Centre for Excellence in Financial Inclusion

CEFI

CEFIRural communities in Papua New Guinea (PNG) often face cash scarcity. Many people in these communities don’t have a bank account, mostly due to the absence of banking services and accessibility constraints imposed on them by poor infrastructure. There are high expectations when it comes to social obligations, making saving for important needs as they arise a major challenge.

To fill this gap in the market, financial institutions offer contractual savings products that allow account holders to save for certain purposes. There is a Christmas savings account that only lets customers make withdrawals from November to January, and a school fees savings scheme that only allows for payments to be made directly to schools to pay the fees. Given the strong communal structures in PNG, these accounts serve as an important safety net for account holders to ensure that savings are kept for particular needs.

MDF has partnered with the Centre for Excellence in Financial Inclusion (CEFI) to collaborate in developing and rolling-out a similar contractual savings product to increase farmers’ ability to purchase seed and other agricultural products. MDF will help with analysing the market and assessing the challenges faced by financial institutions introducing a similar product in the volatile agricultural sector. The product would potentially be a contractual account that will allow farmers to save money to purchase inputs at a time they decide and as permitted by the contract; it will take into account agricultural cycles, seasonal variations, accessibility of financial service providers, other sources of income and savings patterns for farmers. The assessments will lead to a product prototype that is attractive to financial institutions and suitable for farmers.

CEFI was established in 2013 and is endorsed by PNG’s National Executive Council, as the industry apex organisation for coordinating, advocating and monitoring all financial inclusion activities in PNG. CEFI’s vision, mission and values focus on financial inclusion and literacy, poverty alleviation and the promotion of vibrant financial institutional operation in PNG.

The development of this product will be the first of its kind in PNG. It will seek to address the financial constraints that farmers face in making payments for inputs which greatly affects their ability to get higher income from agriculture. With CEFI being a non-commercial entity, MDF will provide support to engage stakeholders in the financial and relevant non-financial sectors from development through to roll-out of the product prototype. Based on the product prototype and interest of the financial institutions, MDF will then support CEFI to introduce the product to cash-crop and fresh produce farmers in areas where there is potential for uptake. Following on from the successful development of the product, a marketing strategy will be designed to encourage behavior change towards a savings culture in rural communities.

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