Papua New Guinea’s Financial Institution Risk Management Boosted by MSC Intervention: Report

A landmark intervention by Microfinance Support Centre (MSC) has significantly improved financial institution risk management in Papua New Guinea, resulting in a notable increase in access to finance for small and medium-sized enterprises (SMEs). The four-year-long project, carried out in partnership with the Central Bank of Papua New Guinea, aimed to establish a robust microfinance sector in the country.

Key Components of the Intervention

• Establishment of a Risk Share Facility (RSF): This facility has helped mitigate risks associated with MSE lending, enabling partner financial institutions to expand their loan portfolios and increase lending to MSMEs.
• Increased Quantum of Lending: The RSF has channeled more deposits into loans rather than inter-bank deposits or government securities, increasing the quantum of lending to MSMEs.

Results

• Reduced Turnaround Time: The project has yielded impressive results, including a reduction in turnaround time for individual loans from two months to just eight days.
• Increased Average Loan Disbursed: The average loan disbursed under the facility has also increased by 95%, rising to USD 5,500.

Impact on Non-Performing Asset Ratio

• Significant Decrease: The Central Bank of Papua New Guinea’s non-performing asset ratio (PAR 30) decreased significantly during the project period, dropping from 29% in 2012 to under 5% by the end of 2017.
• Total Loans Disbursed: By June 2018, a total of 1,765 loans had been disbursed to MSMEs, including 1,086 women clients, under the risk share facility.

Lasting Impact

MSC’s intervention is expected to have a lasting impact on Papua New Guinea’s financial institution risk management landscape, providing a solid foundation for sustainable economic growth and development in the country.