SMEs finance issues

 MANY small medium enterprises (SMEs) fail in the first five years of operation and that could be addressed through accessibility to financing, according to a report by the Asian Development Bank (ADB).

ADB’s Pacific Private Sector Development Initiative’s lead economist Paul Holden says SMEs are critical for generating jobs and promoting geographically balanced growth in PNG’s economy. He 

noted that SMEs are often faced with challenges in having access to finance to increase business activities.

Holden said “About 80-90 per cent of SMEs fail in first five years of operation, one way of promoting private sector development is if finance is available to support growth. “Commercial banks in the Pacific region, including Papua New Guinea, often reluctant to lend.

“Without that businesses cannot flourish.

“The general reason is that business environment in the Pacific region is quite risky which means lending is risky.”

The Asian Development Bank in its report pointed out that PNG Government’s vision for development relies on the private sector as the engine for accelerated growth.

However, translating that vision into policy reforms was proving difficult.

The state dominates the economy well beyond its roles as a supplier of public goods.

One of the key recommendations, ADB put forward for PNG was to reform the finance and banking sectors among others.