Samoa Finance Sector Resilience and Development Project

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The project has three components: (i) financial supervisory and national payment systems implemented by CBS; (ii) national identification systems implemented by the Samoa Bureau of Statistics; and (iii) project management implemented by the Ministry of Finance.Component 1: Financial Supervisory and National Payment Systems (US$6mn). CBS will implement Component 1. The two sub-components support financial supervisory and national payment systems, which are priorities under the Finance Sector Plan and the NFIS and will strengthen financial stability, inclusion, efficiency, and resilience. Sub-Component 1.1 Financial supervisory systems (US$3.5mn). This sub-component finances activities to strengthen CBS’ supervisory systems. It is expected to improve CBS’s identification and mitigation of risks, including climate and environmental-related risks, and enhance financial stability and resilience. There will be two core activities:(i) Financing of a modern supervisory technology (SupTech ) platform to facilitate the flow of information between CBS and its regulated financial institutions, enabled by modern data architecture with advanced data validation and analytics. The project will help CBS conduct a SupTech assessment and to digitize its reporting and regulatory processes, resulting in more efficient and proactive monitoring of risk and compliance at financial institutions. SupTech will support many of CBS’ supervisory phases (i.e., licensing, macro- and micro-prudential supervision, AML/CFT) and address challenges from emerging risks. One objective of the investment in this component is to incorporate key climate related data within CBS’s data infrastructure which will facilitate more effective climate risk assessment, regulation and supervision by the Samoan authorities. The narrowing of climate date gaps would also promote the channeling of public and private finance for climate change mitigation and adaptation.(ii) Financing CBS’s institutional capacity to assess physical and transition risks to the financial sector related to climate events. This will include intensive training for CBS staff on measuring, managing and mitigating climate and environmental related risks to the financial sector and activities to assess and improve quality of data needed to analyze climate risk to the financial sector. The activity will also finance planned sector-wide coordination efforts, including a government-industry taskforce to develop long-term climate-resilient strategies to be endorsed by the Samoan government and industry. Capacity-building efforts will be informed by international best practice guidance and frameworks developed by the Network for Greening the Financial System (NGFS), the Taskforce on Climate-related Financial Disclosures (TCFD), and others.Subcomponent 1.2 National payment systems (US$2.5mn). This sub-component finances activities to strengthen payment systems and promote DFS. It is expected to improve access to formal financial services, expedite short-term disaster-relief in a more efficient and scalable way, and reduce remittance costs. There will be two core activities:(i) Financing implementation costs of the national payment system including annual software subscription fees under the 2023 CBS-launched system, intended to enable more efficient, secure, and inclusive electronic payments. Depending on the trajectory of payment usage, the sub-component could also include investments in further national payment infrastructure, such as a retail payment switch – a specialized system that facilitates and routes electronic payment transactions between multiple parties in the retail payments ecosystem, resulting in efficiency and convenience in utilizing all payment channels, including mobile payments. (ii) Financing key diagnostics, reforms advisory, and gender-focused financial literacy. This would include, among other activities, a diagnostic on a retail payment switch and use cases, and advisory support on payments relevant regulations and standards, including the regulatory and supervisory framework, a financial consumer protection regime, competition with an interoperable payment system infrastructure, and regulatory sandboxes for the development of the fintech ecosystem. Notably, the sub-component will also finance gender-focused financial literacy communication materials.Component 2. National Identification Systems (US$12mn)The Samoa Bureau of Statistics (SBS) will implement Component 2. The two sub-components support the development of the National Digital Identification System (NDIDS) and upgrade of Civil Registration and Vital Statistics System (CRVS), as well as mass registration operations, the issuance of credentials, and integration into public and private sector service delivery. These will enhance public and private services such as healthcare, education, financial services, and disaster-related social protection. Notably, addressing these ID gaps can help with cost-effective CDD and the onboarding of financial service customers, as well as with enhanced KYC to prevent illegal activities and maintain CBRs. Sub-Component 2.1 National Digital Identification System (NDIDS) and Civil Registration Vital Statistic System (CRVS) (US$7.6mn). This sub-component finances the development of the NDIDS, the first such system for Samoa, the upgrade of the CRVS and the migration and quality checking of data from the old CRS, the integration of NDIDS and CRS, the development of identity verification and e-KYC functionalities and their integration with public, private, and financial services (including other e-KYC platforms). The sub-component will also include stakeholder consultations, back-office systems (e.g., grievance management systems), consultants to help SBS design, coordinate, and supervise NDID and CRS development, and other technical assistance and capacity development. The NDIDS and CRS will be aligned with the ten Principles on Identification for Sustainable Development, with adherence to international good practices for accessibility and non-discrimination (especially for women, people with diverse sexual orientation or gender identity such as Faʻafafine, persons with disability, the elderly, and other vulnerable populations), personal data protection, and cybersecurity. NDIDS and CRS will incorporate relevant international and open standards, and adopt, where appropriate, digital public goods to maximize country ownership and interoperability, and enable flexibility for future cross-border use cases such as access to services in other countries and travel. The design and implementation of NDIDS and CRS will include a broad consultative process to understand peoples’ needs, concerns, and expectations, identify potential barriers to registration and use, and develop communication and education strategies, and a grievance mechanism. The NDIDS and CRS data infrastructure will meet internationally-recognized energy efficient standards and be climate-resilient backup mechanisms that will allow data to be easily recovered if the primary data infrastructure is affected by to climate-induced shocks and natural disasters. Notably, the NDIDS and CRS will improve the response to climate-induced shocks and natural disasters by ensuring interoperability with the relevant social protection and other registries, allowing the government to quickly roll out response programs and validate the identity of beneficiaries.Sub-Component 2.2 Registration and credential issuance (US$4.4mn). This sub-component finances mass registration operations and the issuance of the Samoa Digital ID Number (SDIN) and physical ID cards (utilizing 2 D barcode technology and not smartcards), developing the ability to issue digital verifiable credentials (e.g., a digital representation of the ID cards and civil registration certificates) into digital wallets , and the development of a smartphone application to allow people to verify themselves remotely for online