Papua New Guinea’s new finance sector strategy a response to ‘staggering’ growth


Massive growth in participation has forced the Papua New Guinea Government to come up with new strategies for the finance sector and financial inclusion. Business Advantage PNG‘s David James reviews the strategies and finds a greatly enhanced role for the central bank.

The new strategies will give more power to the Bank of Papua New Guinea  Credit: BAI

The National Government has released the Financial Sector Development Strategy 2018-2030 (FSDS) and the National Financial Inclusion Strategy 2016-2020 (NFIS).

The FSDS says the aim is ‘further integration of financial regulation in PNG’ in order to align prudential supervision and securities market regulation.

A single overseeing body is to be established, headed by the central bank.

‘Only 15 per cent of the PNG population is employed in the formal economy, but more than double that number have bank accounts, according to the National Financial Inclusion Strategy.’

‘A number of options are available, including shifting securities market regulation into BPNG, shifting both prudential supervision and securities market regulation into a separate, standalone, financial sector regulatory agency, or an intermediate financial regulator such as a subsidiary of BPNG.’


Only 15 per cent of the PNG population is employed in the formal economy, but more than double that number have bank accounts, according to the NFIS.

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In the last 10 years, the assets of the banking system grew by ‘a staggering’ 142 per cent to K51.0 billion in September 2018 from K20.9 billion in June 2009, according to a statement from BPNG.

The NFIS outlines nine strategic imperatives to develop PNG’s financial system:

  • Improvement of digital financial services
  • Creation of more inclusive insurance
  • Improvement of financial literacy and financial education
  • Improved financial consumer protection
  • Improved access to finance for informal and agricultural enterprises
  • Removal of obstacles to SME financing
  • Better engagement with the resources sector
  • Improved data collection and dissemination
  • Better engagement by government with the sector

There are challenges to be overcome, especially at the lower end of the income scale, according to the NFIS.

The range of formal products available to low income individuals and informal businesses ‘remains limited’, it says.

‘Formal banking in PNG is costly. The costs include account management fees, withdrawal fees, interest rates.

‘There are also complex and often prohibitive account opening and loan requirements. These are particularly onerous for low income people.

‘Levels of financial literacy are low and therefore many adults lack the skills to make informed financial decisions.

‘Financial services providers do not always disclose prices and product terms transparently.’

Insurance and superannuation

The FSDS says changes in the insurance sector are to be implemented ‘in a staged manner, initially with prudential supervision of general insurance shifting to BPNG (Bank of Papua New Guinea), whereupon BPNG will become PNG’s single prudential supervisor.’

Changes to PNG’s superannuation are also proposed.

‘It has been mooted for some time that superannuation funds available to members should be able, or required, to be paid as periodic instalments, rather than as a lump sum.

‘This would lessen the risk of retirement funds being dissipated rapidly.’

The Securities Exchange Commission of PNG (SEC-PNG) will report to the Minister for Treasury instead of the Minister for Trade, Commerce and Industry.

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