Speech: Official Launching and Presentation of License to the Bougainville Savings and Loan Society
Speech by
Ms. Elizabeth Genia, AAICD
Acting Governor of the Bank of Papua New Guinea
Official Launching and Presentation of License to the
Bougainville Savings and Loan Society
Tuesday, 21st November 2023
Buka, AROB
Introduction
Thank you MC for the introduction.
Acknowledgements:
I would like to acknowledge the presence of:
- Honourable Ishmael Torama – President of Autonomous Bougainville Government
- Patrick Nisira – Vice President & Minister for Commerce, Trade & Economic Development, Autonomous Bougainville Government
- Mathias Salas – Minister for Treasury & Finance, Autonomous Bougainville Government
- Shadrach Himata – Chief Secretary, Department of President, BEC & ABG Administration
- Alex Karengpuna – Secretary for Commerce, Trade & Economic Development, ABG
- John Becks, Managing Director – Bougainville Public Investment Corporation Ltd
- Luke Romaso, Board Chairman, Bougainville Public Investment Corporation Limited
- Robert Tulasa, Board Chairman, Bougainville Savings and Loan Society
- The Board and management of the Bougainville Savings and Loan Society
- Invited Guests, Ladies and Gentlemen.
Thank you for inviting me to this launching ceremony and presentation of the License to the Bougainville Savings and Loan Society.
It is with great pleasure that I stand here with the people of Bougainville on this special occasion to mark this milestone.
In my role of Acting Governor of the Bank of PNG, I have been invited to attend important occasions, but it is events such as today’s launch of the Bougainville Savings & Loan Society that are the most memorable.
When you combine achieving business or commercial milestones with significant steps forward for the local community or society in general, it is a reason for real celebration. Clearly, that’s what today is all about.
As acting Registrar of Savings and Loan Societies, to see the official entry of the Bougainville Savings & Loan Society as the 17th licensed participant into the S&L industry in PNG, is very significant to me.
Talking Points:
The savings and loans movement has been with us since the early 1960’s and plays a very important role in PNG’s financial system. The societies promote thrift amongst its members, educates them in financial responsibility and more importantly extends the monetization of the PNG economy into the rural sector, so that the rural population can meaningfully participate in economic development.
Savings & Loan societies have an important role in PNG’s financial system and play a key part in achieving the objective of financial inclusion, which is now an international objective to build sustainable economic growth.
The services that savings and loans societies provide are complementary to those provided by other financial institutions such as banks and finance companies, in that they provide basic savings and loan products to its members.
By providing basic savings and loan products to their members who are often in rural areas, S&Ls enable meaningful participation in economic development. They encourage members to embrace a savings habit, and help educate them in financial responsibility and thriftiness.
Another important benefit provided by S&Ls, such as the Bougainville Savings & Loan Society, is choice – a choice of financial services provider. While they may not offer as wide a range of products, S & Ls are complementary to banks and finance companies, by focusing on basic savings and loans to members.
That notion of ‘choice’ extends to the basic structure of each type of financial institution. The word ‘members’ is the key to the difference between savings and loan societies and commercial banks or other financial services providers.
The fact that members are owners of the society, and have a say in the way their society is being run, through representation on the board and at annual general meetings, is likely to be a key message when explaining to potential customers how Bougainville Savings & Loan Society is different to a bank.
The difference between the societies and the financial institutions is that savings and loans societies operate on the principle of mutuality. That is, members are owners of the society and have a say in the way their society is being run through representation on the board and at annual general meetings.
Over the years, the growth experienced in the industry saw societies moving away from the traditional savings and loans business. Many invested their surplus funds in other products such as in equities and government securities.
The business environment prompted societies to look beyond their traditional environment in order to grow and serve its members in the best possible way it can.
Rather than sticking to providing basic savings and loan products, a business model that they knew well, they took a larger risk by moving into areas they were not familiar with.
Because of their decision-making structure and the rules that were in operation at that time, those decisions did not necessarily have to pass rigorous approval processes.
Boards and management of some S&Ls made poor decisions that ended up being very costly for their members.
In view of these developments – and the challenges, the new Savings and Loan Societies Act 2015 was introduced to create a fair and level playing field for the societies with other financial institutions.
The Act also created uniformity in the regulatory framework for the savings and loan societies with other BPNG regulated institutions under the Banks and Financial Institutions Act 2000, the Superannuation (General Provisions) Act 2000 and the Life Insurance Act 2000, where there is some flexibility in the application of prudential supervision by the Bank of Papua New Guinea.
The regulatory framework that now applies to savings and loan societies is in line with other institutions regulated by BPNG. As a further safeguard for members, the rules include prudential supervision by BPNG.
The savings and loans industry now consists of 17 licensed Savings and Loan Society’s including the Bougainville Savings and Loan Society.
The industry has grown in terms of asset size and membership base over the years. As at June 2023, total assets of the industry were approximately K1.35 billion, total deposits were K604.4 million while total loans and advances were K451.7 million representing approximately 74.4% of total assets.
The overall health of the industry is satisfactory. Capital, asset quality and liquidity are satisfactory while earnings and liquidity are relatively fair and proportionate.
Bougainville Savings and Loan Society’s entrance into the market is very timely for the province and its people as it promotes ongoing competition, one of the key initiatives the Bank advocates for when promoting the development of the financial system.
‘Promoting competition’ is another significant benefit of having a ‘new face’ in the line-up of financial services providers. Encouraging competition is an important consideration for BPNG, as it will also help grow the economy, which is an important objective for the Bank.
Competition is also very good for individuals looking for the most suitable product and service for their own specific situation.
As we celebrate the official launch of the Bougainville Savings and Loan Society, the first licensed and regulated financial institution in the AROB, we recognise the people and organisations who have contributed to, and supported its establishment.
At this juncture, I would like to acknowledge and to thank the Autonomous Bougainville Government (ABG) for providing the seed capital for the establishment of the Bougainville Savings and Loan Society and the continuous support you will provide hereafter.
We are confident that with your ongoing support the Society will make a strong contribution to the economic development of the AROB and the country.
This institution will immensely contribute to the economic development of the AROB and the country. Licensing of the Bougainville Savings and Loan Society makes this institution the first regulated institute in the AROB.
I would also like to acknowledge the Federation of Savings and Loan Society Limited in providing guidance to setting up the Bougainville Savings and Loan Society and in promoting the movement.
The challenge now lies with Board and Management of the society to grow the society, and to provide the financial services it intends to provide to the people of Bougainville. Directors, management and committee also have a duty to continue the effort to educate your members to save for the future and borrow responsibly.
The Bank of Papua New Guinea will continue to support savings and loans societies throughout the country. In receiving this license to operate, the Bougainville Savings and Loans Society comes under the umbrella of the Central Bank of Papua New Guinea and is now fully authorised to take deposits from members and to advance loans to those same members.
Coming under the umbrella of the Bank of Papua New Guinea means you have to earn that right to operate, you are subject to very strict prudential supervision and governance rules.
The Central Bank will continue to look at the best way to promote savings and loans societies within the financial sector. We are currently looking at savings and loans societies having access to the KATS (the interbank Kina Automated Trading System) network for example to allow payroll deposits on behalf of members to be credited directly to member’s accounts with their savings and loans society – this will promote competition in our financial sector and assist our savings and loan societies in being able to directly compete with our commercial banks to attract and retain member’s deposits.
In concluding, I would like to take this opportunity to once again thank the Autonomous Bougainville Government through the Bougainville Public Investment Corporation Limited, the Board of the Bougainville Savings and Loan Society and the organizers of this event.
Without further delay, the Bougainville Savings and Loan Society has my full support and I present this Certificate signifying the approval of your license to conduct business as a Savings and Loan Society, regulated by the Central Bank, the Bank of Papua New Guinea.
Congratulations.
Thank you.