Concerns over high rates, SMEs

 AN official has raised concern about whether high interest rates in the country cause fewer people from taking part in small and medium enterprises (SME). 

National Development Bank Investment Ltd (NDBIL) chief executive Desmond Yaninen (pictured) raised the concern in a recent workshop during which the National Research Institute (NRI) presented its findings in the study “Bank interest rate margins in Papua New Guinea”.

The findings concluded that PNG had highest interest margin levels compared to other countries that were at the same development level and neighbouring countries. 

He questioned whether lower interest rate margins for financial institutions in countries like Indonesia could be the reason why so many people were participating in the sector.

“If we are to encourage the growth of SMEs in Papua New Guinea, then maybe we simply have to reduce the interest rates?” Yaninen said.

He said NDB had a focus on growing SMEs in the country with support from the National Government. 

However, he said about 1 per cent of PNG’s population was currently engaged in the sector.

When responding to The National yesterday, Yaninen said: “A figure of 1 per cent is presently engaged in formal SME activities, as a comparison of the number of businesses to the number of people in PNG.” 

He said this was based on a figure of 49,500 formally registered SMEs with the Investment Promotion Authority compared to a total population of 7.5 million people. 

Yaninen in a paid advertisement said: “With rapid urbanisation, we see our population leave villages for towns and cities in search of opportunities. 

“Less than 1 per cent of our population are involved in SMEs compared to a percentage of 10 per cent in New Zealand, which has a population of less than 4.5 million and 459,300 SMEs.”