HOW DO PEOPLE IN PAPUA NEW GUINEA USE MONEY IN THE DIGITAL ERA PB – at University of Waikato
From the Papua New Guinea National Financial Capability Survey (and inputs from the Financial Diaries Study) September 2015 Conducted by Institute of National Affairs (INA), lead researcher Dr Jonathan Sibley Conducted for: Bank of Papua New Guinea, World Bank (Funding from Korea Trust Fund), Sampling Prof John Gibson, UOW, with NSO support, including Census data
If they have money and if the Digital Age reaches them..... - aspirations to have bank accounts, but other savings/payment methods still prevalent ....
Contents 1. Overview of the Studies 2. Context: financial services and financial inclusion Papua New Guinea 3. Context: Morobe and Madang 4. Financial Inclusion in Morobe and Madang 5. Financial Capability in Morobe and Madang 6. Implications for policy and strategy
OVERVIEW OF THE FINANCIAL CAPABILITY STUDY/IES
Issue • Knowledge of levels of financial inclusion and related understanding of financial capability in Papua New Guinea is currently limited • Increasing knowledge and understanding is particularly important as the formal financial system continues to develop rapidly in PNG and households, whether urban or rural, are required to: • Use an expanding array of financial instruments • Manage increasingly complex household finances • Adopt extended planning horizons which increasingly encompass the need to plan for retirement
Prior Studies: • Some prior studies on financial behaviour in PNG (Salisbury et al), and household income and expenditure (Christie 1980), HIES etc... • Recent studies of financial needs, capacity and utilisation: in Phase 1 of the Financial Capability Survey (undertaken in settlements in NCD and with contrasted communities in Central Province) • Pacific Regional Study – funded by PFIP • Financial Diaries – funded by PFIP – 3 locations in PNG
Financial Diaries (PFIP et al): • data collected in 2013 across three cities/towns – NCD, Kimbe, and Goroka over 25 weeks capturing information from 240 respondents of which 50% women. Also quantitative transaction data, 45 in-depth qualitative interviews for better understand the rationale behind financial decisions. • low income households travel long distances to urban centres for formal financial transactions and seldom use agents closer to place of stay. • Formal financial transactions usually driven by external factors (e.g. palm oil buyers and employers paid wages through direct bank deposits). These transactions on an average usually large, around PGK 400 and once in three weeks households face lump sum expenditure of PGK 100 financed through cash flows. • Low income households heavily depend on social networks to finance emergency expenditures like funerals which account to PGK 200 every four months.
Scope and Objectives • Study scope: Population study of financial inclusion and financial capability in Papua New Guinea • Presentation scope: Population study of financial inclusion and financial capability in Morobe and Madang • Objective of study: • Examine financial inclusion and financial capability for both women and men who make financial decisions on behalf of their household • Develop a baseline measure of financial inclusion and financial capability for PNG
Limitations • This presentation is an initial output from the national financial capability study, and focuses on Morobe and Madang Provinces • The findings may be indicative of the national situation, but do not represent the national situation - (nature of Morobe and Madang) • The focus of the study is households. The use of financial services by formal and informal businesses has not been examined
Definitions • Financial Inclusion: • “A state in which all working age adults, including those currently excluded by the financial system, have effective access to the following financial services provided by formal institutions: credit, savings, payments, and insurance.” (GPFI & CGAP) • Financial Capability: • “The (internal) capacity a person has to act in their best financial interest, given socio-economic environmental conditions .” (World Bank) • Financial capability can also be extended to include acting in the interests of the household in which a person lives
Instrumentation • 2010 teams from Papua New Guinea, Zambia, Malawi, Namibia, Tanzania, Uruguay, Mexico and Colombia met to develop a global instrument to measure financial capability • Development completed in 2011: Interviewer administered closed question survey • Instrument used or planned to be used in 14 countries in Latin America, Africa, Middle East and East Asia and the Pacific • PNG piloted the survey (Tok Pisin) in 2012 • Preparations for the national survey commenced in 2013 • Field work in Morobe and Madang undertaken 2014
Sampling • National sample developed (SRS) • 5 provinces selected. Target n=1,000 households, 2,000 interviews • Both the woman and the man who make most financial decisions on behalf of their household to be interviewed • Two provinces selected in Momase Region: Morobe and Madang Target Actual Districts 8 8 Census Units 40 36 Households 400 359 Individual Surveys 800 688
FINANCIAL SERVICES AND FINANCIAL INCLUSION PAPUA NEW GUINEA
Financial Services Accessibility • Financial services accessibility is increasing in PNG: • December 2012: 9,257 financial services access points • March 2015: 11,015 financial services access points • However, overall network density is low*: • 1.9 branches (2013) per 100,000 adults (global average 12.6, Pacific Islands average 18.9 per 100,000 adults) • 16.5 agents (2013) per 100,000 adults (Kenya 268, Peru 118, Tanzania 57 per 100,000 adults) • 8.4 ATMs (2013) per 100,000 adults (CAGR 8.0%) (global average 34 per 100,000 adult, Pacific Island CAGR 11.6%) • Financial services access points are concentrated in urban locations *BPNG and Global Findex
Financial Inclusion • Levels of financial inclusion in PNG are low • Estimates for adult financial inclusion vary between 435,000 and 800,000 adults (apx. 7-15% adult population) • BPNG estimate unmet demand to be high: • Deposit services (for economically active adult population) – apx. 5.38m people • Credit - 95% and 98% of the adult population.
PNG Government Commitment • Financial inclusion is a development priority • Expanding financial inclusion and enhancing financial literacy incorporated in key national plans: The Development Strategic Plan 2010-2030 and Vision 2050 • The National Informal Economy Policy (2011-2015) identified financial inclusion as a priority action area to facilitate the development of the informal economy
BPNG Commitment • BPNG has taken the lead role in PNG to increase financial inclusion and financial literacy • Financial inclusion is one of BPNG’s two strategic goals • Actions include: • Membership of the Alliance for Financial Inclusion (AFI) • Sponsored and led the establishment of the Centre for Excellence in Financial Inclusion (CEFI) • Supported (in conjunction with ADB) the establishment and management of the Microfinance Expansion Project (MEP) • Commitment to increasing financial inclusion data, in particular supply- side data. • 2013 BPNG signed the Maya Declaration, committing to seven financial inclusion and financial literacy goals • The Maya Declaration goals provide a foundation for financial inclusion and financial literacy policy and strategy
Maya Declaration Goals To reach 1 million more unbanked low-income people in Papua New Guinea, 50% of 1. whom will be women To lead efforts to create a financially competent generation of Papua New Guineans 2. through financial education and financial literacy To actively support innovative use of technology for scaling-up access to financial 3. services and financial literacy To strengthen consumer protection by issuing prudential guidelines and creating a 4. platform for various national regulators and industry networks to monitor consumer protection To begin the process of integrating financial inclusion in local and national 5. government, including getting the National Executive Council to endorse the National Financial Inclusion and Financial Literacy Strategy by quarter 4 of 2013 To promote regular collection and use of financial access data to inform policy making 6. and help identify key dimensions of financial inclusion in Papua New Guinea To optimize these results through knowledge sharing and effective coordination of 7. stakeholders, including development partners, by the newly established Centre of Excellence for Financial Inclusion chaired by the Bank of Papua New Guinea.
MOROBE AND MADANG
Geography and Population • Diverse geography: mountains to coastal plains • Population: 1.17 million (16% of PNG population)
Economy • Diverse economy: major mining, agriculture, fishing projects. Tourism in Madang. • Lae (and to a lesser extent Madang) a hub for formal sector business with extensive informal sector trade • Apx. 50% of population rely on subsistence income (in particular women)
Age Profile - years of age (%) 70 60 50 40 Morobe Madang 30 20 10 0 under 15 15-64 64+
Average Household Size - 2011 7.4 5.9 5.5 5.4 5.3 Morobe Madang Nat Average Nat urban Nat rural
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