Interview: Tony Westaway
What is the relevance of microfinance in Papua New Guinea and where are there more opportunities?
TONY WESTAWAY: Microfinance is a largely untapped industry in PNG, and two statistics that best illustrate the situation are that 85% of the population lives in rural areas and 81% of them are still unbanked. With only four registered licensed micro-banks in the market, it is clear that the supply does not meet the demand in PNG. Contrary to general wisdom, one of the biggest challenges for rural dwellers is not access to credit, but where to deposit their funds, as it is very difficult for them to open accounts with commercial banks considering the existing branch network in the country. Let us not forget that the population density in PNG is only 14.8 per sq km, and extending the branch network is a very expensive exercise. Microfinance could address these issues as it increasingly relies on mobile money to move cash around, thanks to a network of agents set up in stores or even churches in villages and plantations. Although the idea of commuting to urban centres for banking persists in PNG, we are finally seeing the appearance of ecosystems where there is less reliance on cash. There is little doubt that as a delivery channel, mobile money will be the future of outreach.
Why has microfinance not taken off in PNG, while it has been successful in neighbouring countries?
WESTAWAY: I believe the model that was tried out at the turn of the century was just not right for this country as it was based on the idea that lending to communities would enforce repayment. Unfortunately, in PNG individuals often hide behind their clan and this cultural oversight has had negative repercussions for operators, many of whom were forced to shut down. This model was based on previous experience in the Indian subcontinent. No external system can be superimposed anywhere, and it needs to be contextualised to the local environment. This is particularly true in micro-finance, which deals with very sensitive segments of society. The industry needs capital injections and more attention to sustainability. The encouraging trend is that non-performing loans continue to fall among micro-banking institutions in PNG, and when coupled with financial literacy, microfinance can be a very effective tool to improve people’s living conditions.
Do you see the focus on lending to small and medium-sized enterprises (SMEs) as a positive development for the national economy?
WESTAWAY: Lately SMEs have been making headlines in PNG, and the national government likes to stress its full commitment to this segment. Although this is good news, talking about national economic growth without including micro-entrepreneurs does not make much sense in a country like PNG. These are roadside sellers, people who may sell fish and vegetables at the markets and who have not seen any money from the PNG liquefied natural gas project. Helping people at the grassroots level is the real challenge for PNG as they still account for the majority of the population.
What measures is the government taking to reach the grassroots from a financial perspective?
WESTAWAY: I must say the central bank, and specifically Bank of PNG Governor Loi Bakani, is very much at the forefront of financial inclusion, an initiative that was originally spurred by the G20. The central bank has subscribed to the Maya Declaration and is committed to opening 1m new bank accounts over the next two years, 50% of which will target women. In the PNG’s banking sector, women account for only 25% of saving accounts, therefore we do support positive discrimination as PNG is a predominantly patriarchal society. Things are starting to change though, thanks to the proliferation of mobile money, which is taking the development world by storm as it is perceived by women as a safe way to handle financial transactions. In our business alone, we have increased the percentage of women’s accounts from 25% to 37% in a very short time, thanks to the growth of mobile phone bank accounts.
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