Papua New Guinea Financial Diaries: Preliminary Findings Joint - - PowerPoint PPT Presentation

Papua New Guinea Financial Diaries: Preliminary Findings Joint Initiative of PFIP, BPNG and MFO

Purpose of Project

Present a picture of the economic behavior and money management of PNG’s low-income population Develop an understanding of spatial and temporal aspects

• f financial behaviour

Provide data to inform the design of financial products that meet the low income populations’ needs. Foster an enabling environment for financial inclusion in PNG that:

• Delivers appropriate products to consumers
• Offers them real consumer protections

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Overview of Presentation

Key Findings Participants in the Study Informal Financial Transactions Formal Financial Transactions Other Transaction Market Segments and Case Studies Implications Next Steps

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Overview of Participants in Study

Three regions:

• Port Moresby
• Kimbe
• Goroka

Urban and rural locations in each region Broad range of low-income livelihoods Both women and men sampled One respondent per household Data is individual not household

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People average about 1 informal financial transaction per week

• All recorded as person-to-person loans and cash

transfers

• No savings groups transactions in data

Cash transfers and informal loans used to manage:

• Cash flow
• Emergency needs in amounts around PGK 50
• I.e. informal insurance through mutual support

networks Transfers are highly localized

Key Findings: Informal Finance

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Key Findings: Formal Finance

Few Licensed Financial Institution (LFI) transactions Transactions are driven by:

• Requirements of palm oil buyers (NBPOL); and
• Employers who make payments through direct deposits

to accounts. In almost all cases people immediately withdraw the money deposited for them and spend it in town. Transactions are relatively large, averaging PGK 400 Transactions associated with purchase of goods/ services in urban locations - require longer-distance travel: 14km in Goroka, 16km in Kimbe, 4km in Port Moresby

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Key Findings: Cash Flow and Lump Sums

Transactions primarily cash PGK 245 average revenue per week Respondents face a lump sum expenditure of over PGK 100 about once every three weeks Lump sums are financed through:

• Cash flow
• LFI transactions

No evidence financed through informal loans or cash transfers.

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Preliminary Findings: Market Segments

Respondents whose income is dominated by…

• Lump sum agriculture sales proceeds, such as palm oil

sales (18 respondents)

• Salaries and wages (53 respondents)
• (Informal) Business revenue (163 respondents)
• No reported earned income (4 respondents)

Segments overlap

• 44 salaried and wage workers have a business
• 5 salaried and wage workers have a business and sell

palm oil

• All but one palm oil seller reported other business

income

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PARTICIPANTS IN THE STUDY

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Location

Men % Women % Total Goroka 44 51% 43 49% 87 Kimbe 44 50% 44 50% 88 Port Moresby 33 52% 30 48% 63 Total 121 51% 117 49% 238

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• Average age 40 years (+/-)

Education Levels

Number % None 51 22% Other 3 1% Primary 102 44% Secondary 78 33% Grand Total 234 100% Missing 4

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Access and Use of Mobile Phone

12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Male Female <30 31 - 40 41 - 50 51 -60 >60 Urban Rural Gender Age Group Location Receive Calls Make/ Receive Calls Make/ Receive Calls + Text Make/ Receive Calls + Text + Payment

84% of men and 66% of women reported access to a mobile phone. 85% of rural respondents and 70% of urban respondents reported access to a mobile phone

• NB. Data from Financial Competence Study

Individual Revenue per Week (PGK)

Net Revenue Goroka Kimbe Port Moresby Women 399 77 269 Men 409 168 282

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Net Income Goroka Kimbe Port Moresby Women 261 55 228 Men 217 139 184

Main sources of Revenue by Location

Goroka*

• Avg. amount per week Share of all site revenue
• Betel nut sales

PGK 64 15%

• Cigarette sales

PGK 48 12%

• Beverage sales

PGK 44 11% Kimbe

• Palm oil sales

PGK 27 25%

• Fish sales

PGK 12 11%

• Betel nut sales

PGK 9 9% PoM

• Wages

PGK 120 44%

• Business sales

PGK 50 18%

• Flour sales

PGK 12 4%

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* Goroka coffee sales analysis ongoing

INFORMAL FINANCIAL TRANSACTIONS

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Informal Financial Transactions

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Number of Informal Transactions per Week

Dominated by person-person transactions No savings groups or other informal group-based financial activities reported

Amount Family Friends & Associates Average Informal Goroka 1.2 per week 1 per 2.4 weeks 1.6 per week Kimbe 1.1 per week 1 per 7.1 weeks 1.3 per week Port Moresby 1 per 2.0 weeks 1 per 2.3 weeks 1 per week

Gender Dynamics

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Giver Recipient

Male Female Male 1 per 2.4 weeks 1 per 2.0 weeks Female 1 per 2.4 weeks 1 per 3.8 weeks

Within family transfers per week Giver Recipient

Male Female Male 32.6 57.2 Female 59.3 27.0

Average amount of within family transfers

Informal Loan Amounts (PGK)

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Respondent Gender Family Friends & Associates Borrowed Lent Borrowed Lent Male 62 38 90 99 Female 36 37 130 116 Total 45 38 121 112

Informal Loans per Week

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Gender Family Friends & Associates Borrowed Lent Borrowed Lent Male 1 per 100 weeks 1 per 100 weeks 1 per 20 weeks 1 per 20 weeks Female 1 per 100 weeks 1 per 100 weeks 1 per 7.7 weeks 1 per 6.7 weeks* Total 1 per 100 weeks 1 per 100 weeks 1 per 10 weeks 1 per 10 weeks

*Six respondents are market sellers who give loans to their customers

FORMAL FINANCIAL TRANSACTIONS

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Bank Channels

Withdrawals

• ATM – 28%
• Teller – 72%

Deposits – almost all are direct deposits

• NBPOL in Kimbe
• Wage deposits in Port Moresby

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Bank Transactions per Week

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Region Cash Deposits Cash withdrawals Male Female Male Female Goroka Nil Nil 1 per 50 weeks 1 per 12.5 weeks Kimbe 1 per 12.5 weeks Nil 1 per 5 weeks 1 per 20 weeks Port Moresby 1 per 100 weeks Nil 1 per 9.1 weeks 1 per 3 weeks

Average Amount of Bank Transactions (PGK)

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Region Cash Deposits Cash withdrawals Male Female Male Female Goroka Nil Nil 123 400 Kimbe 165 Nil 278 232 Port Moresby 350 Nil 237 448

Direct Deposits & Cheques Cashed

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Region Frequency

• Avg. Amount (in PGK)

Male Female Male Female Goroka 1 per 50 weeks 1 per 10 weeks 123 333 Kimbe 1 per 5 weeks 1 per 25 weeks 344 225 Port Moresby 1 per 25 weeks 1 per 3.3 weeks 441 455

Most direct deposits and cheque payments related to palm

• il sales in Kimbe and wage and salary payments in Port

Moresby and Goroka

Distance Travelled for Financial Transactions

Goroka Kimbe Port Moresby With Individuals 3km 1.5km 0.2km Banks 14km 16km 4km

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Round-trip bus fare for the typical trips to withdraw cash are about PGK 10 each way

Goroka Bank and Respondent Locations

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Respondent locations Bank locations

Kimbe Bank and Respondent Locations

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Respondent locations Bank locations

PoM Bank and Respondent Locations

Respondent locations Bank locations

OTHER TRANSACTIONS

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Lump Sum Transactions

There were 287 expenditures that exceeded PGK 100

• We call these lump sum transactions
• There was a lump sum transaction every 3 weeks

Most of the lump sums were financed out of cash flow But 54 of the 287 occurred in weeks where respondents withdrew as much or more than the lump sum amount from a bank

• A total of 48 bank withdrawals were used to pay for

54 lump sums

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Emergency Expenditures

About one emergency expenditure every four months One large transaction of PGK 250 for funeral clothes Half were fully covered by a cash transfer from a family member, friend or associate

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Number

• Avg. Amount (PGK)

Funerals 8 81 Hospital Bills 10 23 Medicine 41 5.5 Animal Medicine 1 14 Total 60 20

CASE STUDIES AND TENTATIVE SEGMENTATION

Diaries enables segmentation based on behavior, with a focus on cash flow

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Market Segments (tentative)

Respondents whose income is dominated by…

• Lump sum agriculture sales proceeds, such as palm oil

sales (18 respondents)

• Salaries and wages (53 respondents)
• (Informal) Business revenue (163 respondents)
• No reported earned income (4 respondents)

Segments overlap

• 44 salaried and wage workers have a business
• 5 salaried and wage workers have a business and sell

palm oil

• All but one palm oil seller reported other business

income

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Segment Analysis Example

18 respondents in Kimbe research site conducted 28 oil palm sales Average sale amount was PGK 375 NBPOL paid farmer through direct deposit into a bank In almost all cases full amount was immediately withdrawn in Kimbe

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Case Study: Palm Oil Sales

Nonti lives near Kimbe and earns her living selling betel nuts and mustard in town, and palm oil She sells her palm oil to an NBPOL truck driver and receives a receipt for payment in return She travels 11km to Kimbe to withdraw the cash from a BSP ATM

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Case Study: Wage Worker

Isa earns PGK 270 every two weeks She spends most of her income in the first week She uses loans to cover her expenses in the second week

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Implications from Preliminary Findings:

What role can LFI’s play in the provision of informal finance

• How can MNO’s or LFI’s intermediate very small

transactions and/or loans What are the respective roles for the government and private sector in developing the financial infrastructure in PNG

• What roles can government and the financial sector

play in increasing financial inclusion

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Implications (cont.):

What is the role of insurance in enabling households to better manage lump sum and unexpected expenditures

• How can insurance be introduced to low-income

markets How can long term savings (superannuation) be extended to beyond wage workers

• For example: Palm oil and coffee sales

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Next Steps

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Clean remainder of data

• At least another 15,000 records

In-depth interviews

• Get the “story” behind the transactions

Tie five elements of the Diaries database together Further analysis based on your feedback

Acknowledgements

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We would like to thank all members of the following teams for their hard work and important contributions: Bank of Papua New Guinea Field Team Project Steering Committee Pacific Financial Inclusion Programme Microfinance Opportunities

APPENDIX: ANALYTICAL FRAMEWORK

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Integrated Diaries Database

Remittances Transactions In-Depth Interviews Socio-economic profile Events

Connected by Respondent ID and Week Connected by Respondent ID

Transactions Examples

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Transactions data includes:

• 1,021 weeks of data, and
• Over 14,400 records each containing the

information shown in the table.

Behavior Analysis

Transaction interactions and sequences

• Analyze coincidence of transactions in time
• Analyze sequences of transactions (if possible)

To provide insights into

• Cash Management
• Future Planning
• Financial Service Use

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Context Analysis Transaction networks

• Analyze financial networks

Spatial distribution of transactions

• Where did financial transactions take

place?

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