World Bank Group, Papua New Guinea Improve Access to Credit for Smaller Enterprises

June 14, 2011

Port Moresby, Papua New Guinea, June 14, 2011—IFC, the World Bank, and the Papua New Guinea government today signed an agreement to establish a financial program that will help improve access to credit for small and medium enterprises, the primary drivers for job creation, poverty reduction, and economic growth in Papua New Guinea.

The program will help mitigate the default risk that participating banks face by guaranteeing 50 percent of loans that they extend to small and medium enterprises. This guarantee will help banks extend such loans and hence the program is expected to support up to 150 million Papua New Guinea kina (around $61 million) in new financing to small and midsize businesses. Bank South Pacific, Papua New Guinea’s largest bank, is the program’s first partner.   

“The program will allow small and medium enterprises to play a much larger role in economic growth and job creation in Papua New Guinea,” said Gavin Murray, IFC Manager for the Pacific region.  “It will also provide an opportunity for marginalized groups, particularly women, to become more active in managing and expanding their businesses.”

Through the program, IFC will help banks better understand the market and raise their comfort level in lending to small and medium enterprises. Currently, only about 25 percent of up to 20,000 registered smaller enterprises in Papua New Guinea have access to credit.  In addition, the program will provide training for businesses, particularly female entrepreneurs, on how to borrow from banks.  It also will focus on improving the regulatory environment to make it easier for small and medium enterprises to operate.

“Papua New Guinea is experiencing strong economic growth due, in large part, to the resources boom,” said Laura Bailey, World Bank Country Manager for Papua New Guinea. “However, mineral wealth does not automatically improve livelihoods for rural people. With better access to finance, small and medium enterprises can expand their activities to cater to the growing economy, creating jobs and helping to raise incomes for those who need it most.”

The program is a collaborative effort between the Papua New Guinea government; IFC, the member of the World Bank Group focused on private sector development in emerging markets; and the International Development Association, the arm of the World Bank Group that provides interest-free loans and grants to help the world’s poorest countries. The program will be launched later this year.

About the World Bank Group

The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank; the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world.

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