Financial Inclusion and Financial Capability in Morobe and Madang Provinces, Papua New Guinea Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized An initial report of the Papua New Guinea Public Disclosure Authorized National Financial Capability Survey Bank of Papua New Guinea Institute of National Affairs 9363_PNG FinancialCapacitySurvey_1601939_CVR.indd 1 11/19/15 8:17 AM Bank of Papua New Guinea Papua New Guinea Institute for National Affairs The World Bank Financial Inclusion and Financial Capability in Morobe and Madang Provinces Papua New Guinea An initial report of the Papua New Guinea National Financial Capability Survey This Project is financially supported by the Korean Poverty Reduction and Socio-Economic Development Trust Fund II 9363_PNG FinancialCapacitySurvey_1601939_CH00_FM.indd 1 11/18/15 10:15 AM Cataloguing-in-Publication Data ISBN 9980-77-182-8 National Library Service—Papua New Guinea First published: June 2015 Published by: Institute of National Affairs P.O. Box 1530 Port Moresby NCD Papua New Guinea Copyright: This report is a joint product of the project team composed of staff and consultants from Bank of Papua New Guinea, the Institute of National Affairs and The World Bank. The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and should do not necessarily reflect the views of Board of the Bank of Papua New Guinea, the Executive Directors of The World Bank or the governments they represent, or the Board of Institute of National Affairs. The Bank of Papua New Guinea, Institute of National Affairs, and The World Bank do not guarantee the accuracy of the data included in this work. The boundaries, colours, denominations, and other information shown on any map in this work do not imply any judgment on the part of Bank of Papua New Guinea or The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions: The material in this publication is subject to copyright. The Bank of Papua New Guinea, Institute of National Affairs and The World Bank encourage dissemination of this work for non-commercial purposes and will normally grant permission to reproduce portions of the work promptly as long as full attribution to this work is given. All other queries on rights and licenses, including subsidiary rights, should be addressed to Institute of National Affairs, P.O. Box 1530, Port Moresby, NCD, Papua New Guinea Note to Researchers: This report is an initial output from the study. The dataset is available to bona fide researchers. Data is held in SPSS and Excel versions. The code book is also available. Researchers wanting to use the dataset for analysis are requested to contact: Mr Boniface Aipi at [email protected]. Disclaimer/Limitation: This report is a joint product of the project team composed of staff and consultants from Bank of Papua New Guinea, the Institute of National Affairs and the World Bank. The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and do not necessarily reflect the views of the Board of the Bank of Papua New Guinea, the Executive Directors of The World Bank or the governments they represent or the Board of Institute of National Affairs. The Bank of Papua New Guinea, Institute of National Affairs, and The World Bank do not guarantee the accuracy of the data included in this work. The boundaries, colours, denominations, and other information shown on any map in this work do not imply any judgment on the part of Bank of Papua New Guinea or The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Authorship: This Report reflects the work of the Bank of Papua New Guinea, Institute of National Affairs and World Bank team comprising: Gae Kauzi, Bank of Papua New Guinea; Jonathan Sibley, World Bank consultant (principal author); Paul Barker, Institute for National Affairs; Wei Zhang, World Bank (Team Leader); John Gibson, World Bank consultant (sampling). Front cover: Artwork by Joe Scott of INA and photographs, all taken in Morobe and Madang Provinces, by Paul Barker. 9363_PNG FinancialCapacitySurvey_1601939_CH00_FM.indd 2 11/25/15 8:19 AM Foreword The Bank of Papua New Guinea and the World Bank are glad to present the initial findings from the first national survey of financial capacity among PNG population. Financial capability refers to the capacity to effectively manage financial sources over the life cycle and engage constructively with financial products and services. It is recognized as an essential skill for individuals in all walks of life and has become a public policy concern throughout the world from advanced economies to developing countries. It is a new challenge to individuals and households in low and middle- income economies where the traditional forms of family and community support are being replaced or blended gradually with formal social protection programs with innovative products and services. Traditional ways of doing business are also changing to cope with increasing competition at local, national and global levels. Understanding financial matters and making informed financial decisions among citizens will contribute to overall financial stability of a country as evidenced by the recent global financial crisis. Understanding the financial capability of PNG population is of particular relevance to policy makers, educators and researchers in PNG as we all know anecdotally that level of financial exclusion is high in PNG and the ability of many Papua New Guineans to manage money is limited as formal financial services are a rather new concept to the traditional communities in PNG. Increasing our 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 increasing number of financial instruments and to manage increasingly complex household finances. This National Financial Capability Survey aims to provide a detailed picture which can support policy and programmes to enhance financial inclusion and increase financial literacy of all Papua New Guineans. The initial findings from the surveys in Madang and Morobe provinces already provide a set of rich data that can be further analysed. Once completed the National Financial Capability study will provide a baseline measure of financial inclusion and financial capability for PNG. We would like to encourage sharing of key findings of this report among policy makers, researchers, educators and financial services providers so as to support the iii 9363_PNG FinancialCapacitySurvey_1601939_CH00_FM.indd 3 11/17/15 1:24 PM FINANCIAL INCLUSION AND FINANCIAL CAPABILITY IN MOROBE AND MADANG PROVINCES PAPUA NEW GUINEA development of more diversified, customized and affordable financial services and products to PNG population. Both the Government and BPNG are committed to increasing financial inclusion and financial literacy in PNG. The government is committed to expanding financial inclusion and enhancing financial literacy by incorporating the financial inclusion agenda in key national plans as a development priority.1 The World Bank, a development partner with the Government of PNG, is committed to share the technical know-how and international best practices in financial inclusion program design and implementation. Loi Martin Bakani CMG, Governor, Bank of Papua New Guinea James Seward, Practice Manager, Finance and Markets Global Practice, The World Bank 1 Please refer to: “The Development Strategic Plan (2010–2030),” “The Medium Term Development Plan (2016–2017),” “Vision 2050”, “The National Informal Economy Policy (2011–2015).” iv 9363_PNG FinancialCapacitySurvey_1601939_CH00_FM.indd 4 11/25/15 9:05 AM Acknowledgements This report was prepared by a joint team of staff and consultants from The Bank of Papua New Guinea (BPNG), the Institute of National Affairs (INA), and The World Bank led by Gae Kauzi, Paul Barker and Ms. Wei Zhang respectively, with contributions from Elizabeth Genia, Ellison Pidik, Boniface Aipi and Augustine Birie of the Bank of Papua New Guinea, Mr. Emmanuel Peni of INA, Jonathan Sibley (Principal Author) and John Gibson (Sampling Advisor) of the World Bank. The project team appreciate the support and guidance provided by Governor Bakani of BPNG, Hormoz Aghdaey and James Seward, Practice Managers for East Asia and Pacific Region of the World Bank Finance and Markets Global Practice, in project conceptualization and implementation. The team is grateful to the peer reviewers of the report who provided valuable comments and suggestions from the peer reviewers: Chandana Kularatne, Siegfried Zottel, Dominic Sikakau and Rekha Reddy. The team also benefited tremendously from the technical advice and partnership from Jeff Liew, Senior Advisor of the Pacific Financial Inclusion Program (UNDP-PFIP). We owe our special thanks to the field survey management team in INA who took tremendous effort in managing data collection from some remote villages in Madang and Morobe provinces: Rufina Peter and Mary Maima, who were the initial project managers, Ivan Jemen, field coordinator for Morobe Provinece, Busa Jeremiah Wenogo, Senior Project Officer of Informal Economy, CIMC, who was the field supervisor for Madang province, Henry Yamo, Deputy Executive Officer, CIMC, Teine Korokoi—IT Officer, Maisy Talowani—Librarian & Assistant Logistics