Not party to the government’s subsidised loan scheme for small and medium-sized businesses, Kina Bank has unveiled its own range of products aimed at supporting SMEs in Papua New Guinea. Chief Executive Officer, Greg Pawson, explains the thinking behind the move to Business Advantage PNG.
Kina Bank’s Greg Pawson.
Business Advantage PNG:
Successive PNG governments have had a long-term plan to encourage the development of small and medium-sized businesses. We’ve already seen a rollout of a cheap loan schemes aimed specifically at assisting SMEs. Kina Bank did not get involved with that. Let’s talk about what you actually have decided to go to the market with.
Greg Pawson:
We are very encouraged by the government’s focus on the SME sector. We see that as being integral to the future growth and prosperity of PNG.
However, we differed with the government’s view on this tranche of concession lending. The government shouldn’t have to do that. Banks should do that of their own accord because, in an emerging market like PNG, it’s simply the right thing to do.
It’s not a good use of government funding to be subsidising the banks to lend to the small business sector. We’d rather they spent that money on infrastructure, hospitals and schools.
We didn’t get accepted into the K200 million pool that was allocated to BSP and National Development Bank. But our approach was: we’ll do it anyway.
‘A lot of business enterprises don’t have equity available to them. The capital fund helps solve that problem.’
We’ve come out with a SME loan product of up to K500,000 (secured) or K100,000 (unsecured) at four per cent interest per annum, with an extended term of up to 15 years. It goes to businesses that are turning over up to K5 million a year.
We’ve fast-tracked the approval process to be able to access that scheme. There’s effectively a checklist, where our bankers pre-qualify customers and approve it on the spot. As you can imagine, we’ve had an incredible amount of inquiries around it.
We’ve allocated an initial tranche of K50 million for that particular product and we’ll see how that goes.
The important factor, though, is it’s not free money. When the government put out this K200 million subsidised scheme, a lot of small businesses were thinking it was free money. That’s not the case at all. It’s a concessional loan facility.
Business Advantage PNG:
You’ve also flagged a fund to invest directly in SMEs …
Greg Pawson:
The other part is the capital fund that we’re putting in place for those businesses that just need a bit of a capital injection to start to get that next phase of their growth.
That’s about allocating a tranche of money and putting it into a formal fund administered by Kina Funds Management.
‘The way we gear up our relationship management for businesses is more advisory-based. We’re not going to see the customer just to take an order.’
A lot of business enterprises don’t have equity available to them. The capital fund helps solve that problem.
We become a form of silent debt in the business, and provide a whole bunch of advisory services to help them out. We’ll help them with a business plan, a cashflow forecast, accounting software like Xero, help them build a website, whatever the case may be. It will all be part of that model.
Business Advantage PNG:
What other ways can a bank like Kina help with the development of SMEs?
Greg Pawson:
We are putting in place a transactional banking offer for small businesses as well, which will essentially be fee free. It’ll provide access to our payment gateway, which will give them the ability to accept cards for the payment of goods and services online. And we’ll provide a payment card for the SME as well.
Business Advantage PNG:
Kina Haus in downtown Port Moresby. Credit: Kina Bank
That’s really an acknowledgement that SMEs don’t just need a bank account – they need scaffolding around it, don’t they? And different kinds of assistance as they move through their life cycle …
Greg Pawson:
That’s absolutely right. Our business model is a little different to the traditional banks.
For example, the way we gear up our relationship management for businesses is more advisory-based. We’re not going to see the customer just to take an order. We’re going to see them to talk about their future plans: where do they see themselves in five years’ time, and how can we help them get there?
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