Financial exclusion is a critical development issue in Papua New Guinea (PNG). About 75 percent of the adult population are financially excluded. Majority of the financially excluded people rely on semi-subsistence and the informal economy to generate income. Access to financial services can enable entrepreneurs to operate at high levels of productivity, sustain business activities and improve livelihoods. Some of these enterprises can transition to formal small and medium-sized enterprises (SMEs).

What is financial inclusion?

Financial inclusion exists when individuals and businesses are financially competent and have access to a wide range of affordable financial products and services suitable for their needs and delivered in a responsible and sustainable manner. In less than a decade, PNG has made much progress in increasing financial inclusion through the leadership of the Bank of PNG and the Centre for Excellence in Financial Inclusion (CEFI), in collaboration with key stakeholders in government, financial service providers and development partners. More needs to be done to keep the momentum going.

This article is based on the findings of a study investigating the financial inclusion of informal economy entrepreneurs through a case study of open market vendors in Port Moresby.

What do the research results show?

The study results showed that market vending is dominated by people who have limited or no education. The inability to read and write limits their access to financial services. Over 60 percent of vendors, both men and women regularly save part of their earnings. However, most of them keep their savings at home. Over 75 percent of the respondents are financially excluded including account holders who do not use it. Regular account users have not accessed any services in addition to saving and withdrawal of their own funds such as credit, insurance products or making transfers. Two-thirds of the vendors would like to expand and formalise their enterprises, yet most are unwilling to access credit from formal financial service providers.

Why informal economy entrepreneurs remain financially excluded?

The primary reasons for financial exclusion of market vendors include the following:

  • Insufficient income: Many vendors struggle to make ends meet; all earnings are spent on sustaining livelihoods and nothing is left for savings.
  • Don’t understand processes: Lack of understanding of the process of opening and operating accounts prevent them from trying.
  • Lack of financial capability: Vendors lack financial capability to plan and budget earnings and save for future use.
  • Time consuming: It takes time to make trips to banks and wait in long queues which reduces hours of business at the market.
  • Costs too much: It costs more to make trips to the bank to do small transactions.
  • Bank fees: Bank fees are considered by some vendors as ‘theft’ of customer savings with a certain level of mistrust. This discourages them from using accounts.

Potential strategies to increase financial inclusion

Some potential strategies that could increase financial inclusion include:

  • Incentivise regular use of bank accounts

Introducing products like basic accounts that do not attract account keeping or transaction costs for excluded groups can be an incentive to open and regularly use accounts. This can also improve customer trust and reduce negative perceptions of financial institutions.

  • Ensure that information on products and services is widely available

Information on products and services offered by financial service providers needs to be made widely available.

  • Provision of financial literacy and competency training

Provision of adult literacy and financial competency and literacy training can facilitate access to financial services and break the current habit of spending first and saving last.

  • Expand coverage of financial services using digital delivery channels

Increased delivery of services through digital channels such as the establishment of banking agent closer to markets. This can increase opportunities for informal entrepreneurs to do banking without having to travel far to access financial services.


This article was first published in the Post-Courier’s 15 October 2020 edition and on its website’s commentaries and features page.