Governor Elizabeth Genia speech on 2024 AFI GPT Becoming the Inclusive Green Finance Steward – The Papua New Guinea Experience
2024 AFI GPT Becoming the Inclusive Green Finance Steward – The Papua New Guinea Experience
Elizabeth Genia, AAICD
Governor
Bank of Papua New Guinea
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Good afternoon, Ladies and Gentlemen.
Before I begin, I would like to extend my deepest gratitude to the people of El Salvador for your warm hospitality. It is truly an honour to be here in this beautiful country, rich in history and culture, and to be welcomed with such generosity and kindness.
I also want to express my sincerest thanks to the Alliance for Financial Inclusion and Banco Central de Reserva de El Salvador for co-hosting the 2024 AFI Global Policy Forum.
This year’s theme, “Innovation for an Inclusive World,” resonates deeply with the work we are doing in Papua New Guinea. Your commitment to advancing financial inclusion and innovation is not only inspiring, but essential, as we collectively strive to create a more inclusive and sustainable world.
I am thrilled to share this stage with such a distinguished panel of inspirational female leaders. It is encouraging to see the progress being made towards achieving gender equity in the Central Banking sector, as more women are appointed to leadership positions.
In my own case, I have the honour of being the first woman in the history of the Bank of Papua New Guinea’s 50 years of operation to be appointed as Governor of the Bank and I thank you for this opportunity for me to share with you Papua New Guinea’s experience in the area of Inclusive Green Finance.
But first, let me introduce you to my beautiful country.
Imagine living in a land of breathtaking beauty, where lush forests and vibrant cultures are as diverse as the people themselves. Yet, this paradise is on the frontline of the global climate crisis, with its future hanging in the balance.
This stark reality drives our commitment to sustainability and it is within this delicate balance – between preserving our natural beauty and safeguarding our future – that we sought to introduce some meaningful change and PNG’s Inclusive Green Finance Policy came into being.
The Independent State of Papua New Guinea is part of the world’s third largest island. The PNG mainland and its six hundred offshore islands have a combined land area that is well over twice the size of that of Great Britain.
Papua New Guinea is blessed with an abundance of natural resources.
78 percent of PNG is covered by forest, including the world’s third largest rainforest.
PNG represents less than one percent of the world’s landmass, but our country hosts seven percent of global bio-diversity and it is relatively common for us to receive reports of newly discovered flora and fauna species.
You’ve probably seen images of the spectacular colours and forms of native orchids, coral reefs and our national icon, the Bird of Paradise. Sought-after commercial fish like tuna and barramundi are plentiful – we are truly blessed.
Our population is around 12 million, with over a thousand cultural groups and more than 800 distinct languages. This incredible diversity is one of our greatest strengths.
However, eighty percent of our population live in rural areas or remote regions in small traditional villages. Over seventy percent of our people rely on subsistence farming and only thirty-seven percent have access to basic financial services.
Women represent forty-nine percent of the population and traditionally, are responsible for the household, providing subsistence by growing food, often funding family living expenses by selling handcrafts or surplus produce. Yet, more than three million women in PNG don’t have any access to basic financial services.
Our rugged mountain ranges, deep and steep gorges, dense tropical forests and huge river systems also pose geographic challenges and limit our infrastructure development. In many places there is no mains power, no safe roads or bridges and access to important services such as food stores, medical clinics and reputable banking arrangements may be a few days’ walk away from the village.
For example, our capital Port Moresby has no links by road to any other significant town. For much of the country, plane or boat travel – or simply on foot – is the only way to get from A to B.
Positioned on the Pacific’s Rim of Fire, volcanic activity has always been a threat to PNG communities. The town of Rabaul, for example, has been completely destroyed twice in the last 60 years.
In 1998, a devastating tsunami close to Aitape on our north-west coast killed two thousand people. Many climate scientists believe that these ‘natural disasters’ are being influenced and exacerbated by Climate Change, leading to unprecedented and damaging climate events.
Climate Change has already caused massive damage and long-term setbacks in PNG.
For example, in 2015 an El Niño climate event caused widespread drought and decimated food crops while poor sanitation and lack of safe drinking water jeopardised the health of our people. The weather conditions threatened the livelihoods of an estimated two and a half million people and many of these families never returned to their traditional homes, where they had supported themselves with subsistence farming.
PNG’s economy also suffered with exports of agricultural commodities slowing significantly. The IMF estimated that the drought wiped two percent from PNG’s annual GDP.
In May this year the lives of many hundreds of people were lost, when a sudden and massive landslide buried an entire village.
Aside from the immediate tragic loss of life, the economic losses continue over the longer term as the survivors have no homes nor means of earning their livelihoods.
The Prime Minister Marape attributed the tragedy to “extraordinary rainfall”.
Around that time, there were reports of unexpected flooding along rivers, rises sea levels in coastal areas, and landslips in several regions.
PNG is an idyllic paradise while at the same time, it is a ‘ticking Climate-Change time bomb’.
The former reminds us to explore opportunities where we can to leverage our natural advantages. The latter tells us we must become resilient, flexible and learn how to climate-proof our livelihoods.
We need to grow our economy more sustainably.
The Bank of Papua New Guinea’s journey in seeking sustainability evolved from the BPNG’s drive to achieve Financial Inclusion.
While education is generally a very strong priority in PNG families, access to well-equipped schools tends to be limited to larger towns and cities. PNG’s children average less than five years of schooling.
The majority of our people have basic education levels and have little to no financial literacy
Just over fifteen years ago, the Bank of Papua New Guinea recognised this and asserted that all Papua New Guineans need to improve on their financial literacy skills and gain greater access to financial services – or we risk system stability and sustainable development.
With the support of the Asian Development Bank, the BPNG concentrated on developing the microfinance sector and mobile telephone banking, as well as fostering financial education, with the aim of extending financial services to our un-banked and under-banked citizens.
Financial inclusion has continued to build momentum in PNG and is now embedded into the fabric of the Central Bank.
All Papua New Guineans must have access to fair and basic financial services, regardless of where they live, or the nation cannot achieve sustainable economic growth. And without sustainable economic growth, it is unlikely BPNG’s core objectives of achieving price stability and financial system stability can be met.
From its modest beginnings as a project within the Central Bank, Financial Inclusion is now a national strategic priority. Activities are coordinated through the Centre for Excellence in Financial Inclusion, CEFI, which was established in 2013 by the BPNG, in partnership with the Australian Department of Foreign Affairs and Trade.
CEFI is endorsed by the PNG National Executive Council as the apex organisation for financial inclusion activities in PNG and works with a range of stakeholders, including government agencies, financial institutions, civil society organisations and the private sector.
Financial inclusion alone is not enough to combat the impact of Climate Change. Sustaining advances, and fostering inclusive economic development requires continued investment in technology and regulatory reforms.
In our stewardship role, the BPNG has been an integral part of several key initiatives to drive this progress,
These include:
- Implementing the three National Financial Inclusion Policies and Strategies
- Developing the financial system by licensing new commercial banks and microbanks
- Promoting agency banking services, mobile banking and digital wallets
- Reforming the payments system to enable interoperability
- Introducing the regulatory sandbox
- Promoting gender equity and social inclusion
- Strengthening customer due diligence processes
- Developing financial services consumer protection legislation
- Broadening access to credit, through the Risk Share Facility and Credit Guarantee Corporation
Over the last five years these initiatives have accelerated access to, and the use of, financial services across the country.
Technology innovations are overcoming the challenges of PNG’s difficult geography. For example, last year a world-first technology solution, Digizen ID, became the first graduate of the BPNG’s regulatory sandbox.
Now released to the market by a partner financial institution, Digizen ID enables citizens to confirm their identity, without mains power or internet connection, so they can meet the Know Your Customer identification rules, as shown in this picture.
CEFI is now expanding financial inclusion guidance and support into the small and micro business sectors, bringing economic growth opportunities to those markets and giving entrepreneurs and business operators training and support to develop their enterprises.
Over the course of many years, the PNG National Government had earmarked the issues of environmental protection and climate resilience for specific attention in several policies and development strategies, including the nation’s comprehensive, PNG Vision 2050.
BPNG’s response to the Government’s position statements was to consider how to encourage economic activity related to environmentally-friendly and socially-responsible projects which have the potential to lead the way forward towards sustainability and resilience.
The notion of ‘Green Finance’ started to become a reality for Papua New Guinea, when in 2021 the New Zealand Government funded support for the Global Green Growth Institute to work with BPNG and CEFI to develop an Inclusive Green Finance Policy.
In June of last year, we celebrated the launch of our Inclusive Green Finance Policy, the first of its kind in the Pacific.
‘Green Finance’ refers to financial investments and initiatives that promote sustainable economic growth, while reducing environmental impact.
The Inclusive Green Policy includes a road map for the first three years of its implementation and includes a Green Taxonomy – a classification system designed for investors, lenders and other financial sector participants to identify, monitor and demonstrate the scope and volume of Inclusive Green Finance arrangements, whether in the form of loan, equity, guarantee or other type of financial instrument.
In the context of Inclusive Green Finance, the BPNG’s stewardship responsibilities include factoring in Climate Change risks when formulating monetary policy, and when considering prudential standards and risk management guidance for financial services industry participants.
Good stewardship also involves helping our most vulnerable individuals, to strengthen their resilience to Climate Change. For example, it might include skills training to introduce environmentally friendly practices to businesses, or to enable diversification into new market sectors.
The Bank’s stewardship responsibilities also extends to account monitoring, regulating industry participants and assessing the suitability of the products developed, as well as promoting Green Investment into the country.
In March of this year, we officially opened the Green Finance Centre, a strategic partnership between the BPNG, GGGI and the governments of New Zealand and France.
The Centre helps PNG-based Financial Institutions meet their obligation to integrate environmental and social factors into their investment decision-making processes.
Financial Institutions will be able to combine environment and social considerations together, for example, by developing innovative investment products, such as Green Bonds and Sustainability-Linked Loans.
By offering the investment opportunity to investors, they are effectively financing the acquisition of a Green Product, which in turn helps build our resilience to climate change. The investors can share in the potential capital growth of the investment, or they can opt to receive an income stream from it.
And the national economy also benefits from moving towards achieving sustainable economic growth via a a form of financing that also creates environmental and social value.
The Green Centre also provides financial institutions with staff training, technical assistance, and guidance relating to the design of innovative Green Lending Products.
This service is certainly in the best interests of all concerned – for BPNG as the regulator, to make sure the product offerings meet all the necessary requirements – and for the Financial Institutions and their eventual green marketplace participants, to make sure that the products are well designed, comply with all the Bank’s requirements and safeguards the rights of all parties.
The BPNG will also help Green Finance participants track their economic performance by monitoring Green Finance Portfolios and measuring proportional increases in the Green Finance Sector.
I’d like to offer a brief update on what we’re working on right now in PNG…
In the five months that the Green Finance Centre has been in operation, we have signed four major Financial Institutions to participate in a pilot program to test the effectiveness of our Inclusive Green Finance Policy and to develop Green Products aligned with our Green Taxonomy.
The Centre is also assisting financial institutions on factoring in environment considerations into their risk portfolios and work has recently started with International Finance Corporation, to develop a framework for Green Bonds to fund environmentally sustainability in PNG.
With considerable ongoing support from the French Government’s development agency, the Agence Française de Développement, work will soon commence on a Green Refinancing Facility with the facility’s aim to scale up Green Loan activity in PNG.
The next five years will be very dynamic for Inclusive Green Finance in Papua New Guinea with goals being:
- identifying and building a pipeline of projects that will attract concessional loan funding for our priority sectors – i.e. Agriculture, Women, SME and Biodiversity.
- increasing the capital investment of the Green Refinancing Facility to 100 million US dollars, through advocacy, and local and international awareness campaigns.
- participating in, and contributing to learning and development alongside local and international peers
- strengthening our reporting and compliance standards.
But Inclusive Green Finance is not just about mobilising capital resources to support eco-friendly investment opportunities, or creating effective rules to safeguard the integrity of Green Investment.
It is also about providing access to education on sustainability and making environmentally responsible lifestyle choices, as well as empowering people to learn about Green Financing options.
With this in mind, we can expect to see an expansion of Financial Education and Financial Literacy programs, that have been the cornerstone of Financial Inclusion in PNG. Business training for entrepreneurs, and very importantly, training for trainers, so we can continue to spread the learning and the knowledge accumulated to all corners of the nation.
I would like to conclude my remarks this afternoon with an example of how Inclusive Green Finance activities will help people make positive changes that will promote environmental and economic sustainability.
The lack of mains power and network connectivity in most rural and remote regions of PNG has meant that most people in those areas can’t access formal financial services or take part in the mainstream economy.
Pay-as-you-go solar kits are starting to fill the energy gap for access to affordable power in PNG. Our average of three hundred days of sunshine each year provides a reliable and convenient power source with low carbon emissions.
As mobile phone access continues to expand and digital payment platforms are gaining more popularity, more and more people in PNG, particularly those in rural and remote areas, are now able to use smart phones to tap into their bank accounts and other financial services.
I am personally impressed with environmentally and socially transformative examples like this. At each step of the process, Inclusive Green Finance principles and practices are applied.
I am also excited about emerging Inclusive Green Finance innovations, particularly where BPNG’s regulatory sandbox can support their development and commercialisation.
As we commit to implementing our Inclusive Green Finance Policy, in the same way as BPNG continues our strong commitment to driving financial inclusion, I am quietly confident that Papua New Guinea is heading in the right direction towards economic and environmental sustainability.
As we look to the future and we continue to drive Financial Inclusion programs and to champion Green Finance, I am confident that Papua New Guinea is not only preserving its natural heritage but also paving the way for a resilient and sustainable future for the generations to come
Thank you again for this opportunity to present to you and I look forward to meeting you, to hearing your views and learning from your individual experiences over the course of the conference.
Thank you.