SME ACCESS TO FINANCE PROJECT TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA

THE RSF BENEFICIARY SURVEY IMPLEMENTATION

-HIGHLIGHTS-

Types of businesses

Predominantly trade, transportation and construction related

Tend to diversify quickly (grabbing on short term opportunities) as opposed to focus in one business for the long run

Started with a trade store, bought three minibuses and plan to build houses for rent (does not have a recognized brand name)

Emphasis on the machinery or merchandise rather than people or service (the minibuses are the business, as opposed to reliable and courteous transportation services)

No differentiation or innovation ("Me-too businesses") Lack of value proposition ("I also can do it" as opposed to "I can do it better")

Almost none manufacturing or agribusinessesException: cacao commercialization and manufacturing of cacao driers…but only cacao…

Main Business Characteristics

One business location (sometimes two and rarely more than two) One owner (sole trader) IPA registered but not always IRC registered and sometimes do not have

COCs (albeit IRC registered)

Owner is indigenous Papuan New Guinean Owner has very low level of education (primary or less than primary) or

technical/ trade school education Owner manages the business (sometimes they have an operations manager) Family business, with wife/s playing a secondary role Some examples of independent women entrepreneurs

Range of monthly sales: k 5,000 – 500,000 Sales are variable and in several case decrease due to increased competition Less than 20 employees Mostly paid staff

The loan experience

The Smart Business Loan is the first or second loan (after seed money from own savings, family, micro finance or Credit Corp

Many examples of repeat loans (2, 3)

They are very thanful to BSP staff, who are very helpful ("we know them")

They were approached by BSP officers offering them loans or learned through advertisement

They were previous clients of BSP and/or find BSP as the best (or only) option

Communications are mainly done at BSP branches

No ongoing information about balance due and repayment schedules

The loan experience (continued)

Varying perception of loan application complexity

They got the amount they applied for

Assessment of interest rate (and difficulty of repayment) depends on their business profitability

They made extra efforts to avoid repayment delay

Majority considers interest rate to be "too high" or "high"

Many do not know which is their interest rate

There is no clarity regarding default consequences

In general they would apply with BSP for another loan

The impact of the loan Positive impacts

Helped start/ maintain/ expand the businesses

Helped branch out in different businesses

Helped reach more clients

Helped increase revenues in many cases and sometimes profits

Helped maintain employees and sometimes increase employment

Often times revenues decreased due to increased competition and lack of business ties with bigger companies

Almost no impact on imports/ exports

Loan proceeds used to buy assets (machinery, trucks, buses, cars, equipment, stock) and for working capital

Urgent need for training

Owner has very low level of education (primary or less than primary) or technical/ trade school education

No business networking (lack of participation in business associations)

Did not take business training

Feels the need for training

Was not aware of the importance and/ or availability of training

Business and financial planning, cash flow management and basic book keeping are most needed. Sales and marketing to a lesser extent

Need of financial literacy

LEVERAGING PROJECT RESOURCES

RECOMMENDATIONS (as told by beneficiaries)

Lower interest rates

Extend repayment period to 18-24 months (one year is too tight)

Have a counter exclusive for SMEs (long lines)

Improve loan conditions for repeat loans ("they know my business now")

Technical assistance

Training