, political and institutional development as priorities. For example resolutions 12 reads; That there is a need to further mainstream sustainable development at all levels, integrating economic, social and environment aspects and recognize their inter-linkages so as to archive sustainable development in all its dimensions.

In my personal interpretation one dimension that can be further mainstreamed for sustainable economic integration is the banking sector of Solomon Islands and Guadalcanal Province for that matter. The provincial and national government must be involved herein.

Finally, as we prepare for the Federal System of governance (State Government), this is one area I want my people of Guadalcanal to start think serious about. Under this proposes State Government system, our province will be expected to retain bulk of our revenues and we will attract more local and foreign investors. The call for such thinking -having our own bank- could not be more appropriate at this juncture.

To conclude, I therefore believe in us having our own properly regulated public (national) bank and public regional (provincial) banks or public-private domestic banks as the way forward for Solomon Islands. By this we can control our finance and claim to command certain level of independence and avoid private foreign banks ripping us off whilst making us depended on them.

Before I finished off, please note the views expressed here are my personal views and not that of my executive Government nor that of the current 8th Assembly of Guadalcanal Provincial Government. However since all development prospects started with an idea or collective thoughts, I shall continue this discussions with relevant people on my own time and hopefully bring this idea up to certain levels of decision making bodies.

Anthony K Veke (Honorable) is a Member of Provincial Assembly for Tangarare Ward and the Current Premier of Guadalcanal Province. He is a three (3) time premier for Guadalcanal Province and served in the 6th Assembly, 7th Assembly and the Current 8th Assembly. Views expressed here are his own and does not associate with his Official title and position nor that of the publishing paper.

Anthony K Veke

Member of Provincial Assembly for Tangarare Ward and the Current Premier of Guadalcanal Province