DEPARTMENT OF TRADE,COMMERCE AND INDUSTRY NATIONAL DEVELOPMENT FORUM SMALL MEDIUM ENTERPRISE (SME) ACCESS TO FINANCE PROJECT 19 th October, 2016 PRESENTER: Richard Yakam First Assistant Secretary - Trade
PPP to Promote Trade and Economic Growth
BACKGROUND THE RISK SHARE FACILITY Late in 2010, discussions between the World Bank Group and GoPNG agreed to develop a financing facility to support the growth of the Micro, Small and Medium Enterprises in the Country. 14 th June 2011, formal financial agreement signed between GoPNG and World Bank Group and the Risk Share Facility was formally established under the Department of Trade, Commerce and Industry The Government of Papua New Guinea through NEC Decision No.46/2011, Meeting No.2/2011 borrowed US$21.9 million to set up the Risk Share Facility Continue
BACKGROUND - Risk Share Facility The project was designed based on proven SME lending techniques by integrating the special features of local business and cultural factors aiming at sustainable financing of SMEs.
BACKGROUND THE RISK SHARE FACILITY Main development Objective is to address the rigidness of lending policies of financial institutions in expanding lending to MSMEs. Ensure that Financial Institutions are able to relax their lending policies and be more receptive towards MSMES
Financing Agreement 1. Risk Sharing Framework Agreement( PNG Govt, World Bank (IDA) and Bank of South Pacific. 2. Risk Sharing Agreement (Bank of South Pacific and World Bank via IFC) 3. Performance Based Grant Agreement (Bank of South Pacific and Government through Department of Trade, Commerce and Industry)
RISK SHARE FACILITY FINANCING Approximate project cost US$116 million (about K300 million) 1. A SME Risk Share Facility US$ 100 million 2. Capacity Building for SMEs US$2.5 million 3. Technical Assistance for Commercial Bank US$3.23 4. GoPNG Support and Admin Cost K4.18
RISK SHARE FACILITY - FINANCING CONTRIBUTIONS 1. Participating banks US$50 million 2. IFC/World Bank US$45 million 3. GoPNG - K11 million Total US$110 million (GoPNG Component is through International Development Association)
Main components of the project 1) Risk Sharing Facility (RSF) -Bank of South Pacific Credit guarantee to SME loans Loans from K20,000 to K3 million will be given to PNG SMEs Minimum 12 months and Maximum period of 10 years for loan servicing Lending under the facility over five(5) years from 2012 to 2016 Next 7 years from 2017 to 2024 for loan servicing 2) Technical Assistance of K6 million for Participating Financial Institution- BSP (K3.8 million) 3) K13 million SME Capacity Building Training of SMEs-Tanorama Training Consultancy Firm Mentoring and Coaching( Still pending) Targeted training for Women Entrepreneurs-Tanorama Provincial Commerce Division Training-Tanorama
Main components of the project 4) K19 million DCI Support Management and coordination of the day-to-day implementation of the Project. Capacity building to conduct SME surveys and develop baseline performance indicators for the Project. Provision of assistance for the development of, and obtaining necessary approvals for, an updated national SME Policy and Strategy. Provision of assistance for facilitating and supporting the operations of the Project Steering Committee.
Main Achievements Component 1. We are currently at a pilot phase which started with the participation of the Bank of South Pacific as private sector intermediary and will eventually expand to other banks in a later stage.
Continue The disbursement of loans to service the SME sector has been progressing tremendously well, with 1,509 loans granted to promising businesses. These loans amount to a total of PGK 126 million Under RSF, we have disbursed PGK34.4 million as of 31 st December, 2015 171 loans were granted to women entrepreneurs throughout the country Morobe has the highest recipient of loan so far due to spin off economic boom from major projects Approximatly 2,149 jobs created within loan recipients during the project beneficiary survey.
Component 2 (Performance Based Grant Agreement) under PPP model-public and Private Sector We have technical upgraded the capacity of BSP to roll-out the new Smart Business Package; Smart Business Loan that is more suitable for existing SMEs in the market. Small Business Banking Strategy Small business banking unit created & initially staffed in every BSP branches through out the country The total value spent so far is estimated to be K2 million.
Portfolio by of RSF Loan Product Type under BSP Smart Business Loan 81% Tailored Business Loan 3% Business Asset Loan 4% Finance Lease 12%
Continue Portfolio Growth Trend of employment created from RSF
Number of Women entrepreneurs accessing loan under RSF
Number of Formal SMEs access Risk Share Facility by Provinces, updated as 31 st December, 2015. Current Principal % Portfolio by Province No of SMEs Balance PGK National Capital District 270 7,078,092 21% Morobe 382 5,574,836 16% New Ireland 38 3,335,303 10% Western Highlands 170 3,250,453 9% East New Britain 90 2,729,235 8% Enga 39 2,163,938 6% Bougainville 90 1,393,779 4% West New Britain 73 1,252,464 4% Madang 39 1,224,284 4% Oro 33 1,114,196 3% Eastern Highlands 68 1,045,957 3% Southern Highlands 67 913,202 3% East Sepik 46 896,528 3% Simbu 31 613,738 2% Manus 21 569,317 2% Western 17 433,147 1% Hela 10 358,981 1% Milne Bay 15 211,174 1% West Sepik 8 161,193 0% Central 2 21,704 0% Grand Total 1,509 34,341,521 100%
Sum of facility by Provinces Portfolio by Province West Sepik Manus Hela Western Simbu Milne Bay Eastern Highlands Madang Southern Highlands Oro West New Britain East Sepik Bougainville Enga East New Britain Western Highlands Central Morobe, 382 New Ireland National Capital District
Portfolio by Industry Sector Agriculture Hunting & Related TRANSPORT & Service COMMUNICATIO N Portfolio by Industry Sector Wholesale Hotels & Restaurants Manufacturing Busines Services Construction Other Business, 17,358,943 Vehicle/Equipment Hire Retail
Component 3 (Private Sector participation when contracted under the project) Under the Training provided by Tanorama Training Consultancy firm, so far the project have covered 15 provinces, trained 383 SMEs and 391 Women entrepreneurs. Total so far is 774 trainees which is above the set limit as per approved target. BSP Partners doing their presentation on Smart Business Package, in Morobe province, 2014 SME Training Closing Statement by Officer In-Charge, DCTI in Goroka, April, 2015
Number of SME trainees by provinces Participation by Location 76 69 61 61 57 56 60 64 60 51 49 51 51 44 Alotau Buka Goroka Hela Kavieng Kerema Kimbe Kokopo Lae Mendi Mt. Hagen Port Moresby Wabag Wewak
Capacity Building to Provincial Commerce Advisors As part of project objectives, we have build the capacity of 23 Provincial Commerce Advisors through refresher training and purchased their computers, printers and laptops
Component 4 (Government initiatives and achievement under PPP model) Completion of the SME Baseline Study and establishment of the project website. http://www.pngsmersf.com/images/do cs/smebaselinestudyfinalreport.pdf Completion of the recent National SME Master Plan and Policy
GOING FORWARD A local and an international consultant, both working on the feasibility study on setting up of PNG s first Credit Guarantee Corporation in 2017 and launching in 2018. Both ANZ and Wespac have expressed interest to participate in the Risk Sharing Facility, apart from Bank South Pacific (BSP). As a result, the International Finance Corporation (IFC) is currently working with the local bank s team to assess their capacity before they are participate under RSF. SME training originally designed for Port Moresby and Lae but this has been changed to cover the whole entire nation by expanding the training into covering provinces and districts.
GOING FORWARD SME mentoring has begun and this would follow the same SME training strategy to cover all provinces and districts. Capacity building for provincial commerce division is going very successful. An independent impact assessment on the overall project is enviable next year. Restructuring of the project has begun to extend the project result framework indicators as well as closing time in 2019. The restructure would include additional activities to be implemented by the project under the current design. Included in the same restructure, would include additional funding request as an option to consider, apart from the project implementation time extension.
CONCLUSION PPP model tends to be effectively implement under the Project. CONCLUSION POINTS 1. Procurement of Contracts were done through CSTB and approve from State Solicitor Office, maintaining transparency and accountability 2. Disbursement of SME Loans were done through Lend Fast Originating Software from BSP 3. Project funds were disbursement under the approved procurement plan from World Bank 4. Auditing of the project funds were done by international audit firms with reputable characters
Thank you and any question
The project is proudly and successfully implemented in partnership with; Bank of South Pacific And other relevant organizations. World Bank Group