Despite the island nation of Papua New Guinea only having a population of just over 10 million, it is one of the world’s most linguistically diverse countries with over 840 languages spoken. While culturally impressive, from a financial standpoint, the country still has a way to go. We take a deep dive into its current financial ecosystem and fintech’s impact on it.
Papua New Guinea has a gross domestic product (GDP) per capita of just over $2,400, however, according to UNICEF, there is a high degree of income inequality, whereby 40 per cent of the population lives below the extreme poverty line. Furthermore, many of these people are unbanked as research reveals 80 per cent of the population does not have access to financial services. This is likely in part due to the fact that 87 per cent of Papuans live in rural areas.
According to the Asian Development Bank (ADB), the country’s economy is dominated by agriculture and capital-intensive extractions of gold, oil, copper and silver. The informal economy also plays a major role in the country, as 87 per cent of the population relies on it for their livelihood.
Access to finance
There are four major commercial banks operating in the country, however, the Bank of South Pacific is by far and away the most dominant in the market. From an insurance standpoint, there were 13 key players in 2016, with the majority involving branches of foreign-owned insurance companies like AIG and QBE.
To make sure more people have access to these services, the government of Papua New Guinea has been putting a focus on financial inclusion. Efforts to improve it have been ongoing for over a decade, as in 2013, Papua New Guinea’s National Executive Council (NEC) endorsed the creation of the the Centre for Excellence in Financial Inclusion (CEFI). It was established to act as the industry’s apex organisation for coordinating, advocating and monitoring all financial inclusion activities in the country.
CEFI’s vision, mission and values focus on financial inclusion. This includes promoting literacy, eliminating poverty and promoting vibrant financial institutional operations in Papua New Guinea. CEFI is also funded by the Bank of Papua New Guinea (the country’s central bank).
In 2014, the government set up the National Financial Inclusion and Financial Literacy Strategy. Two years later, it took its next step to reduce the country’s high levels of financial exclusion by launching its National Financial Inclusion Strategy.
In 2023, the government announced the third instalment of its National Financial Inclusion Strategy (NFIS) 2023-2027. According to the Bank of Papua New Guinea, it aims to improve:
Financial education and literacy
Growth of financial service providers
Innovative models of financial service delivery
Consumer protection and data
Have these efforts paid off?
All these efforts to improve access to finance have resulted in a rise in deposit bank accounts. Between 2014 and 2023, four million bank accounts were opened as well as over 16,000 access points (ATMs, EFTPOS, bank branches and bank agents). Interestingly, parallels can be drawn between the growth in access to finance and the number of mobile banking users as many transactions have taken place via digital banking methods.
Despite these advancements, the country still faces a lot of challenges.
According to the Bank of Papua New Guinea, the country faces a lot of difficulties, which are in turn, directly impacting the development of financial services and wider financial inclusion. Some of these challenges include:
difficult geographies
lack of physical and social infrastructure
limited technological skills and know-how
For example, internet and mobile connection penetration rates are low (32 and 36 per cent respectively) as a result of poor infrastructure.
Divide in access to finance
While efforts are being made to be more inclusive, currently, Papua New Guinea has the highest financial inclusion gender gap in the region. Specifically, 29 per cent of women are less likely to have access to formal financial services.
One of the strategies put in place to improve this was in 2022. The United Nations Capital Development Fund (UNCDF) partnered with the United Nations Development Programme (UNDP) and launched the Rapid Finance Facility (RFF) project in Papua New Guinea. The RFF Project was designed to provide support to women entrepreneurs by offering digital and financial services. Consequently, it aimed to enhance financial inclusion and address the disproportionate impact of the COVID-19 pandemic on women.
The country’s national strategy continues to focus on financial inclusion as it calls for of financial products and services to reach one million unbanked and underserved people across the country, 50 per cent of whom will be women, within the next two years.
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