In a wide-ranging chat with Business Advantage PNG, the Managing Director of Papua New Guinea’s state-owned National Development Bank, Moses Liu, talks about becoming an emerging force in Papua New Guinea’s banking sector.

NDB’s Moses Liu. Credit: BAI

Business Advantage PNG (BAPNG): Why is it important for the NDB to be corporatised?

Moses Liu (ML): The main objective of the corporatisation is for our sustainability agenda. It should be run as a private entity instead of depending on government support.

It will help us move from a public service mentality to a corporate culture. It’s good for us because we’ve been talking about this for the last four or five years. Now, the Government has approved a two-pronged strategy.

‘The Bank of PNG did a survey showing that the informal sector is close to K11 to 12 billion, so there’s cash floating around those small businesses.’

Number one is to corporatise the NDB group as a commercial banking entity. Two, we’ll have a special purpose agency that will be managed by the new commercial bank, so that we continue to support the Government in its developmental agenda: lending to the agriculture, tourism and renewable resources sectors.

BAPNG: Lending to people who struggle to get formal lending through the larger banks is key to your remit. Where are you at when it comes to concessional lending (loans extended on more generous terms than market loans)?

ML: It’s really risky lending to the agriculture sector because of the lack of collateral. Most of our customers in that sector will be farmers who haven’t done business before. And so we are proposing that there should be a deliberate program in place so that, for instance, they receive financial literacy training rather than just doing the roll-out of the concessional lending.

‘As soon as the government gets some money then the party begins.’

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BAPNG: How does the NDB handle the process of deciding who is eligible for a loan and on what sort of criteria are you judging the applications?

ML: We look at the proposed cash flow that’s going to be generated in a particular project and, obviously, we engage people who are pretty close to the agriculture sector.

Once we are happy with the cashflow on this new lending criteria, we’d provide a credit guarantee scheme as well. That will act to underwrite some of the risk. We would purposefully set aside some funds as a guarantee in the event those loans went bad. It is a self-guarantee scheme.

BAPNG: On the flipside, you have the People’s Microbank. How has that been performing?

ML: That business has done relatively well compared to the NDB because it’s serving the micro-sector. The Bank of PNG did a survey showing that the informal sector is close to K11 to 12 billion, so there’s cash floating around those small businesses.

BAPNG: What are you doing with mobile payments and mobile banking?

ML: If you own a mobile phone already, once we go on the National Payments System, we’ll have the purchase of all goods and services (available) through the mobile phone. Funds transfer and all that will be available. We are testing it out with Bank of PNG and that will be available towards the end of the month [March].

BAPNG: How is the economy going out in the rural areas? What are you hearing from your branches and your customers?

ML: I think we can gauge the situation with the demand of loans coming from those smaller branches and provinces – so, pretty slow.

It is dominated by Port Moresby, Lae, Goroka, Hagen and to a lesser extent Wabag, but in other smaller centres hardly any major economic activity is happening.

BAPNG: To sum up, how are you looking at 2020 as far as the bank is concerned?

ML: As soon as the government gets some money, then the party begins.