Diversifying the Financial System in OECS Countries
Project Development Objective (PDO)
The main objective of this technical assistance project is to support the development and adoption of a strategy and implementation plan for a more diversified financial system with a focus on instruments and markets.
The Eastern Caribbean Central Bank has prepared a detailed plan of its long-term vision for an Investment and Development Financial Architecture (IDFA) for the Eastern Caribbean Currency Union (ECCU). In the plan, the IDFA is designed as the first step toward achieving the Single Financial Space that has been endorsed by the revised founding treaty of the Organisation of Eastern Caribbean States (OECS) Economic Union and its stabilization and growth program.
The IDFA identifies three critical issues in the OECS financial sector: (a) access and depth, (b) financial efficiency, and (c) financial stability. The IDFA also includes nine principles that elucidate the interventions, regulatory changes, and financial innovations necessary to achieve its objectives. The focus of this project is on the fourth and fifth objectives of the IDFA. Specifically, the project seeks to explore the markets and instruments that will serve to diversify the prevailing financial system.
To support a more diversified financial system in the ECCU, the project will carry out two groups of activities.
1. Diagnostic, strategy, and action plan
Strengthen the IDFA’s diagnostic and analysis capabilities to better substantiate the policy choices that it recommends for a more diversified financial system. An analysis of the financial and economic structure of the OECS, as well as of the needs of the sector overall, will be important to form the recommendations. The analysis and recommendations will consider international best practices and lessons learned from other countries with due cognizance of the local nuances and context.
The strategy and action plan could include, among others, financial diversification; capital market development and instruments; financial market institutional investor development; access by micro, small, and medium enterprises to finance; and a consumer protection framework.
2. Dissemination and implementation support mechanism
Conduct workshops and stakeholder consultations related to the elaboration and dissemination of the strategy, including a donor workshop to solicit financial support to implement the strategy at the end of the project. This project will provide advice, support, and capacity building to establish a high-level steering committee to drive implementation.
The main expected outcomes of the project are as follows:
1. Approval of the strategy and action plan
2. Mobilization of support and financial resources to implement reforms
3. Establishment of a steering committee to coordinate and promote the implementation of reforms