NDB celebrates 50 years

The National Business

The National Development Bank is the development finance institution of Papua New Guinea owned by the Kumul Consolidated Holdings as the trustee for the State and the people. The bank is celebrating its 50 years today. The National’s Business Editor SHIRLEY MAULUDU spoke to the NDB managing director MOSES LIU on the bank’s progress over the five decades.

MAULUDU: Congratulations on the National Development Bank’s 50 years operation. How, why did it start?
LIU: The National Development Bank has had four name changes over the 50 years since its inception on July 6, 1967. It was initially known as the Papua New Guinea Development Bank. The name changed to Agriculture Bank, Rural Development Bank and finally to National Development Bank. It was established to assist and empower Papua New Guineans to engage in agricultural businesses and other small businesses by providing them with loans and training in financial and technical skills necessary to undertake these projects.

MAULUDU: What are some of the bank’s functions?
LIU: Some of the functions are to:

  • Empower and create wealth for the people of Papua New Guinea by providing innovative, affordable and demand driven products and services;
  • Facilitate the growth of the local SME sector in the country by providing affordable credit to start and/or grow their businesses;
  • Promote financial inclusion among our people by providing low costs savings accounts to mobilise capital to secure a financial future;
  • Provide business incubation services to our people to integrate the informal micro businesses sector into the formal economy.

MAULUDU: How would you describe NDB’s progress over the 50 years?
LIU: The bank has had a lot of successes and challenges over the 50 years including being insolvent three times. But the Government was determined to ensure its was recapitalised. The latest was in 2004 with the appointment of a good board and management for the benefit of the people. Since
then, the bank has been rehabilitated and restructured to ensure
its operations were profitable.

MAULUDU: We understand that the SME sector is an area that the NDB is mostly engaged in. How do you see the involvement of Papua New Guineans in this particular sector?
LIU: NDB has been at the forefront in promoting the SME sector not only by funding loans but by seriously bringing to the fore the need to promote more locals to be engaged in business. The NDB spearheaded the hosting of the two SME summits at Kokopo in 2011 and Madang in 2013, setting the foundation for the Government’s SME Policy. Consequently more Papua New Guineans are engaged in the SME sector resulting in over 20 per cent demand for SME loans over the last 5 years.

MAULUDU: From the bank’s perspective, what are some of the challenges that SME operators face just to get their business running?
LIU: Lack of financial literacy skills is a major challenge for SME operators. They lack basic accounting, budgeting and cash flow management skills. They need some basic training in business management and accounting skills to properly manage their businesses.

MAULUDU: What would be the greatest achievement for NBD
in terms of its provision of financial services to the people of Papua New Guinea?
LIU: NDB has consistently provided affordable credit at a low interest rate of 6.5 per cent to SME operators to start and/or grow their businesses over the last five years. Consequently a lot of people have been employed by these businesses, thereby transforming their lives.

MAULUDU: From NDB’s perspective, what is PNG’s economic climate like now compared to 10, 20 years ago?
LIU: Papua New Guinea’s economy has been transformed with the growth of its GDP by over 38 per cent in the last 10 years mainly through the development of the LNG project and the flow-on
effect in the growth of businesses in the country. As a result, it had
been good for the growth of local business despite the fact that
there has been a slowdown in the economy over the last two, three years.

MAULUDU: NDB also has subsidiaries. What are they?
LIU: NDB has two subsidiaries:

  • Peoples Micro Bank – offering savings accounts and loan products to the micro business sector;
  • NDB Investments – offering business incubation products and services.

MAULUDU: How challenging is PNG’s economy for a bank like NDB to operate in?
LIU: It’s quite challenging for NDB as the depressed state of the economy is affecting our customer’s ability to repay their loans.

MAULUDU: Where do you see NDB in the next five to 10 years?
LIU: The National Development Bank will be commercialised in the next five to 10 years resulting in increased capacity to provide more affordable and better innovative products to the SME sector and to a lot of our people who are currently unbanked.