Sharing nearly 500,000 clients, Papua New Guinea’s micro finance industry is expanding its reach, its numbers and its services. Business Advantage PNG looks at what three industry leaders are offering.
Papua New Guinea has 12 licensed finance institutions, including the People’s Micro Bank, Nationwide Microbank, PNG Microfinance and the Women’s Micro Bank, which was launched in August 2014.
Each provides loans, some provide banking services, and with the advent of mobile phone technology, each is expanding across the country with more than one taking up the challenge to compete with the commercial banks by offering a foreign exchange service.
Bridging the gap
‘Micro-credit is increasingly becoming an important means to bridge the gap of providing access to formal banking services for the marginalised and unbanked population of the country,’ Anthony Dela Cruz, Chief Executive Officer of the People’s Micro Bank (PMBL), told Business Advantage PNG.
So what is micro-credit?
Small loans, is the short answer, with a wide range of loan amounts on offer. Nationwide Microbank, for instance, will loan between K200 and K200,000.
‘Micro-credit is increasingly becoming an important means to bridge the gap of providing access to formal banking services for the marginalised and unbanked population of the country.’
Nationwide Microbank’s Tony Westaway
‘We loan to small business people, who we like to call micro entrepreneurs,’ says Nationwide’s Tony Westaway.
‘Many of them are small traders with under five employees, family businesses, bakeries, public motor vehicle operators, and fishing businesses.
‘We have 140,000 accounts,’ he says. ‘Our main focus is on the grass roots, those 85 per cent who live in rural areas, farmers, subsistence farmers rural dwellers, people who are finding it a bit tough out there.’
Mobile technology
Mobile phone technology is allowing PNG’s largely rural dwellers access to banking services. Westaway says about half his account holders use mobile phone technology.
‘In the very remote locations, 80 per cent of our new accounts are with people who’ve never banked before and they’re all banking by mobile wallet.
‘They’re taking the money out of the fireplace, out from the bamboo pipes and from around their village and putting it into their bank account.’
‘We are seeing an increase in women banking. It gives them more of a feeling of safety and security. Something like 38 per cent of our mobile wallet customers are women. Across the industry, bank accounts for women would only be about 30 per cent.’
A saving culture
But are these people also saving?
‘They’re taking the money out of the fireplace, out from the bamboo pipes and from around their village and putting it into their bank account,’ says Westaway.
‘There really hasn’t been a savings culture in the past and we’re trying to engender one now.’
The People’s Microbank’s Anthony Dela Cruz
The People’s Microbank (PMBL) offers two main types of loan products: consumer loans of K500 with an interest rate of up to 18 per cent, and business loans of between K500 and K500,000 at 16 per cent.
‘Loans are either secured by cash, salary deductions, or personal assets or real estate depending on the value of the loan amount,’ says PMBL’s Dela Cruz.
New markets
The micro institutions are looking to expand.
‘We will open new branches in Mount Hagen, Kundiawa, Mendi, Aitape, Arawa, Tari all in 2015,’ says PMB’s Dela Cruz, who aims to have a client base of ‘at least’ 200,000 within five years.
‘We will open in Goroka and Kavieng in 2016.’
Forex
Nationwide is also moving into the foreign exchange market.
‘Our desire is to make access to financial services affordable to more Papua New Guineans and traditional commercial banks charge high fees and they charge many fees,’ says Westaway.
‘I know the Governor of the Bank of PNG welcomes competition and we are happy to oblige.
‘There are more Papua New Guineans working in mines overseas and more students studying overseas than ever before so it’s important that individuals can transfer funds to and from PNG at an affordable rate.
‘Insurance penetration in PNG is still very low; it’s still under five per cent, and there is still a great opportunity to deliver insurance.’
‘There are 5,000 living in Cairns, and a significant number in Mt Isa.’
Insurance
Nationwide Microbank’s successful Micash mobile phone banking service
Westaway also sees insurance as a huge untapped market.
‘Insurance penetration in PNG is still very low; it’s still under five per cent, and there is still a great opportunity to deliver insurance.’
‘Also we’ve currently got a project to introduce ATMs and EFTPOS for our customers as well.
‘When you consider 81 per cent of the country is still unbanked, you can see the potential.’
Leave a Reply