The International Finance Corporation (IFC) has negotiated an additional US$50 million in funding for Papua New Guinea’s largest bank, Bank of South Pacific, to expand its financing and promote private sector growth.

Four years ago, the IFC invested US$140 million for a 10 per cent shareholding in BSP to help expand its financial services and boost its presence across the region.

Included in the deal was a loan of US$30 million, designed to enable BSP to participate more fully in foreign currency lending opportunities.

The IFC has now sourced an additional US$50million from two European banks, which specialise in investing in private companies in developing countries: the Netherlands Development Finance Company (FMO) and German development finance institution Deutsche Investitions und Entwicklungsgesellschaft mbH (DEG).

Funding for business clients

Mark Railston, General Manager of Treasury at BSP, says the additional funding will be used to help the bank’s corporate clients.

He said BSP’s ability to compete effectively in the foreign exchange lending market has been constrained by limited access to longer-term foreign currency funding.

BSP’s Mark Railston

‘With this new facility, BSP will be better able to service Papua New Guinea’s growing private sector including small and medium enterprises linked to the natural resources sectors that need access to U.S. dollars.’

It is FMO’s first direct investment in Papua New Guinea, while DEG is renewing its support to Papua New Guinea, according to a spokeswoman for the IFC.

BSP critical

‘BSP is critical to national economic growth,’ said IFC’s Regional Manager for the Pacific, Gavin Murray.

‘For Papua New Guinea to meet its development potential, the country needs strong domestic financial institutions that can provide the financial products needed for the private sector to grow, provide employment and ultimately boost prosperity.’

The deal comes as BSP Group Chairman Kostas Constantinou announced ratings agency Standard and Poor’s has maintained the bank’s B+ credit rating for 2014.