IFC and the World Bank Improve Access to Credit for Small Entrepreneurs in Papua New Guinea
Often deemed too risky to lend to, small businesses in Papua New Guinea face difficulty obtaining bank loans. Only a quarter of small businesses in the IDA country have access to financial services. To increase opportunity for these entrepreneurs, IFC, the World Bank, and the government of Papua New Guinea have teamed up to support up to $61 million in new financing for small and medium firms.
The joint initiative will guarantee 50 percent of the loans that banks extend to small and medium businesses, encouraging banks to lend more to the sector and to develop new financial products to meet its needs.
For entrepreneur Micky Puritau, whose loan applications were turned down by several banks, access to credit would mean he could grow and expand his export business, which supports 2,500 vanilla bean growers.
“When I started exporting vanilla beans 10 years ago, the banks wouldn’t speak to me because I didn’t have collateral,” says Puritau. “I do business on a cash basis, but having access to capital would allow me to fulfill my vision to expand my business to also export coffee beans and, in doing so, help 7,000 more farmers get their goods to market.”
Puritau’s story is common in Papua New Guinea, where small businesses struggle to fulfill bank loan requirements, such as financial statements, collateral, and guarantees. The program will also help train businesses on how to borrow from banks. Over five years, it expects to train 300 small businesses as well as mentor and coach 150 business owners and 300 women entrepreneurs.
IFC and the World Bank will also work with the government to cut red tape, making it easier for small entrepreneurs to grow their businesses and create jobs.
Puritau says this project will create a lasting impact in Papua New Guinea.
“Improving access to finance for the small and medium enterprise sector will revolutionize this country in terms of creating wealth and help businesses like mine create livelihoods for people living in rural areas,” he says.
IFC and the World Bank are rolling out similar programs in other IDA countries in the East Asia and Pacific region.