National Development Bank pledges to boost participation in small business


Papua New Guinea’s Government has an ambitious target of creating 500,000 locally-owned businesses over the next 20 years. The National Development Bank is key to its plans, as Managing Director Moses Liu explains.

The National Development Bank's Moses Liu

The National Development Bank’s Moses Liu

The drive to boost the number of small- and medium-sized enterprises (SMEs) in PNG began in earnest at the April 2011 Kokopo Indigenous Business Summit, which the National Development Bank (NDB) hosted.

Then, Prime Minister Peter O’Neill acknowledged the importance of this sector, saying it provided more opportunities and employment than the mining, oil and gas sectors. It’s a view supported by the World Bank, which noted in its latest PNG Economic Outlook that ‘SMEs can increase economic opportunities for those who have not been able to participate directly in large-scale projects.’

In PNG’s 2013 National Budget, the O’Neill Government put its money where its mouth was, allocating K130 million (US$57.65 million) to the NDB to boost this sector.

A vehicle for change

A state-owned enterprise under the Ministry of Treasury and Finance, with its shares held in trust by the Independent Public Business Corporation, the NDB is the Government’s preferred vehicle for encouraging indigenous business and rural economic development.

‘We believe we live in Paradise and there are abundant food supplies to sustain us and there are no plans to save for tomorrow, but we need to change that way of thinking.’

In charge of the campaign is Moses Liu, the NDB’s Managing Director. A certified accountant, he’s been with the NDB since May 2010, after extensive experience in senior financial management roles in the private sector.

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‘There’s no actual data on this one but we estimate about 10% of SMEs are owned by Papua New Guineans,’ he told Business Advantage PNG. ‘We really want that to be increased by up to 70% within the next 30 years.

‘It is a challenge,’ he admits, ‘but we believe, and it has been proven worldwide, that SMEs are the backbone of the economy.’


In January this year, the NDB dropped interest rates for SMEs to 6.5% – down from 20% in 2012. Secondly, in April, the NDB launched its micro-financing arm, the People’s Micro Bank, which is offering loans from K5,000 up to K100,000 (US$2217 to US$44,350) to small family businesses with fewer than 10 employees. Loans larger than K100, 000 are also possible through the NDB itself.

‘We’re looking at servicing all types of businesses basically – from the sole trader and the retail operation, to accommodation and  transport.

‘The long-term focus is on agriculture. Our current lending to the agriculture sector averages about 45% per annum. Manufacturing is something we’d want to go into, but it’s a bit capital intensive and it’s a long-term thing.

‘The services sector is currently about 15% of all our lending, so we are supporting them now.

‘We want to see all sectors grow and, as the economy becomes more fluid, as people have a larger disposal income, they will look at things they have not done before. So I think in the services sector, there’s scope for extension there.’


Liu says much of the Government’s new policy has arisen out of frustration from potential small business people that they could not access loans.

‘Obtaining credit is an issue for a lot of nationals because of the lack of a security base. When you look at the bulk of the population, about 80% live in the district or rural areas, and they don’t have real assets or funds in the banks.

NDB has a District Credit Scheme in which a local MP can promote small businesses in their Districts by providing security deposits from the District Service Improvement Program funds each receives for his/her community.

‘So we can cushion some of the requirements, if you like,’ says Liu.

Managing risk

Throughout the world, SMEs have a high failure rate (the Sydney Morning Herald reporting an estimated 50% fail in their first five years). So, how does the NDB choose who to give loans to?

‘Our criteria are like other banks. They [borrowers] must have proper equity and security and serviceability,’ says Liu.

‘The starting point is ensuring they have equity. We believe if someone doesn’t put anything in there, or if they can’t get a guarantee scheme, they become irresponsible. We emphasise they must put in at least 30% equity.

‘One of our problems is that we don’t know how to save. This is a problem across the Pacific, basically.

‘When you look (across) Asia, it is the husband and wife start-up that has done very well.’

‘We believe we live in Paradise and there are abundant food supplies to sustain us and there are no plans to save for tomorrow, but we need to change that way of thinking. That model of survival is no longer applicable now in this modern world.

‘So we want them to save and build up the capital to engage in business.’

Stret Pasin Stoa

Liu has one other key project to fulfil. It’s the resurrection of a successful support scheme that ran in the 1970s and 1980s called ‘The Stret Pasin Stoa Scheme’.

‘In the 1970s and 1980s, we bought out about 150 retail outlets and engaged a couple to manage it, gave them a loan to fund the operation and mechanise all that and when the loan was paid off, we’d transfer the title to them.

‘We will go in as a partner with someone already in business or buy the property outright in retail, transport or construction.

‘It will be a family unit that has worked very well. When you look (across) Asia, it is the husband and wife start-up that has done very well.

Branch network

Liu also has an ambitious plan to set up branch offices in seven provincial capitals this year.

‘While we are in an advanced communications era, the bulk of our people are in the rural areas and we need to provide a face for the NDB. Our people need to see a structure and they want to go the bank.

‘As we speak, we are setting up an office in Buka (Bougainville) with communications and banking services.’

By year’s end, Liu hopes to have offices in Kiunga (Western Province), Tari (Hela Province), Mendi (Southern Highlands), Wabag (Enga) Vanimo (Sandaun) and Lorenga (Manus Province).