SME Access to Finance Project — Papua New Guinea's Risk-Share Loan Guarantee Facility, and Its Overstated Results

Papua New Guinea's small and medium enterprises have long struggled to access credit: one commercial bank, Bank South Pacific (BSP), controlled half the financial sector, and customary constraints on acceptable collateral further narrowed lending. In 2011 the World Bank approved an IDA credit for the SME Access to Finance Project, centred on a Risk Share Facility (RSF) that shared the credit risk on new SME loans with participating banks, alongside a smaller pilot microfinance component.

The RSF was designed so BSP would hold half the facility, with two or three other commercial banks expected to join later. In practice, two of PNG's three other banks, ANZ and Westpac, scaled back their PNG operations during implementation rather than take up the product, leaving BSP as effectively the sole participant. The project also built in explicit tracking of lending to women-owned SMEs from the outset, deliberately avoiding mandated quotas.

Between 2012 and 2017 the RSF guaranteed an estimated 1,471 SME loans at an average size of PGK77,900 (about $22,194) — 74% of the original 2,000-loan target — with annualised loss rates averaging 3.1%. In guaranteed loan value, the facility reached PGK114.6m (about $32.6m) against a PGK250m ($71.2m) target, or 46%.

The World Bank's own Completion and Learning Review for its 2013-2018 country programme initially described the RSF as having guaranteed PGK492m ($140.2m) in SME loans, 'outperforming its targets.' A 2019 review by the Bank's Independent Evaluation Group (IEG) found the correct disbursement figure, per the project's own December 2018 status report, was PGK114.6m — roughly a quarter of the claimed amount — and downgraded the country programme's financial-sector results objective from 'Achieved' to 'Partially Achieved.' The project's overall outcome was separately rated Moderately Unsatisfactory.

The underlying instrument outlived the disappointing first outing: two follow-on Risk Share Facilities launched in 2019, including one that brought interest rates on guaranteed SME loans down from over 30% to 5%, had guaranteed a further PGK70m (about $19.9m) by the time of review — evidence the redesigned model found more traction than the original.

Read the full analysis: https://ieg.worldbankgroup.org/evaluations/world-bank-group-papua-new-guinea-2008-23/chapter-4-supporting-growth-nonextractive