MANILA, PHILIPPINES - The Asian Development Bank (ADB) and the Australian Government will support a $24 million project to help rural communities in Papua New Guinea access credit and financial services.
The Microfinance Expansion Project is expected to generate jobs and boost growth in some of the country's poorest and most isolated regions.
Lack of access to finance is a major constraint to rural development in Papua New Guinea. ADB estimates that only 15% of the population has access to formal or informal banking facilities, and many parts of the country still use a non-monetary barter system for transactions.
"This project will help rural areas move from a subsistence to a modern cash-based economy and in the process it will increase incomes and reduce poverty by stimulating informal business activity," said Robert Wihtol, Director General of ADB's Pacific Department.
The project will extend and build on the experiences and lessons learned from ADB's Microfinance and Employment Project, also co-financed by the Australian Government through AusAID, an 8 year project that began in 2002 and established a solid base for microfinance in Papua New Guinea.
The new project will strengthen industry regulation and bolster 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 will also support a large-scale financial literacy training program for more than 120,000 people living in rural 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 enables them to save money in a more secure way, provides them with an efficient means of transferring funds for personal and business transactions, and allows them to borrow to start up a business," said Eugenue Zhukov, Regional Director of ADB's Pacific Liaison and Coordination Office in Sydney. "These activities create jobs, encourage economic growth, and, importantly, improve the lives of thousands of people living in rural communities."
ADB's loan, from its concessional Asian Development Fund, covers 54% of the project cost of $24.06 million. The loan has a 32-year term, including a grace period of eight years. Interest is charged at 1% per annum during the grace period and 1.5% per year for the rest of the term.
AusAID will provide a grant of $6 million to be administered by ADB. The Government of Papua New Guinea and project beneficiaries will cover the remaining cost of $3.09 million.
The project is due for completion around the end of 2017.
Papua New Guinea joined ADB in 1971. It is ADB's largest partner in the Pacific in terms of loans for public and private sector development.