By PATRICK TALU
THE Asian Development Bank (ADB) and the Australian government will support a A$24 million (K62 million) project to help rural communities in Papua New Guinea access credit and financial services.
In a statement last Friday, ADB said the microfinance expansion project was expected to generate jobs and boost growth in some of the country’s poorest and most isolated regions.
ADB said lack of access to finance is a major constraint to rural development in PNG.
It estimated that only 15% of the population had access to formal or informal banking facilities, and many parts of the country still used a non-monetary barter system for transactions.
“This project would help rural areas move from a subsistence to a modern cash-based economy and in the process it would increase incomes and reduce poverty by stimulating informal business activity,” Robert Wihtol, director general of ADB’s Pacific department, said.
ADB’s loan, from its concessional Asian development fund, covers 54% of the project cost of A$24.06 million.
The loan has a 32-year term, including a grace period of eight years.
Interest is charged at 1% per annum during the grace period and 1.5% per year for the rest of the term.
AusAID will provide a grant of A$6 million to be administered by ADB. The government of PNG and project beneficiaries will cover the remaining cost of A$3.09 million.
The project is due for completion by the end of 2017.
The project would extend and build on the experiences and lessons learned from ADB’s microfinance and employment project, also co-financed by the Australian government through AusAID, an eight-year project that began in 2002 and established a solid base for microfinance in PNG.
The new project would strengthen industry regulation and bolster the capacity of lenders to deliver a wider range of financial services and products in rural areas, with a focus on lending to micro and small enterprises, and especially to women, who struggle to access credit and income-generating opportunities.
“Making financial services more accessible to people in rural areas enables them to save money in a more secure way, provides them with an efficient means of transferring funds for personal and business transactions, and allows them to borrow to start up a business,” Eugenue Zhukov, regional director of ADB’s Pacific liaison and coordination offfice in Sydney.