Package delivered: government gives first K$100m to help Papua New Guinea SMEs

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The first half of the Papua New Guinea Government’s promised K200 million funding for small and medium-sized enterprises has been handed over to Bank South Pacific. The money will be used to provide subsidised business loans.

Prime Minister James Marape (centre) and Minister for Commerce William Duma (right) present a cheque for K100 million to Bank South Pacific CEO Robin Fleming (left). Credit: MSME Council

Back in August, the Papua New Guinea government announced it would provide K200 million for loans to help small businesses struggling in the wake of the global pandemic.

The money was to be split between Bank South Pacific (50%), the National Development Bank (40%) and Department of Commerce and Industry (10%) and be loaned out at a competitive rate to in-need SMEs. The first K100 million was delivered to BSP yesterday in a ceremony at the bank.

Bank South Pacific (BSP) CEO Robin Fleming said that the money will allow PNG’s largest bank and largest kina lender to provide low-cost lending over the next five years to Papua New Guinean SMEs, with the confidence that the government has helped protect them from any defaults.

‘BSP is acting in trust for the government,’ Fleming said. ‘These aren’t BSP funds; they are held in trust for the government and part of our responsibilities with that trust account is to ensure that our policies and procedures are adhered to.

‘With that K100 million comes a long-term sinking fund that can continue to provide lending for small businesses – not just in 2021, not just in 2022, not just for the life of this government but for the life of future governments.’

Apologising for the delay in releasing the funds, Prime Minister James Marape praised the efforts of SMEs in helping to grow PNG’s economy. He said they would ‘protect the country from the boom-and-bust of the oil and gas sector’.

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‘Its about time that Papua New Guineans take a step back and embark upon our own business opportunities. We don’t want to look for jobs; we want to create jobs ourselves,’ he said.

Marape said he has asked BSP to target two groups: start-ups and existing business that are struggling under high interest rates.

Low-cost loans for SMEs

POMCCI’s Rio Fiocco. Credit: Rocky Road

The subsidised loans will be substantially cheaper to obtain than normal bank loans.
‘What’s so special about this loan facility by the Marape government?’ asked Des Yaninen, President, MSME Council in a statement. ‘Well, current BSP SME interest rates are around 30 per cent. That means that if you obtain a loan of K100,000, you pay an additional K30,000 in interest. Under this new program, you only pay back K5000 at an amazing 5 per cent interest rate. This has never been done before. Also, half of the funds must be for women SMEs.’

The move has come just in time for struggling small businesses starting to worry about when the funds would arrive.

‘The businesses and the SME sector in particular are looking forward to the release of the funding so that the SME package can be implemented,’ Rio Fiocco, President of the Port Moresby Chamber of Commerce and Industry told Business Advantage PNG the day before the funding announcement. These loans are seen as a lifeline for many businesses who have had to curb trading in line with a series of State of Emergency rules.

SME owners who are BSP customers can borrow from K5000 up to K3,000,000 at a rate of 5 per cent for a repayment period of up to 15 years, depending on the assets being financed under the facility.

Businesses keen on accessing these concessional loans do need to follow the rules that include:

  • provision of profit and loss statements
  • bank statements
  • tax returns and taxation compliance
  • formal registration with the IPA
  • ownership of major assets
  • 30 per cent or more equity for certain loans
  • insurance must be taken

NDB in line for next cheque

Speaking at the presentation of the funds to BSP yesterday, Minister for Department for Commerce and Industry William Duma also pointed out that there was another K100 million on the way for SMEs. The next K100 million tranche of funding is set to be divided up between the NDB (K80 million) and the Department of Commerce and Industry (K20 million).

Although won’t start lending lending money until it receives funds, the NDB has indicated how it intends to use the funds.

It plans to support MSME agriculture projects (K40 million), youth and small business loans (K24 million), women in business loans K8 million), with Bougainville enterprises also receiving K8 million. Applications will be accepted and processed at local branches once the NBD receives the money from the government.

Once again this stimulus is a secured loan, though at a concessional rate (likely to be 4 per cent for NDB customers), but not a handout. Businesses will need to provide a range of assurances to the NDB to access the stimulus. The NDB is looking for proof in financial literacy, realistic cashflow projections, a clean credit record, that they be registered with the IPA and have opened a Peoples Micro Bank Limited account.

Comments

  1. Am fully in support of the SME financing. However, very important department that generates money is Customs. The office has K6m oustanding rental bills. That needs immediate attention. SME loans are good but how soon can the loans be repaid is a question.
    My suggestion is get the Customs office reopened and empower them as the major revenue earner is to monitor trade income. Then we will see more money entefien the treasury an finance department.
    ACK

  2. Michael patriot says

    Mr marape

    Thanks for that grate support, but the question is that why 20 million kina was given to the Deptment of trade and industry and is this a bank or govern
    ment department?

  3. Allan Wawah says

    Congratulations to the PNG government for living up to its words and acutally investing promised money to support SME growth in PNG. PNG SMEs are struggling for growth and sustainability. Investing in SME loan does not solve all SMEs’ challenges. There are other factors which may be political, social, economic, legal, ecological and technological in nature that needs to be researched and addressed. The SME business environment is not really condusive for progression. Despite that, the Marape/Basil government is doing great, keep striving for excellence and poverty reduction.

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