Microfinance has grown considerably in PNG in the past few years. Business Advantage PNG talks with Tony Westaway, Managing Director of Nationwide Microbank, about the transformative power of microfinance and the sector’s rapid  growth.

Some of the 1000 women who attended financial literacy training given by Nationwide Microbank in Mangiang Village, Markham Valley, Morobe Province in 2013.

Business Advantage PNG (BAPNG):  The Bank of Papua New Guinea and the PNG Government are pushing the expansion of microfinance. What do you see as the benefits of this kind of finance for ordinary Papua New Guineans? How does microfinance help the development of small business?

Nationwide Microbank’s Tony Westaway

Tony Westaway (TW):  Microfinance is seen as an excellent way of growing an economy where more than 80% of the population live in rural areas and support themselves through informal economic activities.

If we can provide access to financial services for these people and assist them to ‘grow’ their business activity from the informal sector in to the formal sector imagine how rich this country could be?

Access to credit is difficult for ordinary Papua New Guineans who economically reside in what is known as ‘the bottom of the pyramid’.

Microfinance specifically targets this sector with financial services including credit, whereas traditional financial institutions such as commercial banks ordinarily do not.

BAPNG:  What is the typical size of a microfinance loan and what are the most common reasons for borrowing?

TW: Microfinance loans start at K200 as a minimum and the average loan with Nationwide Microbank is approximately K4,500.

‘Our loan book has grown three fold in the past three years.’

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We provide loans to micro entrepreneurs or market vendors who wish to finance freezers to store fish, through to small businessmen and women who may wish to purchase a PMV.

BAPNG: How has Nationwide’s business grown in recent times? What has driven this growth?

TW: Our Loan book has grown three fold in the past three years.

This growth has mainly been driven by supporting small businessmen and women in both rural and urban areas in growing their existing businesses. We work with the people to prepare their cash flow forecasts and business plans. Financial Education is very much part of our approach in developing our loan book.

BAPNG: Small loans still involve risk. How does Nationwide manage the risk involved with these kinds of loans?

TW: Being close to the client is important, as is educating people to make sure their very first repayment is on time. Our experience shows that if the relationship starts on the right footing it lead to a long term successful partnership.

BAPNG: There are now several institutions offering microfinance in various forms. What is the potential for growth in the microfinance sector and what else could be done to help it expand?

TW: There is huge potential in PNG.

This is because of a significant untapped market evidenced by the fact that 81% of the adult population does not have a Bank account.

The Government of PNG together with Asian Development Bank and Australian Aid recognise the power of microfinance and currently co-finance a microfinance expansion project here in PNG.

The Project aims to build capacity in the microfinance sector through training of the partnering financial institutions, introducing a risk share facility, and by promoting financial literacy and education.

A recent successful outcome of this project, has been the establishment of the Centre for Excellence in Financial Inclusion or CEFI.

It is chaired by the Governor of the Central Bank and I sit on the Board as a Director, representing the microfinance industry.

CEFI now co-ordinates all activities that lead to financial inclusion and the empowerment of ordinary Papua New Guineans, through access to financial services.