Carolyn Blacklock is a finance industry professional, and member of the Business Coalition for Women in PNG, where she raised $1.2 billion for access to electricity, finance, and nuclear power in Australia, as well as investment and banking in the Pacific. In the following article, Carolyn Blacklock discusses the introduction of mobile banking in Papua, New Guinea and how this modern innovation is a step in the right direction for the country.
Papua New Guinea is a banking late-bloomer.
Though the southwestern Pacific Ocean country is one of the world’s largest islands, Papua New Guinea has only been banking since 1910 and didn’t establish a central bank, the Bank of Papua New Guinea, until 1973.
As recent as 1999, banking was only for the country’s few rich residents, and just one in 20 citizens could take advantage of financial services at a time when SMS banking was introduced globally.
Carolyn Blacklock says that the latest modern banking innovation to come to the country for its estimated 9.4 million residents is mobile banking. It’s a step that has the potential to change the financial game for the entire country, both within its traditional agricultural industry and its growing number of microenterprises.
Carolyn Blacklock on Overcoming Challenges
Papua, New Guinea has long been a cash-only country. It has a very low population density spread out over multiple island communities.
For many living there, banking was financially prohibitive because a trip to the nearest bank branch meant a 120-mile drive on average. Despite those setbacks, Bank South Pacific saw mobile phone access at about 90% and found an opportunity.
The goal: reach 200,000 new clients within three years by linking mobile banking to savings accounts.
Welcome to Mobile Banking
Carolyn Blacklock explains that Bank South Pacific (BSP), the largest of Papua, New Guinea’s four banks, targeted new customers and those in rural and disadvantaged areas through the introduction of digital financial services. Almost immediately, the number of savings and banking accounts in the rural market started to soar.
A big part of the country’s mobile banking success was the support from the International Finance Corporation (IFC), part of the World Bank Group.
Since 2011, the BSP has received IFC support for its mobile banking program and its goal to bolster good financial practices among thousands, especially those who own small businesses in the remote regions of New Guinea.
Carolyn Blacklock notes that the IFC offered advisory and investment services for Bank South Pacific to launch its mobile program, including $110 million in equity, $30 million in a three-year, a senior loan providing lending to businesses, and a $770,500 performance-based grant.
FC advisors helped the mobile banking rollout by outlining a business plan, promoting mobile services to potential clients, and creating a network of agents.
In its first year offering mobile banking, IFC signed well over 100,000 first-time mobile banking users. By 2014, mobile clients numbered 175,000, a 70% increase and a figure that represents 5% of the country’s entire adult population.
Carolyn Blacklock says that profit per customer rose by 440% and, over the service’s first five years, deposits to BSP increased by 65%, hitting $5.5 million.
Game-Changer
Today, all of the major banks in Papua, New Guinea have their own mobile services product offering everything from checking balances to fund transfers. Banking officials see that mobile banking and technology updates are essential if the country hopes to expand its financial system.
Carolyn Blacklock says that the benefits of a mobile finance ecosystem are clear. Such services help protect cash and foster a cash-out system where most people sell and buy goods.
Perhaps most impressive is how mobile systems established a solid foundation for the country’s microfinance sector.
The eight-year Microfinance and Employment Project, a joint initiative between the Australian government and Asian Development Bank, has been popular among low-income residents who balk at losing work time just to go to a bank branch.
Rural residents who had previously never banked held 80% of Nationwide Microbank’s mobile accounts.
Part of mobile banking’s success stems from how it also fosters financial literacy and awareness in a country where just 8% of people had previously held a bank account. Carolyn Blacklock explains that banks and agents worked closely with rural customers to ensure that they understood how to bank on a mobile platform while tweaking it to make the interface more comfortable.
Mobile banking has been revolutionary for this area where telecommunication and infrastructure were once severely underdeveloped. It also created an even financial playing field where there is high diversity in languages and cultures.
Mobile services also address a safety issue tied to the country’s cash-based economy. Theft has long been an epidemic in the country, with the large majority of its citizens, especially farmers, preferring to stick with cash transactions. Farmers are common prey for robbers, ambushing them as they return to the village from selling goods to the market in a larger town.
Carolyn Blacklock explains that with mobile banking, Papua, New Guinea’s economy is not just secure — it’s safe as well.
