APABI Talks with IBBM, PNG: Post-COVID may leave a changed Banking and Economic Sector



With an urbanization rate of 13%, Papua New Guinea (PNG) is one of the world’s most rural countries, and in a very different situation from other APABI members. The pandemic has had a profound impact on the nation’s economy and banking sector, and it will probably take several years to discover how the full effects will play out.

Sweta Sud, Dean of the Institute of Banking and Business Management (IBBM), is one of the few remaining expats in the country following the departure of most foreign experts during COVID crisis. In particular, the resource sector, one of the country’s most important economic drivers, has largely slowed down due to a postponement of resource projects and foreign direct investment, causing foreign exchange and fiscal funding challenges.

The transition to distance-learning has proven difficult for IBBM and its member banks. PNG’s digitalization level is low, but certain cultural hurdles also increase the challenge. Self-discipline is required; “dry, preloaded” courses are not accepted. Even physical security is a problem: most people have no electronic equipment at home, but it’s unsafe to carry devices home from work on public transport.

Given these considerations, IBBM settled on a hybrid learning model (“Online + Coaching”). Instructors have access to online courses, but students must show up at the campus in person every two weeks in order to receive group instructions and personal coaching.

A new future

The country’s banking sector has now consolidated substantially. In September 2019, Australia and New Zealand Banking Group (PNG) Ltd (“ANZ”) completed its agreement to sell its Retail, Commercial and Small-Medium Sized Enterprise (SME) banking businesses in Papua New Guinea to Kina Bank Limited (“Kina Bank”), to allow it to focus solely on Institutional and Large Corporate banking in the PNG market. Westpac Group also decided on the sale of its Pacific businesses – Westpac Fiji and Westpac's 89.91% stake in Westpac Bank PNG Limited – to Kina Securities Limited. Banks South Pacific (BSP) Financial Group, which was originally listed only on the PNG Stock Exchange, is dual listed on the Australian Securities Exchange since June 2021. The result of these developments is that two largest PNG banks are now listed at the Australian Stock Exchange.

As a small economy, investments by a single large project can have substantial impacts on PNG. Due to its exposure to foreign funding through investments and resource projects, the macroeconomic tends tend to lag global trends by six months to a year. This means that the true depth and length of the global economic slowdown remains to be seen. Foreign development aid (except for in-kind donations of supplies like vaccines and health professional support) are also at a slowdown due to their analysis on systemic and operational risks.

PNG isn’t waiting. Sud notes a strong trend towards nationalism under the slogan “take back PNG,” aiming to make the country less dependent on inputs from overseas. This will eventually mean that more local bankers will be needed. She notes a doubling in master’s and MBA degree enrollment within IBBM.

This will eventually translate to better local capabilities, but it will take a few years for the country’s banking and economic sector to settle into the new equilibrium.