Oxford: PNG banks eye rural areas

 BANKS in Papua New Guinea are using the rapid evolution of mobile technology to expand and seek growth in rural areas, according to the Oxford Business Group (OBG). 

OBG said: “The banking sector has struggled to weather a series of crises over the past three decades.” 

By 1996, commercial lenders found themselves compelled to reduce their combined number of branches, which dropped from 485 to 195 and, since then, the number of banks operating in the country has dwindled from seven to four.

Asian Development Bank (ADB) findings suggested that around 85% of PNG’s population remained unbanked in 2012.

While the Bank of PNG estimated in the same year that just 22% of the K900 million (US$417million) thought to be in rural circulation was held by commercial banks.

Bank South Pacific group chief executive officer Ian Clyne told the OBG that there are two trends in PNG’s banking system.

 “The first is an aggressive drive to provide financial services through electronic solutions to the majority of Papua New Guineans; the second is to grow the premium services offered to high-net individuals and corporates”, Clyne said.

BSP remains PNG’s market leader, holding about 1.2 million bank accounts in 2013, up from 550,000 in 2011. 

Australia and New Zealand Banking Group (ANZ) and Westpac Banking Corporation, meanwhile, place second and third, respectively, with a combined total of 250,000 accounts, although both have traditionally targeted the high-revenue corporate and more affluent retail segments. 

Malaysia’s Maybank (Malayan Banking) was granted a licence in 1994 and remains the sector’s smallest player.

In the 2012 budget, BPNG extended tax incentives for banks opening rural branches through to 2017. 

However, lenders are still seeking out low-cost channels in a bid to achieve the economies of scale they need to break even. 

Clyne said BSP estimated that some 40% of clients who conduct transactions through their branches would be better served through rural branches, mobile banking or by using Eftpos.

A drive to push into rural areas last year helped boost customer numbers for PNG’s banks, with ANZ and Westpac both almost is doubling their accounts tally. 

Each of the two banks opened around 55,000 new basic accounts during 2012.

“While PNG’s formally banked economy remains small, international recognition is likely to galvanise activity within the financial services sector.

“Forthcoming revenues from the liquefied natural gas project, coupled with rising formal employment, which is estimated to be growing at around 7%, should boost demand and help strengthen the banking sector’s expansion efforts”, OBG says.