Image: NDB’s Moses Liu
The potential for improved financial and other services delivered via the internet in Papua New Guinea is high, the nation’s top bankers tell Business Advantage PNG. But costs have to fall first.
Moses Liu, Managing Director of PNG’s National Development Bank (NDB), told ‘Business Advantage Boardroom‘, a new business program aired on EMTV earlier this month, that geographical isolation is the main challenge.
‘We find that a common factor is that most of our customers are rural-based and the terrain is difficult to access,’ he says.
‘So, electronic banking has a lot of appeal.’
Liu says if broadband was available cheaper then current uptake trends on phone usage, SMS banking and electronic funds transfer indicate there could be a significant potential upside.
‘Interestingly, that is on the way up: smart phones with the latest apps. We are no different from Kenya, with 50 per cent of GDP transacted through the mobile phone. PNG is no different. We have the same geographic set up.
‘We have seen the new products through the mobile phones.’
‘We need to improve the telecommunications framework and the cost of doing business through that particular mode would be much more affordable.’
Financial inclusion
Loi Bakani, Governor of the Bank of Papua New Guinea, says improving financial inclusion is a priority. ‘We have seen the new products through the mobile phones. It enables a lot of people to get access; you have seen how more people are on mobile phones.
‘For people in rural areas, it really reduces the cost of travel to access financial services in urban towns or cities. The market in PNG is big and there are a lot of people who are not into the financial sector yet. That is why we are trying to get them into financial sector and start a journey to improve their livelihood.’
Bakani says some new products are being used on mobile phone platforms.
‘The biggest one we see now is insurance: premiums being paid by mobile phones. We have seen a lot of people signing up for mobile phone products.’ He says voluntary super is another growth area.
Barriers
The promise may be there but the barriers to reducing costs remain considerable. Todd McInnis of Deloitte Access Economics in a presentation earlier this year claimed PNG’s broadband prices are the highest in the Pacific.
‘Another way to make gains is to strengthen mobile money ecosystems around PNG’s resource projects.’
He says the PNG-specific issues are skill shortages, mountainous terrain, low population density and landowner relations. Developing a ‘holistic ICT industry strategy,’ strengthening regulatory frameworks and improving governance are ways to make gains, he argues.
Resources link
According to a paper for the Centre for Social Responsibility in Mining for the University of Queensland, another way to make gains is to strengthen mobile money ecosystems around PNG’s resource projects.
‘We do need to get cost effective, efficient and really low cost broadband so we can pump the product out.’
The report says this can improve the distribution of payments to local communities; strengthen the ‘social license to operate’ for resources companies; and enhance financial inclusion efforts in PNG’s mining, oil and gas regions.
Robin Fleming, Chief Executive of Bank South Pacific, says there is high potential growth, but he, too, believes cost is the issue. He says the implementation of PNG’s National Broadband Network, due for early 2017, may well be a trigger point ‘but you have got to reduce the costs’.
Fleming says banking products that use SMS codes especially show promise.
‘We do need to get cost-effective, efficient and really low cost broadband so we can pump the product out so the users at the other end can access it without spending more on telecommunication costs than they do on bank fees.’
Copyright © 2016 Business Advantage International.
