Blockchain to boost financial inclusivity in PNG

New blockchain solutions and devices are being trialled in Papua New Guinea as part of the government and central bank’s efforts to foster greater financial inclusion. A number of initiatives are already under way as global tech firms move to develop the country. Additionally, as many APEC member counties also experience low financial inclusion rates, the country’s adoption of blockchain technology in financial technology (fintech) solutions could serve as an example for the wider region, providing investment opportunities within a number of countries.

Mobile Advantage

Around 85% of the population remains without a formal bank account, according to data from Bank of PNG, with one of the primary contributing factors being distance from banking facilities. A large majority of PNG’s 8m-strong population live in rural areas, with less than 20% residing in urban centres with easy access to brick-and-mortar financial institutions. However, stakeholders are looking to take advantage of the fact that mobile coverage is quite high, with services available to around 90% of the population, according to data released by the Ministry of Communications and Information Technology in May 2018.

One such project currently being tested in the remote village of Lalaura, six-hours east of Port Moresby in Central Province, is IDB ox. The solar-powered unit formulates a unique ID – created with a map of the user’s mobile phone and fingerprints – to allow people to access financial services such as microfinance, micro-insurance and remittances services. Given its potential to bridge the existing gap in financial inclusion, the central bank is supportive of the use of blockchain technology in tools such as IDB ox. “We are undertaking research to carefully consider blockchain as a technology to achieve our objectives of financial inclusion,” Loi Martin Bakani, governor of the Bank of PNG, told an APEC dialogue on digital trade in Port Moresby in June 2018. However, to fulfil these ambitions and fully realise the potential of broader technological developments, infrastructure constraints must also be overcome. Electrical outages are not uncommon, and high internet fees tend to discourage fixed-line broadband penetration, which stands at less than 5%, and limit access to online services.

Special Economic  Zone

International tech firms have recognised the potential in such initiatives. In May 2018 US-based blockchain firm Ledger Atlas inked a memorandum of understanding (MoU) with the Port Moresby government for the company to design the operational guidelines for PNG’s planned blockchain-focused special economic zone (SEZ).

As the country’s first SEZ of this kind, it is intended to serve as a global financial centre for blockchain activity, enabling tech solutions to be developed in an incubator-like environment. The Finschhafen district on the north-east coast of Morobe Province has been proposed as a suitable location.

US venture capitalist Tim Draper has also committed to providing financial support for the project, with further backing expected to come from other offshore investors. “Technology is the future of any country,” Rainbo Paita, the member of Parliament for Finschhafen, told press following the signing of the MoU. “We are a small country, but that does not mean we shouldn’t take bold and calculated risks.”

Regional Potential

If successful, the fintech solutions currently being tested in village communities in PNG could be implemented elsewhere, potentially helping boost financial inclusion in other countries. One of the main outcomes of the APEC Senior Officials’ meeting in 2018, which was held in Port Moresby at the end of May, was a joint commitment to promote cooperation in bridging the digital divide. By working together, it is hoped that the member states will be able to harness the opportunities of the digital economy for the region.