Banking
From The Report: Papua New Guinea 2018
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Papua New Guinea’s banking sector experienced a mixed year in 2017, with commercial bank assets declining after four consecutive years of growth. Total loans to the private sector also fell against a backdrop of subdued economic activity, even as Bank South Pacific, the country’s leading commercial bank, recorded a strong rise in lending and increased profits. Nevertheless, efforts are under way to overcome these challenges, with a focus on modernising existing infrastructure and improving financial inclusion. Under a far-reaching sectoral review, launched with support from the World Bank, the Bank of PNG – the country’s central bank – has made steady progress in upgrading the country’s interbank transfer network to support the development of a national payment system.

This chapter contains interviews with Loi Bakani, Governor, Bank of PNG; and Robin Fleming, Group CEO, Bank South Pacific.

Articles from this Chapter

Overview

Financing the future: Public and private sector activity set to meet new challenges
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Papua New Guinea’s banking sector experienced a mixed year in 2017, with commercial bank assets declining after four consecutive years of growth. Total loans to the private sector also fell against a backdrop of subdued economic activity, even as Bank South Pacific (BSP), the country’s leading commercial bank, recorded a strong rise in lending and increased profits. Moreover, although commercial banking retains high growth potential, the sector is characterised by low levels of consumer…

Interview

Viable solutions: Loi Bakani, Governor, Bank of Papua New Guinea (BPNG), on the national budget, financial technology and APEC 2018
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In what ways does the 2018 national budget support plans for economic development? BAKANI: The 2018 budget plans for a deficit of K1.99bn ($621m), equivalent to 2.5% of GDP. The government intends to raise 81% of financing of the deficit from external sources, and it is very likely these efforts to support expansionary fiscal policy will be successful. This is a stark change from previous years, when the focus was mainly on domestic financing. This structure meant that shortfalls of domestic…

Analysis

Growth unchained: New technologies coupled with infrastructure upgrades are expanding access to financial services
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Financial inclusion remains persistently low in Papua New Guinea, with an estimated 63% of the population remaining unbanked. This has prompted the Bank of PNG – the country’s central bank – and several private institutions to explore financial technology (fintech) as a means to improve access to financial services. Beginning in mid-2017 the bank has actively promoted the distributed ledger technology blockchain as a means to overcome these challenges, launching a series of trials in…

Interview

Moving on strong: Robin Fleming, Group CEO, Bank South Pacific (BSP), on developments in the sector and their impact on the wider economy
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What has been the impact of the country’s economic performance on its banking sector? FLEMING: Papua New Guinea’s financial sector is robust. The country’s GDP is growing, both liquidity and profitability in the banking sector are strong, and non-performing loan levels are at between 1.2% and 1.3%. Given the concentrated nature of the sector, the country’s four major banks profit from good exposure and continue to invest in future growth. However, the banking sector is also most…

Analysis

Big business: The country’s largest lender is expanding operations across the Asia-Pacific region
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Although commercial banking assets and business lending dropped in 2017 as a result of macroeconomic headwinds, the sector has performed well in recent years. Notably, Bank of South Pacific (BSP), which is PNG’s biggest lender, recorded robust asset, lending, and profit growth, with returns on equity rising to a new highs in 2017. At the same time, its dominance in the sector has led to commentary that the bank is overly reliant on government lending, with a domestically concentrated lending portfolio and low levels of share liquidity hindering investment and expansion. Nevertheless, BSP’s diversification strategy has already seen…