Reaching out to the unbanked


Papua New Guinea’s strong financial services sector is becoming ever more sophisticated in servicing both the mass-market and premium ends of the market.

BSP's premium banking suite, BSP First, in Port Moresby

BSP’s premium banking suite, BSP First, in Port Moresby

‘PNG continues to have a very, very strong banking sector. We are very lucky here to have the banks that we do. Investors want that, and they often don’t expect that there’s going to be this level of financial sector sophistication in PNG,’ says Carolyn Blacklock, IFC Resident Representative in Papua New Guinea.

There are three major banks in PNG: locally-based Bank of South Pacific (BSP) has the largest retail presence, while Australia’s ANZ and Westpac also have long-standing and significant branch and ATM networks. (A fourth bank, Malaysia’s Maybank, has a small presence in PNG.)

In addition to the banks, the Bank of Papua New Guinea also licenses 10 financial institutions, including Kina Finance, PNG Home Finance (both part of the Kina Securities group), Credit Corporation, and a number of microfinance lenders.

‘The central bank is first class, in my opinion.’ says ANZ’s Chief Executive Officer, Pacific Northwest, Vishnu Mohan. ‘I think there are well qualified people running the governance of the financial institutions, so we have no issues.’

‘People just assume that PNG is a very mundane plain vanilla market, but only when you start offering products do you realise that there are customers here who are looking for fairly advanced products.’

High liquidity

There is a high level of liquidity in PNG’s banking system currently (about one billion kina, or US$468 million), as Mohan explains: ‘Corporates are doing well, so they’re recycling the cash that’s being generated in their businesses. Commodity prices have been high, commodity production and output has been good, and then you have the inflow of US dollars for the ExxonMobil PNG LNG project. The dollar inflow has been so healthy that the central bank has had to come into the market every now and then to absorb the US dollar liquidity, which means pumping back kina [PNG’s currency] into the market. So that creates a high level of kina liquidity.’

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New services grow the market

There appear to be two clear trends in PNG’s financial sector: firstly, a concerted drive to provide financial services to the majority of Papua New Guineans who presently do not have access to them and, secondly, the development of premium services for high net worth individuals and corporates.

Banking the unbanked

Firstly, the ‘unbanked’: as Wayne Dorgan, Managing Director of insurer Pacific MMI puts it, 85% of PNG’s population is in the informal sector and therefore most financial services companies are only providing services to the remaining 15%. With more Papua New Guineans entering the formal sector each year (employment growth is currently around 6% per annum), and with financial inclusion and regional development being clear policy objectives in PNG’s medium- and long-term development strategies, the race is on to bring as many of the 85% as possible into PNG’s financial system.

‘Expanding financial services can encourage the participation of more people, especially those in rural and urban settlements, in developing activities in both formal and informal sectors of the economy,’ noted Bank of PNG Governor Loi M Bakani in a March 2012 speech.

Expanding reach

PNG largest bank, BSP, has taken a multi-pronged approach, establishing a rural network of agencies under the BSP Rural brand, but also more than doubling its extensive national network of automatic teller and EFTPOS machines.

‘The cheapest and easiest way for a customer to access their money is clearly EFTPOS followed by ATM,’ notes BSP’s Managing Director, Ian Clyne. ‘It’s also the cheapest and easiest way for the bank to service these customers.’ BSP has set itself the goal of having a million retail customers across all its business lines by the end of 2012.

‘We’re up to 780,000 and we’re hoping to add another 20,000 each month during 2012—that would be the largest retail client acquisition in the history of the bank,’ Ian Clyne told Business Advantage in December 2011.

Westpac’s recently-launched Choice Basic account is also geared towards the retail mass market. ‘We’ve set a fairly bold aspiration to double the number of customers that we bank on the retail side of the business by 2013,’ notes Westpac’s General Manager—Pacific Banking Greg Pawson.

Mobile phone banking

With an estimated 12 million mobile phones in Papua New Guinea compared to only a million bank accounts, PNG’s expanding mobile phone network offers an opportunity for both existing and new players.

‘Papua New Guinea lends itself to mobile phone banking because of the rugged terrain, the fact that transportation is difficult, and that a lot of the places where the development is going on are a long way from the major centres,’ observes Michael Rowland, ANZ CEO Pacific. ‘We’re investing heavily in mobile phone banking and will be launching our service for customers later this year.’

Westpac is rolling out its mobile phone banking service now, part of a regional rollout that started in Fiji in 2011. BSP also offers a mobile phone banking solution, with 200,000 mobile banking accounts activated.

In March 2012, Bank of Papua New Guinea Governor Loi M Bakani presented a first mobile banking licence to Digicel Financial Services, a division of Digicel PNG. Digicel will offer a mobile or electronic wallet which can purchase with phone credit.

In awarding the licence, Bakani said the central bank would support three mobile banking business models: that offered by the banks (whereby a mobile phone is used to conduct bank account transactions), the mobile wallet favoured by Digicel, and also a mobile payments model such Post PNG’s.

The mobile phone network is also being used by other financial services providers. For instance, Pacific MMI is planning to offering micro-insurance through PNG’s mobile phone network and enabled by a new central computer system. The service is due to be launched in the second half of 2012.

‘Micro-insurance is good business practice,’ asserts Pacific MMI’s Wayne Dorgan. ‘If we’re having to work with very small margins and very small premiums, anything we do to create cost efficiency then flows through to regular insurance, and our clients get the benefit.’

Microfinance expands

Microfinance is also expanding in PNG. Nationwide Microbank, which has been the recipient of support from the Asian Development Bank, announced its 100,000th customer in 2011, while PNG Microfinance and the National Development Bank also provide loans to small businesses and individuals who have yet to develop a credit history. (Since 2008, the Credit and Data Bureau has provided credit history data in PNG.)

Premium banking

In parallel with mass-market expansion, there is a concerted drive with all three major banks to provide premium services to high net-worth individuals and corporate customers. BSP has been rolling out its own premium service, BSP First, with lounges and priority banking areas appearing in its Port Moresby branches in the first quarter of 2012. Meanwhile, ANZ last year introduced Signature Priority Banking in PNG, which is focused on helping affluent customers grow their wealth across the Pacific and connect with Asia.

‘People just assume that PNG is a very mundane plain vanilla market, but only when you start offering products do you realise that there are customers here who are looking for fairly advanced products and opportunities to have better investment income,’ observes ANZ’s Vishnu Mohan.

This article first published in Business Advantage PNG 2012/2013

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