Banking reaches grassroots


Financial inclusion is an issue in PNG with a lot of individuals and businesses, mainly the informal sector lacking accesses to financial services and financial literacy skills to manage their money.  The National’s business reporter DALE LUMA spoke to the Centre for Excellence in Financial Inclusion for an update on some of its programmes aimed at addressing this issue.

THE Centre for Excellence in Financial Inclusion (Cefi) is mandated by the Government to advocate and promote the expansion of financial services and products.
According to Cefi, it aims to facilitate the opening of new bank accounts, increase the usage of digital financial services, extend access points of banking services, improve the uptake of insurance products, and provide money management and financial literacy skills.
“These financial inclusion objectives are guided and facilitated through National Financial Inclusion Strategies and National Financial Inclusion Policy,” the centre told The National.
“The first strategy on financial inclusion was implemented during the years 2013 and 2015. A second financial inclusion strategy was launched in 2016, and is currently under implementation and will conclude by December 2020.

Two million new accounts
“Collectively, both national financial inclusion strategies implementation reached 2,094, 870 new bank accounts as at December 2019.
“This demonstrates an increase of 20 per cent more people opening bank accounts, thus reducing the unbanked population from 85 per cent to an estimated 65 per cent.
“Many individuals and small businesses lack knowledge of the licensed banking institutions and products they provide.
“Empirical studies have demonstrated this trend by establishing that individuals and small businesses sought loan products more than saving and investing their income or profit from banks.
“Additionally, banks are perceived to be expensive and charge high maintenance fees for accounts by individuals and small business.
“This lack of awareness has deterred businesses with many perceiving bank accounts as liabilities to their business rather than partners in their businesses.
“However, opening a bank account opens access to individuals and small business currently left out of the banking system with a basic entry point to broader financial inclusion.
“Using bank accounts to move away from cash to digital payments have made it easier to be part of the formal financial system when banks are inaccessible.
“Businesses and individuals who open banks account can access other formal financial services, such as savings, payments, credit and insurance.
“Access and use of appropriate financial services can help people better manage risks, grow and develop their businesses and build a better life.”

Cefi’s current programmes
Cefi is conducting financial literacy training to individuals and business in partnership with financial institutions, non-governmental organisations, faith-based-organisations, community-based-organisations, government institutions, private enterprises, resource sector and commodity boards.
This training is delivered by Cefi trainers to organisations requiring financial literacy training for their organisations, partners or communities. Additionally, Cefi provides high level training-of-trainers (TOT) courses to qualified trainers to build capacity to deliver financial literacy training to individuals and communities.
This is to further extend the money management skills to communities.

Business development skills for SME/MSMEs
Conducting business development skills training targeting SME/MSME clients from small to medium businesses as well as building capacity for start-ups to scale up their businesses.

Financial education schools programme (school children in Grade 1-12) 
Cefi is working with Department of Education to develop teachers’ resources and syllabus to be used by primary to secondary schools.
The aim of the initiative is to promote savings for younger generation and to create a saving culture at an early age.

Financial literacy training coordinator programme
Cefi is working in partnership with National Training Council to register Cefi as the national custodian for financial literacy training in the country.
This will enable Cefi to standardise training modules which will be used by trainers and organisations conducting financial literacy across the country.

“ Access and use of appropriate financial services can help people better manage risks, grow and develop their businesses and build a better life.”

Account opening (all people and businesses) 
Facilitate opening of bank accounts during the financial literacy training with support from financial institutions for individuals and businesses.
Cefi has a total target of 500,000 people to be trained by 2020.
As at March 2020, a total of 236, 623 people have been trained with financial literacy skills, of which 112,178 were women.
CEFI endeavours to reach 263,377 by December 2020, of which 50 percent will be women.

Many Papua New Guineans live in low income households, especially in rural areas where they make on average K100- K200 a month.
This makes opening and maintaining a bank account an expense and lesser priority for them.

Logistic and geographical constraints
Due to Papua New Guinea difficult terrains, many trainees who have received the financial literacy training face difficulties to travel to banks, which are often located in towns.
Skills attained which include opening of bank accounts to save, becomes an expensive exercise.
This impacts the skills and knowledge implementation of acquired training. Trainees find that they rather keep the money than bank their money.

Inadequate or no network connectivity
Digital financial services are increasingly a priority for banks to expand their reach into rural areas. Cefi and its dedicated digital financial services working group are working to improve the reach with Mobile Network Operators (MNO). Recent developments have seen people using MNO as banking avenue to transfer money and check account balances and pay for goods and services.
However it is found that many rural populaces cannot access the digital financial services due to lack of network connectivity.
Many trainees are trained to develop a savings plan, a budget, and open an account to formally and safely manage their finances.
Due to poor network coverage, this remains a hindrance to financial inclusivity.

Lack of service infrastructure
many trainees express greater interest to venture into multiple income streams after financial literacy training to better support their livelihoods.
However, lacks of proper market and road infrastructure to their villages and wards have hampered this pursuit to fully participate in the formal economy.

Achievements and outlook
According to Cefi, Small-Medium-Enterprises (SME) access to finance is cited as one of the main barriers to the growth of the sector.
“Cefi through its working groups, SME Finance and Informal and Agriculture Finance, with stakeholders in the private and government sectors are working together to bridge this accessibility gap.
“In June 2020, a first national SME product loan guide for micro, small and medium businesses in the country was launched under this collaboration with Cefi, Bank of Papua New Guinea and the working groups.
“The guide booklet is a one-stop reference guide with detailed information on loan products available at licensed banking institutions, including client requirements and contact details of the institutions.
“The guide will assist individuals and businesses to access appropriate loans to start, develop and expand their businesses.
“This loan product guide is part of the national financial inclusion strategy to improve access to financial products for start-ups and small businesses.

International partnership to empower low-income households
“Cefi and the Market for Village Farmers (MVF) Project have signed a 5-year Memorandum partnership under the Department of Agriculture and Livestock (DAL) and implemented by Fresh Produce Authority (FPDA).
“Cefi will facilitate access of 25,000 farming households to financial training, services and products across the Highlands region, Morobe and East New Britain Provinces.
“This is to support the transition of fresh produce farmers from semi-subsistence agriculture to market-oriented production farming businesses.
“Cefi will facilitate technical assistance for regulated financial institution to design innovative agriculture lending products for farmers.
“Cefi has recruited full time staff and will open an office in Eastern Highlands Province in June 2020 to administer and monitor the financial inclusion activities.

Moving into provinces
“Cefi and BPNG have identified provinces with least penetration of financial services and have embarked on memorandum partnerships with provincial administrations.
“In 2019, Cefi signed two memoranda of understanding with West New Britain in August and Milne Bay in November.
“The partnership will expand banking and financial services network, increase formal bank accounts for residents, financial literacy and business development training and digitizing provincial government payments.
The respective project steering committees headed by deputy provincial administrators with heads of divisions have been appointed to direct and guide these activities.
“Official invitations have been extended to East New Britain and New Ireland to participate in this initiative in 2020.

Cefi and commodity boards
“Cefi will be working on a partnership programme with commodity boards under the Department of Agriculture and Livestock.
“This partnership will see the introduction financial inclusion services and financial education and training for communities that participate in commercial cropping, livestock and fresh produce.”