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BANKING AND EXCHANGE CONTROL
Fiji has a well-developed banking system supervised by the Reserve Bank of Fiji (RBF). The RBF regulates the Fijian monetary and banking systems, manages the issue of currency notes, administers exchange control, and provides banking and other services to government. In addition, it provides lender-of-last-resort facilities and regulates trading bank liquidity as a mechanism in monetary policy.
There are five trading banks with established operations in Fiji. In addition, there are non-banking financial institutions providing financial assistance and borrowing facilities to the commercial community and to consumers.
In the main, these institutions comprise the Fiji Development Bank, Fiji National Provident Fund, Housing Authority, Credit Corporation, Merchant Bank of Fiji and insurance companies.
LOCAL FINANCING
The principal areas of finance for business enterprises are:
Short-term working capital
This is bank lending to businesses on an overdraft basis mainly for short - term working capital purposes. Interest is payable on daily balances. Trading banks now commonly require that the advance be fully drawn and repaid according to an agreed schedule.
Fixed Term Loans
Trading banks also make fixed term loans for capital expenditure and equity participation. Normal establishment fees and a loan service fees apply and a commitment fee is usually charged on any undrawn balance from the date of approval to the final draw down of the loan. Interest is charged monthly, quarterly, half-yearly and annually on a reducing balance basis and is typically slightly higher than those on overdrafts. Generally for loans, the terms range from 3 to 7 years.
Trade Finance
Trading banks offer bill (draft) lines whereby the bank will agree to accept, open and endorse a customer's bill of exchange up to an agreed amount, and then either hold, or discount the bill itself, or allow the customer to make his own arrangements for sale. These lines can be established for short-term working capital or by periodically "rolling over" (renewing) the bill, for longer financial purposes.
Besides bills, banks handle other documentary credits, provide pre-shipment and post- shipment finance facilities and forward foreign exchange cover. Finance for exports is assisted by the Export Credit Ratio, a requirement by banks to lend a part of their portfolio to companies in the export and tourism sectors.
Export Finance Facility
The Export Finance Facility (Pre/Post Shipment Finance) was introduced by the Reserve Bank to assist exporters to obtain credit at concessional rates of interest to help improve international competitiveness and also to ensure the availability of credit to the export sector. The scheme is provided through commercial banks with no recourse to the RBF. The commercial banks can borrow from the RBF at the Minimum Lending Rate (MLR) of around 2% and lend to exporters at a rate equivalent to MLR plus a fixed margin of 4% per annum. Currently the maximum rate is set at 6% p.a.
All producer-exporters to any destination qualify to apply provided they satisfy the value added rules. Also eligible is financing for the construction of up market hotels.
Producers of certain traditional exports including sugar, molasses, gold, green logs and rough unprocessed sawn timber are not eligible for the pre-shipment finance facility.
Forward Foreign Exchange Cover
The facility was re-activated in January 1997 in an attempt to encourage commercial banks to enter into forward contracts with their customers to buy and sell foreign currency. Subsequently, the Reserve Bank allowed commercial banks to withhold currency at the end of a trading day instead of selling to the Reserve Bank, to build up positions up to the limits on net open positions.
The forward foreign exchange contract protects the exporter or importer from the possibility that the foreign currency would become cheaper or expensive in the future. The contract allows the trader to fix his costs from day one and incorporate this into his pricing.
Banks Bridging Finance
Trading banks offer short-term loans against the security of land or property. Insurance companies and the Fiji National Provident Fund also engage in lending over longer terms but on the basis of first class security, usually in the form of real estate.
Leasing Arrangements
Currently leasing of capital equipment is available through the Merchant Bank of Fiji, Credit Corporation and Fiji Development Bank. Generally the interest rate is higher as the loans are of higher risk.
Factorising Service
This is designed to help finance a company's working capital requirements and provides cash flow alleviation, sales and ledger maintenance, credit management and collection services.
Development Finance
This is provided in the area of Agriculture, Industry and Commerce by the Fiji Development Bank. Agriculture lending terms range from 3 to 15 years and Commercial lending tenure is 10 to 18 years the average amount of long term finance available from the FDB for Industrial and Commercial purposes is 65 % of the project cost.
Export Credit Ratio
The Reserve Bank implemented the Export Credit Ratio with effect from August 2001 to improve exporters access to credit and help boost the export industry and support Fiji's economic recovery. Under the scheme, commercial banks are required to maintain a minimum of 5% of their average deposits and similar liabilities in outstanding loans to eligible exporters of goods and services.
Similarly, all producer-exporters qualify, except producers of non-traditional exports, provided they satisfy the value added rules. Also eligible are funding for the construction and refurbishment of hotels and specific tourism related operations such as eco-tourism, dive and in-land tours etc. and export of certain professional services.
Local borrowing applications that fall outside the specified limits that require Reserve Bank approval will be assessed on the following information:
- Approval of the project by the Fiji Islands Trade and Investment Bureau;
- Approval by the Reserve Bank of Fiji for issue of shares to the non-residents in the business;
Debt to equity gearing ratio of the business is within approved guidelines.
INTEREST RATES
The commercial banks weighted average lending rate was 7.69% in September 2006. Generally, interest rates have declined over the years as a result of the Reserve Bank's accommodative monetary policy.
Table 1: The weighted average lending rates of interest for September 2006 of commercial banks by industry
| Industry Group |
Interest Rates
(% per ANNUM)
|
| Agriculture |
8.85 |
| Manufacturing |
6.68 |
| Building & Construction |
8.15 |
| Real Estate |
7.42 |
| Wholesale & Retail |
7.17 |
| Transport |
7.41 |
| Non-Bank Financial Institutions |
8.43 |
| Professional & Business |
7.70 |
| Private Individuals |
8.53 |
The commercial Banks weighted average deposit rates for September 2006 were
EXCHANGE CONTROL
Exchange Control Authority
The Reserve Bank of Fiji administers the Exchange Control Act through the monitoring of Fiji foreign exchange transactions with the rest of the world to safe guard the country's foreign reserves.
Fiji's exchange control policies and regulations are reviewed annually in line with economic conditions and projections.
Exchange Control Relaxation
As announced by the Minister of Finance in the 2005 Budget Address, the Reserve Bank of Fiji introduced further relaxation of exchange control effective from 1 January 2005. These changes are in line with the Reserve Bank's policy to gradually deregulate foreign exchange transactions to further assist in foreign trade and foreign investment.
General Principles
The rationale of exchange control in Fiji is to preserve the country's external reserves by having a firm control over foreign receipts and payments.
The following areas would be affected by exchange control:
. transactions in foreign currency
. transfer of ownership of securities out of Fiji
. export and import transactions
Generally, investments outside Fiji and the flow of funds arising from commercial and private transactions into and out of Fiji are subject to exchange control.
All trading banks operating in Fiji along with other non-bank financial institutions are delegated certain authority by the Reserve Bank from time to time in matters concerning exchange control.
Exchange Control Guidelines relating to foreign currency payments
Facilities not delegated to commercial banks and restricted dealers require the permission of the Reserve Bank of Fiji under the Exchange Control Act.
Table 2: Facilities delegated to commercial banks and restricted dealers effective from 1 January 2005
TYPE OF PAYMENT
|
DELEGATED LIMIT
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Airline/Shipping (applicable only to overseas airlines with offices or agents in Fiji)
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Full amount
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TYPE OF PAYMENT
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DELEGATED LIMIT
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Court Order Payments
a) Alimony
b) Collection of debt
c) Out of court settlement
d) Others
Note: Beneficiary must be non-resident
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Full amount
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Charges/Fees/ Services
a) Freight & Shipping
b) Other Transport Charges
c) Royalty & Commission
d) Patents, Copyright
e) Brokerage & Other Charges to agents and representatives outside Fiji
f) Movie/Film Hire, News Service
g) Repair - domestic air shipping, other
h) Technical, Professional & Management Fees
i) Advertising/Licence
j) Office Expenses
k) Visa Application
l) Re-imbursement
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Full amount
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Credit Card Payments
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Full amount
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Deposits into Expatriates F$ External A/cs
a) Salaries & wages from employment in Fiji
b) Interest payable on the account
c) Payments from other external accounts
d) Proceeds of sale of assets
e) FNPF Proceeds
f) Tax Refunds
g) Proceeds from sale of foreign currency sourced from external sources or remaining from travel funds uplifted
h) Other funds from local sources
|
Up to the full amount
Up to the full amount
Up to the full amount
Up to the full amount
Up to the full amount
Up to $100,000 per sale
Up to the full amount
Up to $1,000 per month
|
Education/Training Expenses (for current year only)
a) Paid directly to the education institution
b) Paid directly to the student
c) Scholarship Payments by recognised
|
Full amount
$20,000 per beneficiary per annum
Up to the full amount due
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TYPE OF PAYMENT
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DELEGATED LIMIT
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Emigration Allowance
Sources of Funds
- Sale of personal assets
- Maturity of life insurance
- Death benefits
- Rental/Directors fees
- Savings/FNPF/Refund
Note: long term business visas & work permits do not qualify under this delegation and required RBF approval
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$200,000 per family
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Gifts
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Up to $10,000 per applicant/beneficiary per annum
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Government Department
Payments/Transfers (includes
Funding of Offshore Accounts)
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Up to the full amount due
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Import Payments
a) Goods on board ship or aircraft, or goods
landed but waiting Customs clearance.
b) Goods already landed & cleared by Customs
c) Prepayments of term bills for goods already landed & cleared by Fiji Customs
d) Advance import payments prior to shipment of goods
e) Merchanted Goods [Payment for imports to be delivered and sold to a country other than Fiji]
f) Payment to third party [Goods already received in Fiji]
g) Offsetting (refer to separate heading)
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Up to full amount due
Up to the full amount due
Full amount
Up to $1.0 million per amount due
Up to $1.0 million per amount due
Delegate up to $1.0 million per amount due
|
Insurance/Re-Insurance Payments Offshore
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Delegate up to the full amount due (but still subject to approval under the Insurance Act)
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Lease Payment
a) Aircraft
b) Fishing or cruise vessels
c) Machinery
d) Other Lease Payment
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Full amount
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|
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TYPE OF PAYMENT
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DELEGATED LIMIT
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Loan Repayments
a) Principal and Interest (excluding up front fees)
b) Loan prepayments
c) Interest
d) Loan repayment by Statutory Bodies
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Up to $500,000 per amount due for scheduled payments
Delegate up to $500,000 per loan balance
Full amount
Full amount
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Lottery Tickets
Note: up front payment of lottery winnings is not permitted |
Up to $10, 000 per applicant per annum
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| Maintenance |
Up to $10,000 per applicant/beneficiary per annum |
|
Medical Expenses
a) Paid directly to the Medical Institution
b) Paid directly to the patient
|
Full amount
Up to $20,000 per treatment
|
Offsetting of Foreign Exchange Earnings against Foreign Currency Bills Payable
a) Merchandise Imports
b) Other Business Payments
|
Full amount
Full amount
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Pensions /Superannuations/Gratitude
a) Payments by Govt.'s & FNPF
b) Payments by companies
|
Up to the full amount
Full amount
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Profit declared and distributed to non-resident shareholders/partners/sole proprietors
a) Capital
b) Dividend or Operating Profit
|
Delegate up to $500,000 per business entity per annum
Note:
a) Capital and operating profits remittance to be restricted to F$10.0 million each per entity per annum
b) Local borrowing to fund profit remittance is restricted
|
TYPE OF PAYMENT
|
DELEGATED LIMIT
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Refund
a) Hotel bookings cancelled
b) Tax
c) Other (inc. airline tickets sold
locally by travel agents
|
Full amount
|
Subscriptions to clubs, magazines,
Societies and trade organisations including
Entrance fees, including donations to church
[Incl. Donations to churches]
|
Full amount
|
|
Travel Allowance [sourced from resident account]
ยท Return ticket holders to Fiji
. One way ticket to Fiji
Notes
1. Travellers abroad including emigrants are only allowed to carry Fiji currency notes up to $500 and foreign currency notes up to the equivalent of F$5,000 (inclusive of any Fiji currency notes)
2. One way ticket holders are entitled to F$5,000 under delegated authority;
3. Exception Cases: Students with return ticket originating from offshore are entitled to the full allowance
|
Up to $20,000 per traveller
$5,000 per trip
|
Wages paid in foreign currency cash to foreign crew members
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Full amount
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Wedding Expenses
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Up to $10,000 per applicant /beneficiary
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Withdrawal of Investment by non-resident investors
a) Sales of Shares /Assets
b) Shareholders Funds
|
Delegate up to $500,000 per business per annum |
Miscellaneous Expenses
|
Up to $10,000 per transaction
|
|
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Exchange Control Regulations as they affect a foreign investor
Residency
The Reserve Bank distinguishes between residents and non-residents of Fiji for both individuals and business entities.
The Reserve Bank determines the residential status of a business in terms of the local and non-resident beneficial shareholdings. A non-resident controlled business comprises 51% or more non-resident interests. In a 50/50 non-resident and resident shareholding, the Reserve Bank considers the boardroom and management control of the business to determine it's residential status.
In the case of individuals, the Reserve Bank regards foreign nationals residing in Fiji for more than 3 years as residents of Fiji.
Foreign nationals residing in Fiji for less than 3 years, or those attending full time courses of study, irrespective of their length of stay, are classified as non-residents.
Fiji residents who are temporarily residing outside Fiji are regarded as residents of Fiji, unless they have obtained approval for emigration from the Reserve Bank.
External Accounts
Non-resident individuals and businesses (incorporated and operating offshore) may maintain a Fiji dollar external account or a foreign currency account, or both with the commercial banks, without Reserve Bank approval. The operation of the account is subject to certain conditions.
Acquisition of shares by non-residents
Where shares and other securities in businesses operating in Fiji are to be issued or transferred to a non-resident, approval must first be obtained from the Fiji Islands Trade & Investment Bureau.
In the case of share transfers, a valuation of shares is required from a Fiji registered Chartered Accountant in public practice.
When shares are issued to non-residents, consideration for equity in the form of cash must be provided from external sources and the bankers' confirmation for the receipt of funds into the company's resident Fiji dollar account must be provided to the Reserve Bank.
If share considerations are being met in kind, original Customs import entries are required, and where appropriate a valuation report from a Fiji registered valuer is to be provided.
Local Borrowing
Lending institutions in Fiji have been delegated authority to lend to non-resident controlled business without the prior approval of the Reserve Bank of Fiji up to the following specific limits and guidelines.
- New and existing non-residents controlled business
Up to F$10.0m
- Foreign currency loans to Fiji residents
Up to F$5.0 million provided the borrower has sufficient sources of foreign exchange earnings to service the loan
- Non-resident individuals
Up to F$0.5 million provided the debt to equity ratio is within 3:1
- Bank guarantees and other contingent liabilities
Up to any amount requested.
Note: Lenders in Fiji require the approval of the Reserve Bank to lend to non-resident individuals/controlled businesses amounts over and above the limits delegated to commercial banks and other official lending institutions. Debt to Equity Ratio
When considering applications for local borrowing by non-resident controlled businesses, the Reserve Bank ensures that the project has been approved by the Fiji Islands Trade and Investment Bureau. Also, that the business has fulfilled the requirements of the permission for the issue of securities to the non-resident shareholders.
Table 3: The debt to equity ratio criteria for local borrowing
| Non-Resident Shareholding (%) |
Debt/Equity Ratio |
|
91- 100% |
3:1 |
|
71 - 90% |
4:1 |
|
51-70% |
5:1 |
Offshore Borrowing
The approval of the Reserve Bank is required for all foreign currency loans exceeding F$5 million per annum.
In the case of non-resident controlled businesses, the total borrowing must be within the debt/equity ratio criteria.
Repatriation of Capital and Income
The prior approval of the Reserve Bank is required for the remittance of dividends and profits by businesses.
Authorised dealers may approve the repatriation by companies of operating and capital profits including withdrawal of investments up to F$5 million per borrower per annum.
EXPORTING TO FIJI
Import Restrictions
Most goods may be imported into Fiji without any import licence being required. However, there are restrictions on the import of a number of products. The restriction are absolute for some products while others may imported subjected to conditions imposed by statue or under licence from the Ministry of Commerce, Industry, Trade and Public Enterprises.
Import Duties
All imports into Fiji are classified according to Standard Tariffs, which are based on the International Convention on the Harmonised Commodity Description and Coding System.
The rates of duty vary with the type of goods and the classification in thein the tariff import duty, comprising fiscal duty levied at various rates in accordance with the Customs Tariff Act, 1986. 12.5% Vat is payable upfront with fiscal duty.
There are facilities for exemption, remission, reduction and refund of duty depending on the type and purpose of import. There are concessionary rates levied on certain raw equipment imported for the established or expansion of local industries. Applications for further reduction and exemption can be made to the Fiji Islands Trade and Investment Bureau.
Excise duty is principally charge on certain manufacture goods such as tobacco, liquor and petroleum products. Repayments of certain Customs and excise duties, unknown as drawback, may be claimed if goods are exported after duty has been paid. There are also facilities for the temporary import of goods for alteration or repair, for public exhibition trial or entertainment, of goods not normally available in Fiji to be used solely in connection with some particular project, and of goods for use temporary residents.
Capital Markets in Fiji & South Pacific Stock exchange
The Capital Markets Development Authority, or CMDA, was established by Government to supervise the share market and see that it works fairly, honestly and openly. They carry general information on shares and other investment choices and the service to the public is free. Thy also provide much of the information needed for individuals and business on how to become an investor. CMDA does not buy or sell shares, or any other type of investment, and nor can it give specific investment advise. How an individual invests is a matter that is to be decided after discussion with the broker.
The CMDA office has many series of leaflets designed to help individuals who are interest in investing in stocks and shares. Their instruction manual in investing is free, and interested individuals should contact their office or visit them for more information.
Generally, shares are bought and sold on the South Pacific Stock Exchange (SPSE), and only by licensed brokers. A broker will act as your agent for a commission of 1.5%, or less. Licensed brokers can advise you on the suitability or certain investments, and may charge for this service also. Brokers are not permitted to share in any dividends or capital gains you receive (nor is this income taxable). Neither can they share any losses you sustain.
Click for Checklist of Requirements for application for a licence to conduct Banking Business in Fiji...
Click for Liquidity Risk Management Requirements for Banks..
Click for Supplementary Information to the Checklist of Requirements..
Click for Guidelines of Loan Classification & Provisioning for impaired assets..
Download pdf version .....Banking & Exchange Control
For more information on Reserve Bank Guidelines, please refer to their website: http://www.rbf.gov.fj
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