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Papua New Guinea's central bank and the Australian Government are investigating how a new technology could help impoverished PNG villagers engage with banking, finance and the broader economy.
Key points:
- Only about 15 per cent of Papua New Guineans have a bank account
- Rugged terrain of PNG makes it difficult for people to have access to financial services
- Australian Government allocated $200,000 to help investigate Blockchain technology
The Bank of PNG and an Australian aid contractor are looking at how Blockchain — a system of recording and validating online transactions — could dramatically improve PNG's low rate of financial inclusion.
Blockchain is a digital ledger that records transactions made in electronic, encrypted currencies — like Bitcoin.
Ultimately the project could see PNG leapfrog more developed economies, and provide a way to help people who are missing out on opportunities and services.
Currently only about 15 per cent of Papua New Guineans have a bank account, said the Bank of PNG — limiting peoples economic opportunities, as well as having broader implications for PNG's prosperity.
Loi Bakani, Bank of PNG's governor, said the rugged terrain of PNG made it difficult for many people to have access to financial services.
He said they hoped that introducing Blockchain, by the use of Bitcoins, could help to improve the problem in rural areas.
The Australian Government has allocated $200,000 to help the Bank of PNG investigate the possible applications of Blockchain technology.
Benefits in developing countries 'could be great'
It might sound strange for a country with low internet connectivity and poor rural infrastructure to be considering a cyber solution to its problems.
But Blockchain enthusiast Pip Ryan, from the School of Law at the University of Technology Sydney (UTS), said it could have greater benefits for developing countries, than for places like Australia.
"If you can get up a system that's secure and that can ensure transactions will occur when they should and the correct amounts and you trust it," she said.
"Then you can actually introduce banking services where they don't currently exist — I think it's a really positive move."
Blockchain can be used for more than just financial transactions — it can also be used to record and verify who owns assets.
Dr Ryan said that could help reduce disputes over land ownership, a common and economically debilitating problem in PNG.
"So the Land Titles Registry could be in charge of this and they could say, 'let's put the whole thing on the Blockchain and stop the arguing as to whether there are other interests on that land or disputes over ownership or boundaries'," she said.
But there are downsides to the technology that could affect its utility in PNG, and Dr Ryan said the primary one was cost.
"It's expensive. Anything you want to put on the Blockchain, it's going to cost money," she said.
"The fact that Australia is throwing some money at this and assisting is fantastic — it's going to take a fair bit of money to get started."
But she said she was confident that if Blockchain were introduced, Papua New Guineans would be able to use it, and it would make a difference to their lives.
"I think the take-up will be really significant once people realise the benefits of what they can prove, once they've got that technology," she said.
Working out the obstacles
Rabbie Namaliu Jnr is the manager of private sector innovation and economic growth at the Australian-funded PNG Governance Facility.
He said Blockchain would "hopefully" tell them whether the software would be a workable solution under PNG's current operating environment.
"Whether people can participate meaningfully in the banking system, if they choose to," he said.
"How money can be remitted internally and address some of issues of fraud and anti-money laundering.
"Also [if it will] meet compliance KYC, which is Know Your Customer standards that banks often have."
Mr Namaliu said the first task would be to work out which obstacles were preventing people from accessing financial services.
"What is the issue of financial inclusion? Is it around ID? Is it around access to internet or is it around access to power?" he said.
"How do you make banking cheap, or reduce cost of doing banking in the rural sector, that allows for people to be on the system.
"But at the same time offers a value proposition for our current financial institutions to provide that service to the 85 per cent that are unbanked."
Topics: business-economics-and-finance, consumer-finance, banking, industry, currency, money-and-monetary-policy, regional-development, computers-and-technology, papua-new-guinea