SME A CCESS TO F INANCE P ROJECT T O T HE I NDEPENDENT S TATE O F P APUA N EW G UINEA T HE RSF B ENEFICIARY S URVEY I MPLEMENTATION - 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 agribusinesses Exception: 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 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