PNG - Small and Medium Enterprise Access to Finance Project

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The objective of the Small and Medium Enterprise Access to Finance Project for the Government of Papua New Guinea (GoPNG) is to facilitate access to sustainable credit for Small and Medium Enterprises (SME) and thus contribute to incremental growth of SME employment and income. There are four components to the project: 1) risk sharing facility, this component will support newly originated SME loans by Participating Financial Intermediary (PFIs) in an estimated amount of up to PGK 300 million (approx. USD116 million). It will establish a Risk Sharing Facility (RSF) to partially guarantee a portfolio of newly-originated loans to SMEs and therefore encourage eligible local private sector commercial banks and finance companies to expand lending and leasing finance to SMEs. This is expected to immediately accelerate commercial banks' lending to emerging and established SMEs Under the proposed arrangements, International Finance Corporation (IFC) will cover 50 percent of all principal losses in the portfolio, resulting in an aggregate gross exposure of up to PGK 150 million (approx. USD58.4 million) for IFC.; 2) technical assistance for financial institutions is estimated to cost USD2.35 million, of which USD1.53 million will be financed by International Development Association (IDA) and GoPNG This component consists of performance-based technical assistance tailored to the first PFI, and potentially to subsequent PFIs; 3) Capacity building for SMEs is estimated to cost USD5.15 million, all of which will be financed by IDA/ GoPNG this component consists of four sub-components: (a) SME management and financial skills training; (b) focused SME mentoring and coaching; (c) targeted training for women entrepreneurs; and (d) support for provincial government commerce staff. SMEs in PNG face significant constraints in terms of business and financial management capacities; as such this component will aim to develop capacity for participating SMEs; and 4) support to GoPNG Department of Commerce & Industry (DCI) is estimated to cost USD7.44 million, of which USD3.56 million will be financed by IDA The purpose of this component is to upgrade DCI capacity to implement and monitor the project, and its capacity to implement an updated SME strategy and policy.