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Banking the Unbankable in PNG
A widow and small-time coffee grower in remote Papua New Guinea province is one of thousands of customers benefiting from a successful microbank focused on the needs of the poor.
Port Moresby, Papua New Guinea - It took almost half a century for Tommie Seriate to open her first bank account. Prior to walking into a branch of Nationwide Microbank in May 2011, this 49-year-old subsistence farmer from the rural Eastern Highlands Province of Papua New Guinea kept her earnings buried in the ashes of the fireplace where she cooked food for her family. Saving proved difficult. A widow with four children and eight grandchildren, Ms. Seriate was often tempted to dig up the hearth to meet family needs. Then one day she heard a presentation given by Nationwide Microbank representatives in the local market. Ms. Seriate had tried in the past to open bank accounts with other commercial banks but found their account opening process too difficult. But what she heard that day in the marketplace encouraged her to try again.
“The message was loud and clear. It was simple for people at village level to open a savings account with Nationwide,” she said.
Stories like Ms. Seriate’s are becoming increasingly common in rural Papua New Guinea. In opening her bank account she became Nationwide’s 100,000th customer, a number that speaks to the success of a project that began in 2002 to expand access to financial services in rural communities and is now helping to generate jobs and boost economic growth in some of the country’s poorest and most isolated regions.
Nationwide Microbank (formerly Wau Microbank) was established as part of the Microfinance and Employment Project, which ran for 8 years from 2002 to 2010. The project – which was supported with a $9.6 million ADB concessional loan to the Government of Papua New Guinea and a $909,000 grant from the Australian Agency for International Development (AusAID) – helped lay the foundations for the microfinance sector in Papua New Guinea through extensive training of staff and the development of financial products tailored to a rural clientele. In 2004, the project provided capital and technical advice for a pilot microbanking program, Wau Microbank, which quickly expanded to the towns of Bulolo, Kainantu, Lae, Madang, and Wewak. In 2008, the central bank issued the institution with a full banking license and renamed it Nationwide Microbank to better reflect the geographical aspirations of the bank. It now has 14 branches throughout the country.
“Nationwide Microbank continues its efforts to ensure that the people of Papua New Guinea have access to relevant and affordable financial services,” said Tony Westaway, Nationwide Microbank’s Managing Director in Port Moresby. “We are ‘banking the unbanked’, an achievement that would not have been possible without the ongoing support from the ADB and the Pacific Financial Inclusion Programme (PFIP).”
Lack of access to finance is a major constraint to rural development in Papua New Guinea. ADB estimates that only about 15% of the population has access to formal and informal banking facilities, and many parts of the country still use a non-monetary barter system for transactions.
In late 2010, ADB and the Government of Australia announced a new co-financed project to help further expand access to financial services in rural communities. The $24 million Microfinance Expansion Project is building on the experiences of the Microfinance and Employment Project and aims to boost growth and reduce poverty in some of Papua New Guinea’s most isolated regions.
The new project aims to strengthen industry regulation and increase the capacity of lenders to deliver a wider range of financial services and products in rural areas, with a focus on lending to micro and small enterprises, and especially to women, who struggle to access credit and income-generating opportunities. The project also has a substantial financial literacy component targeting more than 120,000 people living in remote areas, at least 40% of whom will be women, to allow potential clients to better determine what products they need and if they can afford them.
“Making financial services more accessible to people in rural areas will allow them to save money in a more secure way. It provides them with an efficient means of transferring funds, and allows them to borrow to start up or expand a business, or to give their children a better start in life,” said Eugenue Zhukov, Regional Director of ADB’s office in Australia.
Increasing access to financial services is one of the key focus areas of ADB’s Pacific Private Sector Development Initiative, which started in 2006 with cofinancing from the Australian government. The initiative supports efforts by developing member countries in the Pacific to encourage private sector-led, sustainable economic growth. In particular, it supports microfinance institutions, especially in Papua New Guinea, Timor-Leste, and Vanuatu, to develop financial products suitable for the rural population, and the development of new technologies to lower the cost of extending rural financial access.
Meanwhile, Nationwide Microbank is developing a branchless banking strategy, with support from PFIP and ADB, which will offer financial services through the use of mobile phones and other wireless technology. The aim of the service is to enable clients to access their bank accounts without having to travel to a bank branch, a journey that can be both costly and time-consuming.
This will be welcome news for clients like Ms. Seriate, whose closest bank branch is located in the provincial capital Goroka, a 2 hour trip by bus. Soon she may able to do her banking by pressing a few buttons on her mobile phone.
“I made the right decision to open a bank account,” said Ms. Seriate. She plans to pay forward her good fortune. Her savings will cover her grandchildren’s school fees.