29 May 2016

Women's Business Leadership pilot project underway in Fiji

Pictured with the program participants are Lynette Mayne, Course Trainer (3rd from left); Vijaya Nagarajan, PSDI Gender Specialist (4th from left); and Valerie Mosley, Course Trainer (5th from left).
PSDI’s Women's Business Leadership pilot project was launched in Fiji today with 29 participants joining PSDI trainers for the first of three, two-day training sessions.

The year-long training program pairs participants with local and international business mentors and gains support from their employers to help see more women reach positions of leadership.

The pilot project is being replicated in Fiji having concluded in Tonga four months ago.

22 May 2016

Private sector assessment for Solomon Islands released

Further reforms to Solomon Islands business environment are needed to attract investment that will diversify the economy and grow the private sector, says PSDI’s private sector assessment (PSA) for Solomon Islands.

CLICK HERE to listen to PSDI's Paul Holden discuss Solomon Islands' reform achievements and the recommendations of this private sector assessment in an interview with Radio Australia's Pacbeat program. 

The report, Continuing Reforms to Stimulate Private Investment: A Private Sector Assessment for Solomon Islands, identifies reform initiatives previously undertaken by the Government of Solomon Islands as having enhanced the country’s business environment. It recommends further measures to attract investment and promote formal sector employment that can help alleviate poverty and promote growth.

“Solomon Islands has implemented many private sector development-oriented reforms that have secured tangible benefits for its economy and people,” said Hayden Everett, Senior Country Specialist at ADB’s Pacific Liaison and Coordination Office. “Building on those achievements and making it easier for businesses to start-up and grow in the formal economy offers a sustainable way to accelerate economic growth and improve livelihoods.”

The report provides a snapshot of Solomon Islands current business environment, with a particular focus on constraints to private sector investment and growth. It proposes responses to a range of challenges affecting the environment, including improving the financial system, making state-owned enterprises more efficient, enhancing access to skilled labor, promoting women’s economic empowerment, supporting competition, and modernizing the tax system.

The recommendations aim to inform discussions on future reform initiatives, with the report noting that capacity constraints will limit responses initially available to the government and the business community.

The report builds on a 2005 PSA for the country prepared by the ADB. It is the first of four PSAs PSDI is producing for Pacific island countries this year. PSDI's private sector assessments focus on institutional and policy reforms needed to remove constraints to broad-based private sector growth.

15 May 2016

PSDI's Peter Dirou discusses how PNG's new secured transactions registry will help extend access to credit

PSDI's Senior Financial Expert Peter Dirou has been interviewed by ABC Radio's Pacific Beat program about the recent activation of Papua New Guinea's Personal Property Security Registry.

“Lenders will use the registry to register their security interest in an asset that has been used as collateral by a borrower," said Peter.

"The generic term is ‘moveable assets’ … these are assets other than land and buildings, such as inventory, accounts receivable, contracts; the assets on the balance sheet where, typically, the value of a small business resides. It makes sense to be able to unlock the collateral value of those assets to increase finance in countries like PNG.”

Listen to the full interview here.

10 May 2016

PNG moveable asset registry goes live, completing its secured transactions framework

More businesses will soon be able to access credit in Papua New Guinea (PNG) following the activation of an online registry that enables lenders to easily accept moveable property, such as vehicles, machinery or stock, as collateral.

“The activation of this registry completes a new framework for lending that is safe, convenient, and sustainable,” said Hayden Everett, Senior Country Specialist at the Asian Development Bank’s (ADB) Pacific Liaison and Coordination Office. “As demonstrated elsewhere in the Pacific, making moveable collateral viable for lenders results in the extension of credit to new categories of borrowers and unlocks the value of so-called ‘dead capital’.”

The registry, together with the Personal Property Security Act that underpins it, allows lenders to quickly and conveniently secure their claim on non-land assets pledged by borrowers as collateral. Once registered, lenders can easily repossess these assets in the event of non-repayment.

As well as allowing lenders to register their security interest in a pledged asset, the registry also allows them to verify the asset has not already been pledged to someone else. It is expected that the convenience and accessibility of the registry will also encourage non-bank lenders, such as wholesalers and supply stores, to extend credit, as this can now be secured against their customers’ business assets or outputs.

The registry was launched and a test version made available to the public in January this year. It went live this week following the official commencement of the Personal Property Security Act.

Creation of the registry and passage of the act was led by the Government of PNG’s Department of Treasury, with support from ADB’s Pacific Private Sector Development Initiative (PSDI).

PSDI has been helping the country’s financial institutions make use of the new framework by assisting them to transfer existing loans to the registry, and by advising them on new loan products they can now offer. PNG is the eighth Pacific country that PSDI has helped establish a ‘secured transactions’ framework.

The registry is managed by the Investment Promotion Authority and can be accessed at https://ppsrpng.com

9 May 2016

Op-ed: Lending reforms can boost Pacific growth

With PSDI support, eight Pacific countries have now implemented
secured transactions reforms, which extend access to credit by
making 'moveable' property, such as machinery, crops or stock, viable
forms of collateral.
By Peter Dirou, PSDI Senior Financial Sector Expert, and Terry Reid, PSDI Business Law Reform Expert

Small and medium-sized enterprises in Pacific island states often find it difficult to get credit. Financial institutions in the region tend to view lending to smaller businesses as risky because, without land and buildings as collateral, the likelihood of repayment in case of default can appear low.

This situation is starting to change. Seven Pacific island countries have instituted a system to help lenders accept 'movable' property, such as vehicles, machinery or even accounts receivable, as loan collateral, and more are following in their wake.

Increasing access to finance will benefit business and promote growth. Finance enables entrepreneurs to start new businesses and expand existing ones. Businesses often need credit to buy equipment and for working capital to hold inventory and extend trade credit to their customers. Many farmers need credit to buy the seeds, fertilizer and feed needed to grow crops and raise livestock. This finance and credit may come from banks, finance companies or sellers of equipment, inventory, supplies and fuel. Without it, business opportunities can go to waste to the detriment of economic growth.

In January, Papua New Guinea became the seventh Pacific island economy to establish a framework for secured transactions. PNG's new web-based registry, within the context of the Personal Property Security Act passed in 2011, will allow lenders to safely and easily accept movable property as collateral and repossess and sell such assets if a borrower defaults. For lenders, this will reduce the risk of extending loans and increase the likelihood of being repaid.

For borrowers, the new arrangement will make it easier to access credit. For PNG, the framework will promote economic development by extending access to finance on commercial terms as has been the case in the Federated States of Micronesia, Marshall Islands, Palau, Solomon Islands, Tonga and Vanuatu.

Secured transaction reforms in each of these countries have been supported by the Asian Development Bank's Pacific Private Sector Development Initiative, a technical assistance facility supported by the Australian and New Zealand governments that addresses constraints to private-sector development. While lenders could already repossess movable assets offered as collateral and sell them to recover outstanding amounts before these reforms, this typically required the involvement of lawyers and the courts, making for costs and risks unacceptable to most Pacific lenders.

Under a secured transactions framework, lenders may seize pledged assets without a court order. Additionally, through online registries, lenders can quickly verify that the assets a borrower is offering as security have not already been pledged, adding another level of security. In the past, uncertainty on this point was often cited by banks as a major disincentive against lending because it was not uncommon for borrowers to pledge the same collateral to several parties.

PNG, along with Samoa, Fiji and East Timor, which are also in the process of instituting secured transaction frameworks, drew lessons from the seven Pacific island countries that have already enacted the reform. Lenders were approached early and advice provided to help them understand and apply the new framework.

So far, all the countries that have implemented the reform have benefited from increased lending, particularly to smaller businesses, the poor and women, who in the Pacific can be remarkably entrepreneurial.

As the new framework for lending allows borrowers to use movable assets as security for borrowing, it unlocks large amount of "dead capital" that was previously not usable as collateral for loans. Moreover, the reform promotes increased finance based on commercial lending that does not require government intervention or loan guarantees.

Another benefit of secured transactions, stemming from the convenience and accessibility of electronic registries, is that it encourages non-bank suppliers, such as equipment sellers, motor vehicle dealers, those who sell inventory to businesses and suppliers of agricultural inputs to extend credit to their customers secured against the output it is used to produce. For example, in Tonga, loans to rejuvenate and extend vanilla plantations are being secured against a pledge of future crops.

Establishing a secured transaction framework does not instantly expand access to credit. Lenders and suppliers need assistance to use the systems and encouragement to establish new loan products and credit services. Potential borrowers, especially SMEs, need to be made aware of how such frameworks can improve their access to credit. But in time, as much of the Pacific is discovering, these reforms expand and strengthen the business environment, spurring productivity, efficiency and poverty reduction.

This op-ed was first published in Nikkei Asian Review on 6 May 2016.