Banks and financial services companies are tapping into PNG’S rising middle class.
PNG’S senior bankers are focusing their strategies on a growing middle class. Robin Fleming, Chief Executive of Bank South Pacific, says the bank has sharply increased its lending for housing. ‘Housing loans have probably grown by about 40 to 50 per cent; maybe a little bit more,’ he says. ‘It means that our retail banking has grown and developed and increased its internal metrics.
‘It is certainly not a driver of short-term profits. It is more a longer term positioning for an emerging middle class over the next 10 to 15 years.’
Mark Baker, Managing Director of ANZ in PNG, agrees the country is developing a more mature consumer market. The bulk of ANZ’S business in PNG is corporate, but the bank is also focusing on the growing middle class. Baker points to the recent launch of a Visa debit card.
‘Papua New Guineans want to travel, and they want to be able to fund themselves in the way that most travellers do, which is to securely debit their home account,’ he says. ‘You are also seeing some growth in mortgages as more land is released and titles registered. We’re always open to people approaching us on this.’
A second positive for the financial services sector is the increasing sophistication of technology. In effect, PNG is leapfrogging the industrial era by deploying post-industrial technology.
Greg Pawson, Westpac’s Regional Head, South Asia and Pacific, says although the country is 20 years behind more developed markets like Australia and New Zealand in electronic transactional banking, it is catching up quickly.
‘That will give people back the time they spend visiting branches or managing their financial affairs. It will also help to take the pressure off the volume, the sheer volume, in cash and cheques that are in the banking systems in both (the PNG and Fiji) markets today. It causes us more concern in PNG because the security cost of moving cash around is significant.’
Pawson says value-added services can be provided using mobile phone technology. ‘They can pre-pay their utility bills, they can buy insurance services and a whole bunch of other things—all from the palm of their hand.’
Syd Yates, Chief Executive of Kina Bank, believes technological change will transform PNG’S finance sector.
HOUSING LOANS HAVE PROBABLY GROWN BY ABOUT 40 TO 50 PER CENT; MAYBE A LITTLE BIT MORE. IT MEANS THAT OUR RETAIL BANKING HAS GROWN AND DEVELOPED AND INCREASED ITS INTERNAL METRICS. Robin Fleming
He anticipates that banks will become ‘quasi-technology’ companies.
‘EFTPOS machines probably won’t have great growth. Mobile technology will probably be where it all really sits, and we need to think about digital online. So, our customers need to be able to connect with us anytime, anyhow and anywhere.’
There are barriers to improving the finance sector in PNG, however. PNG’S financial system is undeveloped, which means there is insufficient demand for PNG financial assets. So when investment flows out of the country because of the ending of large resource projects there is a lack of availability of overseas currency. The slowing economy also changes the risk appetite of the banks and other financial institutions. Credit improving Land ownership is based on customary rights, which means that it is not conventionally tradeable and cannot be used as an asset to back a loan. As the World Bank’s most recent
Doing Business survey notes, however, the establishment of a Credit and Data Bureau in PNG has been instrumental in improving the situation for both business and consumer borrowing. In just one year, between 2016 and 2017, PNG rose from 109th in the world to 32nd for ‘getting credit’.
A new residential development in the Port Moresby suburb of Baruni. Significant housing construction is under way in the capital’s outer suburbs.