MUCH has been said about promoting the growth of SMEs.
However, the worldwide empirical evidence shows a high failure rate of 80 per cent from startups and most don’t even survive beyond five years. Against this settings, which is also evident in PNG, it would be better for the Government to set an independent credit guarantee corporation to hedge the credit risk exposure to banks and financial institutions.
There has to be business extension officers employed by the Government in rural and urban areas to ensure beneficiaries do not mix business activities with non-business activities.
This requires banks to track their business accounts to raise red flag.
Until all liabilities are met, those beneficiaries can be left off the radar.
Without those reforms, the SME loans will be always a bad debt while there will be rooms for abuse and corruption with those managing the loan portfolios as seen before.