Loi Bakani, Governor, Bank of Papua New Guinea (BPNG): Interview

Interview: Loi Bakani

What approach are banks taking to increase financial literacy, and how can this impact the economy?

LOI BAKANI: Financial literacy is considered an important part of the strategy for financial inclusion in Papua New Guinea. The aim is to create a financially competent generation so that available resources are managed effectively, and they are able to exploit the opportunities presented by economic development.

With the assistance of the Centre for Excellence in Financial Inclusion and the Microfinance Expansion Project, six financial literacy modules are being rolled out in the country. The modules cover savings, budgeting, financial services, financial negotiations, debt management and mobile phone banking. We have now reached over 170,000 people with these financial education training modules. The target is to reach a minimum of 500,000 by end of 2020.

We are using various cost-effective delivery channels for financial education, such as partnering with commercial banks, microbanks, faith-based and community-based organisations, NGOs and women’s groups. We conduct on-site monitoring of these initiatives to ensure quality, and we prepare case studies to demonstrate the changes resulting from financial education. In addition, we are finalising plans to conduct a scientific impact assessment study for financial education in partnership with the Asian Development Bank and the University of Sydney. We also plan to look at more innovative delivery channels, such as street dramas and the use of mobile phone SMS to convey key messages of inclusion. We are now in the process of introducing financial education to schools, including the primary, secondary and tertiary levels, commencing with a pilot project in two technical schools in the Eastern Highlands Province during 2017.

Enhancing financial literacy will help promote a savings culture in PNG, and it is expected to improve the utilisation of services provided by financial institutions to start and expand micro-and small enterprises.

What can be done to sustain the long-term growth of microfinance in PNG?

BAKANI: The first microfinance bank was licensed by BPNG in 2006, and we now have five institutions licensed to operate as microbanks in the country. These institutions have demonstrated that they can reach the unbanked population effectively and provide financial services in many parts of the country. The sustainability of these institutions is dependent on the expansion of outreach, and their ability to innovate and attract more private investment. Microbanks have shown steady growth in outreach and have also adopted digital financial services and ATMs as new, innovative delivery channels.

These are very positive trends for the sustained growth of this industry. One of the microbanks reported profits of over PGK1m ($317,000) in FY 2016, and most of the others are able to cover the cost of operations. In addition, the increasing focus by commercial banks, credit unions and the National Development Bank on the promotion and provision of financial services such as credit, new savings products and financial literacy targeted at the small and medium-sized enterprises sector, especially in areas like agriculture, tourism and manufacturing of small industrial products, would ensure the long-term sustainability of the microfinance sector in PNG.

How is BPNG tackling the current currency shortage in the country?

BAKANI: Rather than a shortage of foreign currency, there is instead a decline in supply, resulting from prolonged low international commodity prices, the drought in FY 2015/16 and the misallocation of foreign currency inflows by authorised foreign exchange dealers. In 2016 and 2017 BPNG issued a series of foreign exchange directives aimed at improving the functioning of the domestic foreign exchange market, to encourage an active interbank market in particular.