With mobile phone use now widespread in PNG, the country’s largest bank is aiming to bring financial services to the ‘unbanked’ in PNG’s rural areas for the first time—an initiative that is expected to drive small business development.

PNG-based Bank South Pacific (BSP), the Pacific’s largest bank, will this year ramp up its rural banking program, in an effort to stimulate economic activity in Papua New Guinea’s rural areas.

BSP’s Head of Rural Banking Paul Thornton says the bank aims to mobilise at least 200,000 new customers over the next three years.

The first branch of the new network opened in Kwikila as part of a pilot in September 2010, with two branches in the Eastern Highlands following. If the pilot is successful, the program will be rolled out across the country in 2011.

‘[The aim] is really to get the money out from under the mattress,’ Thornton says, stating Bank of PNG statistics that some K900 million in cash is in circulation around the countryside, but only about K200 million of that is in banks.

Rural banking will give people a safe haven to place their surplus funds, and provide opportunities for financing local agricultural producers and entrepreneurs, says Thornton: ‘Once people have a bank account, you start building a financial history. Banks like information and in the absence of any information it is hard to make valid credit decisions. We think by placing these branches in the districts, money will circulate within the local areas and that will help develop small and micro-business opportunities for people.’

The project has the financial support of the International Finance Corporation, also an investor in BSP. ‘Access to banking services is critical for poor households and smaller rural enterprises to boost productivity, create jobs, and reduce poverty,’ said Lars Thunell, IFC Executive Vice President and CEO. ‘In Papua New Guinea, more than 90 percent of adults lack such access, which denies them opportunities to improve their lives. IFC is supporting BSP Rural to help extend the reach of financial services to rural areas.’

A range of banking services will be delivered via mobile phone provider Digicel’s network, now a feature of most major rural communities. ‘Digicel’s GPRS rollout has made it possible for us to do all sorts of things,’ says Thornton.

As part of the effort, BSP is also conducting financial literacy training during field days in order to sign up customers and show them how to use their plastic debit card. BSP is also looking to install more EFTPOS terminals using wireless facilities in 2011.

This article first published in Business Advantage PNG 2011/2012