BY MAXINE KAMUS
The Bank of Papua New Guinea has launched a legal unit, the Credit Guarantee Corporation Limited, which will support government policy to develop and develop the micro, small and medium enterprise sector in the country.
The new entity’s acting chief executive, Dominic Sikakau, said 60% of the company would be owned by BPNG and 40% would be owned by the government through Kumul Consolidated Holdings Limited (KCHL).
He said that currently the Credit Guarantee Corporation Limited (CGCL) is 100% owned by BPNG pending KCHL to join the shareholding.
He said CGC will have its independent board and management separate from BPNG and the Central Bank will only be a shareholder.
“When the entity becomes fully operational in mid-2022, MSMEs will not come directly to CGC to access credit finance, but will go to existing financial institutions to apply for loans, and if MSMEs are successful, they are, but if MSMEs don’t have collateral when CGC steps in to share the risk with the financial institution,” Mr. Sikakau said.
He said this will encourage the financial institution to lend to MSMEs because if MSMEs do not repay the loan, CGC will pay 50% of the loss.
BPNG Acting Governor Benny Popoitai said the main objective of the CGC is to ensure that MSMEs can obtain financing for viable business investments and in particular to help MSMEs who are otherwise solvent but who do not have adequate guarantees to obtain a loan at a reasonable interest rate. .
Popoitai added that he hopes that providing guarantees and reducing risk for financial institutions through guaranteed payment, in the event of default, will lead to lower interest rates by existing financial institutions.