Why BSP has Mekong Delta as a target

THE Bank South Pacific is making its mark not only in PNG but also the region. Business reporter MARK HAIHUIE spoke to BSP Group chief executive ROBIN FLEMING on the company’s expansion programme.

HAIHUIE: Bank South Pacific has ventured into the Asian market after a successful expansion in the South Pacific. Could you give an overview on this expansion strategy, and how the bank should be placed in a decade’s time?
FLEMING: Our board has determined it would be beneficial for BSP to have some diversification of its income from outside of the region. The Mekong Delta region of South East Asia was selected as it has similar characteristics to those in our region, with developing economies and largely unbanked populations. The medium to longer term objective if our initial expansion is successful from a financial and scale perspective would be to have a small retail banking operation in the region.
HAIHUIE: The government and BSP have partnered since 2014 to allow citizens to purchase affordable housing through the First Home Ownership Scheme (FHOS). This partnership is to end in 2019. Could you give an update on the number of loans BSP has given out on the scheme, the total amount, and the possibility of renewing this arrangement in 2019?
FLEMING: Our housing loan product and in particular our FHOS loan have been successful. We are funding approximately 40 loans a month at a value of K15 million per month. We will soon initiate dialogue with the new government to agree on how we can increase the value of loans under the FHOS. It needs to be remembered that the government does not guarantee these loans but only provides liquidity for the funding of these loans to mitigate liquidity and interest risk. The key issues that act as a governor to increasing the number of housing loans we can settle is the capacity of the lands department and agencies such as the National Capital District Commission to meet the increasing demands of developers and financiers for title searches, building board approvals, occupancy certificates, power and water connections etc.
HAIHUIE: BSP is a major employer and developer of human resources. What is the bank’s initiative on this and what are the long-term plans on it?
FLEMING: BSP uses a number of initiatives to improve the capacity of our staff to meet the increasing demands of a modern bank. We have a Leadership Management Development Programme that involves over 40 staff across the region. It involves external studies and internal secondments to improve the leadership capability of our staff. Additionally, we have a graduate development programme to recruit staff with tertiary qualifications. And we have regular training plans for all our staff.
HAIHUIE: You mentioned in a past interview that SMEs around the country are limited in their growth because of internet pricing and availability. Are there some other factors that limit SME’s growth?
FLEMING: Improved access to reliable, lower cost internet bandwidth that is available to large parts of the country will increase the prospects of SMEs leveraging their product offerings or improving their operation efficiency. Financial literacy skills for a number of SMEs also need development. This this is an area that stakeholders – not just financiers – should give attention to.
HAIHUIE: As the chief executive of the largest bank in Papua New Guinea, what is your view on the performance of the economy so far this year and what you expect in early 2018?
FLEMING: The new Government has stated that it will be focusing on some of its fiscal challenges in coming months. We would expect conditions to continue to be more difficult than in the recent past with decisions relating to the next LNG projects being critical to higher confidence levels in the business community.
HAIHUIE: The construction phase of the Papua LNG is expected to begin around 2019. Tax revenue from the current PNG LNG is expected to come in after 2020. What are the plans by the bank to cater for this change?
FLEMING: Improving our capacity to deal with all participants in the next LNG project is a clear focus for BSP. With the key project sponsors, this involves the recognition that BSP is a PNG-owned bank from a local content perspective, and that we have the capability to be a partner in various funding needs of the sponsors. Equally we will leverage the relationships developed in the PNG LNG with other key contractors. We will also work with landowner beneficiaries in relation to funds management.
HAIHUIE: From BSP’s perspective, how should Papua New Guineans prepare themselves to benefit from the bank’s plans regarding the expected revenue from the PNG LNG project and Papua LNG construction phase?
FLEMING: Early engagement with the LNG partners is important – benefiting from lessons learned from the PNG LNG and ensuring minimum financial, professional and capability standards are in place in anticipation of the next phase of the LNG.
HAIHUIE: What are BSP’s subsidiaries and how are they performing?
FLEMING: BSP now has bank operations in Papua New Guinea, Cook Islands, Fiji, Samoa, Solomon Islands, Tonga, and Vanuatu. It has finance company businesses in Cambodia, Fiji, Papua New Guinea and, from September, in the Solomon Islands. Its life insurance business is in Fiji. All businesses have performed well and we will be releasing to the market our half yearly results to June 2017 on 21 August.