Papua New Guinea’s state-owned National Development Bank is preparing to apply for a full commercial banking licence by early 2017, according to Managing Director, Moses Liu.

The National Development Bank’s Moses Liu

The move to a full commercial licence, endorsed by the National Government with a K35 million grant to assist the process, is a testament to the bank’s performance over the last three years, which includes becoming profitable, and increasing its customer base, deposits and loan portfolio value, according to Managing Director, Moses Liu.

Liu has told Business Advantage PNG that this was a sign of the ‘huge progress’ made by the bank since 2007 when, due to ‘financial mismanagement’, the board and management moved to ensure the bank became ‘competent’.

‘It has streamlined its operations and introduced new systems to position it to become a modern financial institution,’ he says.

‘It is said there are two million people in this country who are yet to be banked.’

‘The bank is now in a growth phase. The book value of our loan portfolio is K220 million net, about 200% up from what it was in 2009.’

Last month, the bank reported its subsidiary, the People’s Micro Bank (PMB), now had more than 50,000 customers, and deposits worth K50 million.

‘We are the first micro bank to report profitability within just two-and-a-half years,’ he says, ‘and it will be fully operationally sustainable next year.’

Financial literacy

NDB Investments’ Des Yaninen and the NDB’s Moses Liu present the keys to a PMV truck to Jackson Yoane, a participant in the NBDI’s Young Enterprise Scheme. Credit: NBD

The backbone of the PMB’s success has been a financial literacy program, established by the country’s central bank, the Bank of PNG in partnership with the Asian Development Bank.

‘The purpose was to provide a savings culture among our people, basically. Those people come from a subsistence, agricultural background with little planning for tomorrow—it was a hand-to-mouth society,’ explains Liu.

‘So we needed to get the people out of that culture into a modern economy by creating a savings culture and build and mobilise credit for nation building, through local small and medium-sized enterprises.

‘It is said there are two million people in this country who are yet to be banked. It is a big task and one of the ways to dot it is to bring banking services to all levels. So, that financial inclusion project is working well.’

While the PMB currently has physical branch office in each province, it is now partnering with telco Digicel to move to branchless banking, using mobile phones. Field staff will be out delivering financial literacy training with villagers, and with the goal of raising the level of savings.

Drought

The impact of the drought has affected our customers, says Liu, and the bank is attempting to accommodate the financial stress they are facing.

‘We are going to be the government’s vehicle to promote agriculture, tourism, fisheries, and development funding in the renewable resources sector’

‘Our clients engaged in the agriculture sector have been hit hard by the drought as they cannot sell their produce and repay their loans.

‘We are arranging to reschedule their loan repayments to assist them to repay the loans after three months of rainfall.’

Banking licence

‘We want to commercialise all of the National Development Bank into a fully fledged commercial bank, riding on the success of the micro bank,’ says Liu.

‘We envisage in the next year or in the following year, we will apply for a commercial licence to include cheque accounts, foreign exchange transactions and all the usual transactions of a commercial bank.

‘The economy is growing on the back of a resources boom. We believe the country needs another commercial bank and we are positioning ourselves to be that from what we’ve done over the last eight years.

‘We will still be offering developmental funding based on concessional loans as part of a commercial operation. So, a division or subsidiary will do that and the rest of the operations will be commercial.

‘So, we are going to be the government’s vehicle to promote agriculture, tourism, fisheries, and development funding in the renewable resources sector.

‘There will always be the need for affordable credit and I think that’s what we’ll be underpinning our operations on.’