Papua New Guinea: Microfinance Expansion Project

Sovereign Project | 44304-013 Status: Approved

Summary

ADB is helping rural communities in Papua New Guinea access financial services. The project will strengthen industry regulation and 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. The project will also support a large-scale financial literacy training program.

Latest Project Documents

Consulting Notices See also: CMS

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Procurement Documents


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Project Name Microfinance Expansion Project
Project Number 44304-013
Country Papua New Guinea
Project Status Approved
Project Type / Modality of Assistance Grant
Loan
Source of Funding / Amount
Grant 0226-PNG: Microfinance Expansion Project
Australian Grant US$ 6.00 million
Loan 2686-PNG: Microfinance Expansion Project
Asian Development Fund US$ 13.00 million
Grant 0425-PNG: Microfinance Expansion Project (additional financing)
Australian Grant US$ 2.85 million
Strategic Agendas Inclusive economic growth
Drivers of Change Partnerships
Private sector development
Sector / Subsector

Finance - Finance sector development - Inclusive finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The Project will support the further development of the microfinance sector in Papua New Guinea (PNG) through an integrated package of support, including six outputs. Outputs 1, 2 and 3 will strengthen the capacity of the microfinance industry to provide financial services to a broader cross-section of the community and strengthen the capacity of its clients and potential clients to utilize these financial services. Output 4 will provide appropriate regulation for, and supervision of, microfinance institutions (MFI) and savings and loan societies (SLS) through the Bank of PNG (BPNG). Output 5 will seek to increase lending to micro and small enterprises (MSE) to increase rural income generation. Output 6 will provide efficient and effective project management services to the Project. As a result participating financial institutions (PFIs) throughout PNG, which will be identified through a series of institutional assessments, will be better able to provide profitable, appropriate, reliable and safe financial services to financially literate clients and capable businesses.
Project Rationale and Linkage to Country/Regional Strategy

The Asian Development Bank (ADB) estimates that only approximately 15% of the population in PNG has access to formal or informal banking facilities, and that this is lower in rural

areas. Lack of access to financial services is an impediment to the monetization of rural economies, a constraint on the growth of MSEs, and a restraint on the mobilization of domestic

capital. The project will extend and build on the experiences and lessons learned from ADB's Microfinance and Employment Project, which built a solid base for microfinance and developed microfinance as a suitable tool for rural development in PNG.

Impact Economic growth led by the private sector is enhanced

Project Outcome

Description of Outcome PFIs sustainably and safely provide financial services to a substantially increased number of clients across PNG
Progress Toward Outcome A request for a minor change in scope was approved to extend the project by one year and reallocation to finance extension of consultant contracts.
Implementation Progress
Description of Project Outputs

Business and product management capacity of participating financial institutions is increased

Clients and potential clients understand and know how to access, financial services for personal or business use

The Association of MFIs monitors jointly agreed industry standards

BPNG regulation and supervision of MFIs and SLS is streamlined and improved

A risk-share facility supports increased micro and small enterprise lending

The PMU provides efficient and effective project management services

Status of Implementation Progress (Outputs, Activities, and Issues)

Despite some set-backs in the first couple of years (specifically the challenge of establishing reliable partnerships and recruiting quality staff), the project is now on track and continues to gain momentum. Strong progress has been made in the five specific outputs including (i) business and product management capacity of partner financial institutions (PIFs) is increased, (ii) clients and potential clients understand and know how to access financial services for personal or business use, (iii) Centre for Excellence in Financial Inclusion (CEFI) jointly monitors agreed microfinance industry standards, (iv) BPNG regulation and supervision of microfinance institutions (MFIs) and savings and loans societies (SLS) is streamlined and improved, and (v) a risk share facility supports increased micro and small enterprise lending.

Key milestones during 2015 include:

(i) Continued to work with ten microfinance institutions which have complete coverage of PNG, and supported the institutions to expand the outreach to 31,831 people (the number of new bank accounts), and expand lending by PGK26.8 million,

(ii) Financial education training has now been extended to 91,319 people of which 43,063 (47%) are women,

(iii) The first mobile banking agent (Mibank) was opened in Tsak valley,

(iv) CEFI has successfully coordinated the National Financial Inclusion and Financial Literacy Strategy 2014 2015, and is now in the process of designing the next phase,

(v) MEP facilitated partnership between Mi Bank and Reformation Ministries for Churches Network (RMCN) to establish a mobile banking agency in Tsak vally in Enga province,

(vi) 2,847 person days of staff training (for microfinance institutions) conducted, of which 1,405 days are for female staff (44%).

(vii) Commenced business development training and business counselling services targeting the micro and small business sector. Partner agreements were signed to reach 12,354 people during the next two years, and

(viii) Risk share facility commenced operations to support partner financial institutions to lend to micro and small business sector. Three risk share agreements have been signed that covers a lending portfolio of PGK2 million so far.

Geographical Location

Safeguard Categories

Environment FI
Involuntary Resettlement C
Indigenous Peoples B

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation The project partners with commercial banks, microbanks, NGOs, faith-based organizations and cooperatives to reach very remote parts of the country to facilitate financial education and link clients to the formal banking sector.

Business Opportunities

Consulting Services The lead implementation firm has been engaged. Various, smaller consulting packages for financial literacy and business development skills training, and others will be through QCBS/CQS/SSS/ICS method as suitable.
Procurement

All procurement of goods will be undertaken in accordance with ADB's Procurement Guidelines. Before the start of any procurement, ADB and the government will review the public procurement laws of the government to ensure consistency with ADB's Procurement Guidelines.

The PMU will be responsible for the procurement of all goods and related services, under the project. Shopping will be used for procuring readily available off-the-shelf goods and related services valued up to $100,000.

Responsible Staff

Responsible ADB Officer Hayden Everett
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Liaison and Coordination Office in Sydney, Australia
Executing Agencies
Bank of Papua New Guinea
Douglas St., P. O. Box 121
Port Moresby
Papua New Guinea

Timetable

Concept Clearance 05 Mar 2010
Fact Finding 25 May 2010 to 28 May 2010
MRM 19 Aug 2009
Approval 28 Oct 2010
Last Review Mission -
PDS Creation Date 05 Nov 2010
Last PDS Update 17 Mar 2016

Grant 0226-PNG

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
28 Oct 2010 25 Nov 2010 07 Mar 2011 30 Jun 2018 30 Jun 2019 -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 11.05 Cumulative Contract Awards
ADB 0.00 28 Oct 2010 0.00 4.03 67%
Counterpart 5.05 Cumulative Disbursements
Cofinancing 6.00 28 Oct 2010 0.00 3.58 60%

Grant 0425-PNG

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
09 Feb 2015 10 Jul 2015 10 Nov 2015 30 Jun 2018 30 Jun 2019 -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 2.85 Cumulative Contract Awards
ADB 0.00 09 Feb 2015 0.00 0.71 25%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 2.85 09 Feb 2015 0.00 0.09 3%

Loan 2686-PNG

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
28 Oct 2010 25 Nov 2010 07 Mar 2011 30 Jun 2018 30 Jun 2019 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 13.00 Cumulative Contract Awards
ADB 13.00 28 Oct 2010 10.93 0.00 89%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 28 Oct 2010 9.99 0.00 82%

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

Title Document Type Document Date
Papua New Guinea: Microfinance Expansion Project Brochures and Flyers Apr 2016

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