Innovative technology is helping BSP to bring banking services to remote areas of Papua New Guinea. BSP’s Head of Rural Banking, Peter Komon, gives an insight into the impact this programme is having on rural communities.

Farmer George Waire of Magautou village signs his new BSP card at Magaut. Credit: BSP

Christine Iauve, a vegetable farmer from Magautou village, used to keep her hard-earned cash in a safe. Now she, and hundreds of others in rural and remote areas, are getting access to banking services, and setting ambitious goals.

Until very recently, access to banking in Papua New Guinea was limited to those who could travel to a bank branch to deposit or withdraw their money. That could involve a long trip and an expensive bus fare.

According to the Bank of Papua New Guinea, an estimated 90% of the country’s population are ‘unbanked’—that is, they do not use the banking system and subsist entirely in the cash economy.

For Christine Iauve, a subsistence farmer from the Rigo District in Central Province, that meant keeping the income from her crops of capsicum, corn and peanut in a safe.

But, after a recent trip to the area by Bank of South Pacific (BSP), Iauve and about 90 other farmers opened accounts with access to mobile banking. She has now set a goal of saving up enough money to buy a new truck.

For other farmers, access to a bank account will help to open up new markets, since larger retailers in Port Moresby and other towns often require farmers to have a bank account so that payments can be made electronically.

Drive into rural areas

The major banks are using state-of-the-art technology to bring in new customers in remote rural and Highlands areas who have never used bank accounts before. Some are landowners seeking to save the royalties from the massive LNG project.

Although some areas do not have serviceable roads, people can access bank services thanks to mobile phone coverage.

‘We are targeting the 80% of the population that live in rural areas. So far most have been unbanked and their economy is mainly cash-based.’

With a more than 100% growth in transactions since the start of the year, BSP’s mobile banking service is really booming, BSP Rural Head Peter Komon told Business Advantage PNG.

BSP’s Rural Banking program aims to grow to 200,000 customers by the end of next year, up from 120,000 customers currently. The bank has over one million deposit accounts in PNG.

‘We are targeting the 80% of the population that live in rural areas. So far most have been unbanked and their economy is mainly cash-based,’ Komon said.

In addition to mobile banking, BSP also has a dense network of thousands of ATMs, EFTPoS merchants and agents, significantly increasing the customer’s ability to access their bank account and save.

BSP agents are third-party agents are usually based in trade stores or canteens, who work on commission and use hand-held computer tablets to provide card-based transactions.

Komon said that gaining broader community acceptance and confidence in BSP Agents remains a big challenge due to its break from the traditional branch banking model that customers are familiar with.

‘People would rather go to the BSP branch, because that is what they are familiar with and they have not reached a level of comfort with our agents yet,’ he said.

A recent study, supported by the central bank, confirmed that view.

‘The interim results … highlighted that low income households travel long distances to urban centres to carry out formal financial transactions and seldom use agents closer to their place of stay,’ the study found.

Financial habits

The study aimed to find out more about the financial habits and needs of people in the cash economy.

BSP’s Komon predicts it will be a predicts it will require a long term effort to convince and educate PNG’s rural population of the benefits of joining the financial system..

It was the first such financial project in the Pacific supported by AusAID, and was jointly funded with United Nations and European Union aid agencies.

‘The methodology helps map the financial lives of the unbanked and low income households in order to better understand their financial behaviour with regards to indebtedness, the use of social grants, savings, their response to unexpected events and the management of micro business,’ central bank Governor Loi Bakani said in a recent speech.

While BSP dominates the retail and rural markets, its smaller competitors have their own projects to reach out to remote communities.

Westpac PNG recently introduced in-store banking in local trade stores in the New Ireland province and the ANZ has introduced its own mobile phone banking technology.

For its part, ANZ has set a target for 2013 of introducing mobile phone banking to 50,000 rural customers across PNG, Vanuatu, Samoa and Solomon Islands.

‘We are preparing the next generation of customers,’ he said.