Focus set on money management

The Centre for Excellence in Financial Inclusion executive director SALIYA RANASINGHE and Bank of Papua New Guinea assistant governor ELISION PIDIK agree that cash flow management is a major challenge faced by many business owners who need financial literacy training. They spoke to Business Reporter PETER ESILA on the issue.

Q: You have a lot of financial inclusion programmes. What is the main issue identified in the programmes?
RANASINGHE: We identified different areas of financial inclusion.
First, people do not manage their money.
So we are strongly advocating financial literacy as an important element in financial inclusion.
We are working with the Department of Education to make sure that the children are taught these things at an early age.
Second is the digital financial service.
If we are reach the remote parts, there is still a lot of people who have to walk (long distances) to get banking services.
We want digital financial services to be promoted.
There are very remote parts that can have a remote banking outlet using a supermarket, or something like that.
So that is another area that we are focusing on.
Third is the partnerships with the resources sector, companies and things like that which we really feel can contribute to this whole exercise.
If you look at how much royalty money been given out in this country, what has happened to all the money?
We are working with resource companies to make sure that people are properly educated on how to use money, and to always use the banking instruments, not just using cash.
Finally, we are also thinking of introducing family training.
All this time we are thinking about individuals but we feel that there will be a better impact if we train the whole family so everybody supports each other and has a better impact, so we are going to try it on a pilot process.
We want to design something for the whole family which will be an integral component of it.
At the outset, financial educations is a means to financial inclusion.
That is, financial education could play an important role in enabling the most vulnerable segments of the population to use appropriate financial services.
The main challenges or concern in delivering financial education in PNG’s rural areas is the level of literacy and consequently financial literacy.
In PNG, levels of adult financial literacy are low and many adults lack the skills to make informed financial decisions.
In addition, consumers tend to have low awareness or financial competency, lack of understanding of financial concepts and overestimation of their knowledge and skills relative to financial products and issues.
There are other factors such as the rapid pace of innovation and growing sophistication of the financial market including the introduction of financial products like credit cards.
Cefi is in the process of reviewing its financial literacy courses and curricula so that they are tailored to the different segments of the community to improve their financial skills and knowledge. Such programmes should promote their awareness of available financial services and enable them to make appropriate use and choice of these services.
So a curricula for youths, women, middle income earners/professionals and MSMEs.

Q: What is the outcome of your programmes on financial inclusion? Has there been any impact on the market?
More people are going into the banking sector.
And there are new small-to-medium enterprises being created. So I think there is positive impact on the lives of the people, and also we feel that the financial inclusion will change the whole landscape for the country and into the future.
Financial inclusion is important in the PNG context as 75 per cent of the adult population do not have access to formal financial service.
Difficult geographies, lack of physical and social infrastructure, limited technological skills and know-how has created difficult challenges in the supply and access of financial services.
As a result a large part of the low-income population, in particular rural people and women are financially excluded, as they lack access to financial services.
Consistent with PNG Government’s Vision 2050 for wealth creation, financial inclusion ensures that all people have access to a full suite of quality financial services, provided to them at affordable prices, in a convenient manner, and with dignity for clients.
Financial services are delivered by a range of providers, most of them private, and reach everyone who can use them, including disabled, poor, rural and other often excluded populations.

Q: From a Bank of PNG’s perspective, what is the current status of financial literacy in the country?
PIDIK: It is a challenge that we are continuing to address, to do more awareness on.
Training for different groups, financial management, savings, debt management, is continuing.
Cefi is driving a lot of these financial literacy training.
They are the key coordinating body and we have got a network of trainers across the country.
Training is important because all the banks are now giving out loans like the National Development Bank. And one of the requirement is to have a financial literacy and management training.

Q: Is there a policy that directs all banking institutions to have financial literacy programmes?
There is no directive at the moment.
But the financial institutions giving out loans see that it is important for their customers to go through some form of capacity building especially in the areas of SME, essential business and development skills.
That is good because customers who have the knowledge to manage those finances can use the money properly and make their businesses grow, have cash flows, repay their loans and generate more income.
So when they are repaying their loans they are generating money.