Papua New Guinea Financial Diaries: Preliminary Findings Joint - PowerPoint PPT Presentation

Papua New Guinea Financial Diaries: Preliminary Findings Joint Initiative of PFIP, BPNG and MFO

Purpose of Project Present a picture of the economic behavior and money management of PNG’s low -income population Develop an understanding of spatial and temporal aspects of financial behaviour Provide data to inform the design of financial products that meet the low income populations’ needs. Foster an enabling environment for financial inclusion in PNG that: • Delivers appropriate products to consumers • Offers them real consumer protections 2

Overview of Presentation Key Findings Participants in the Study Informal Financial Transactions Formal Financial Transactions Other Transaction Market Segments and Case Studies Implications Next Steps 3

Overview of Participants in Study Three regions: • Port Moresby • Kimbe • Goroka Urban and rural locations in each region Broad range of low-income livelihoods Both women and men sampled One respondent per household Data is individual not household 4

Key Findings: Informal Finance People average about 1 informal financial transaction per week • All recorded as person-to-person loans and cash transfers • No savings groups transactions in data Cash transfers and informal loans used to manage: • Cash flow • Emergency needs in amounts around PGK 50 • I.e. informal insurance through mutual support networks Transfers are highly localized 5

Key Findings: Formal Finance Few Licensed Financial Institution (LFI) transactions Transactions are driven by: • Requirements of palm oil buyers (NBPOL); and • Employers who make payments through direct deposits to accounts. In almost all cases people immediately withdraw the money deposited for them and spend it in town. Transactions are relatively large, averaging PGK 400 Transactions associated with purchase of goods/ services in urban locations - require longer-distance travel: 14km in Goroka, 16km in Kimbe, 4km in Port Moresby 6

Key Findings: Cash Flow and Lump Sums Transactions primarily cash PGK 245 average revenue per week Respondents face a lump sum expenditure of over PGK 100 about once every three weeks Lump sums are financed through: • Cash flow • LFI transactions No evidence financed through informal loans or cash transfers. 7

Preliminary Findings: Market Segments Respondents whose income is dominated by … • Lump sum agriculture sales proceeds, such as palm oil sales (18 respondents) • Salaries and wages (53 respondents) • (Informal) Business revenue (163 respondents) • No reported earned income (4 respondents) Segments overlap • 44 salaried and wage workers have a business • 5 salaried and wage workers have a business and sell palm oil • All but one palm oil seller reported other business income 8

PARTICIPANTS IN THE STUDY 9

Location Men % Women % Total Goroka 44 51% 43 49% 87 Kimbe 44 50% 44 50% 88 Port Moresby 33 52% 30 48% 63 Total 121 51% 117 49% 238 • Average age 40 years (+/-) 10

Education Levels Number % None 51 22% Other 3 1% Primary 102 44% Secondary 78 33% Grand Total 234 100% Missing 4 11

Access and Use of Mobile Phone 84% of men and 66% of women reported access to a mobile phone. 85% of rural respondents and 70% of urban respondents reported access to a mobile phone 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Male Female <30 31 - 40 41 - 50 51 -60 >60 Urban Rural Gender Age Group Location Receive Calls Make/ Receive Calls Make/ Receive Calls + Text Make/ Receive Calls + Text + Payment NB. Data from Financial Competence Study 12

Individual Revenue per Week (PGK) Net Revenue Goroka Kimbe Port Moresby Women 399 77 269 Men 409 168 282 Net Income Goroka Kimbe Port Moresby Women 261 55 228 Men 217 139 184 13

Main sources of Revenue by Location Goroka* Avg. amount per week Share of all site revenue • Betel nut sales PGK 64 15% • Cigarette sales PGK 48 12% • Beverage sales PGK 44 11% Kimbe • Palm oil sales PGK 27 25% • Fish sales PGK 12 11% • Betel nut sales PGK 9 9% PoM • Wages PGK 120 44% • Business sales PGK 50 18% • Flour sales PGK 12 4% * Goroka coffee sales analysis ongoing 14

INFORMAL FINANCIAL TRANSACTIONS 15

Informal Financial Transactions Number of Informal Transactions per Week Friends & Average Amount Family Associates Informal Goroka 1.2 per week 1 per 2.4 weeks 1.6 per week Kimbe 1.1 per week 1 per 7.1 weeks 1.3 per week Port Moresby 1 per 2.0 weeks 1 per 2.3 weeks 1 per week Dominated by person-person transactions No savings groups or other informal group-based financial activities reported 16

Gender Dynamics Within family transfers per week Giver Recipient Male Female Male 1 per 2.4 weeks 1 per 2.0 weeks Female 1 per 2.4 weeks 1 per 3.8 weeks Average amount of within family transfers Giver Recipient Male Female Male 32.6 57.2 Female 59.3 27.0 17

Informal Loan Amounts (PGK) Respondent Gender Family Friends & Associates Borrowed Lent Borrowed Lent Male 62 38 90 99 Female 36 37 130 116 Total 45 38 121 112 18

Informal Loans per Week Gender Family Friends & Associates Borrowed Lent Borrowed Lent Male 1 per 100 weeks 1 per 100 weeks 1 per 20 weeks 1 per 20 weeks Female 1 per 100 weeks 1 per 100 weeks 1 per 7.7 weeks 1 per 6.7 weeks* Total 1 per 100 weeks 1 per 100 weeks 1 per 10 weeks 1 per 10 weeks *Six respondents are market sellers who give loans to their customers 19

FORMAL FINANCIAL TRANSACTIONS 20

Bank Channels Withdrawals • ATM – 28% • Teller – 72% Deposits – almost all are direct deposits • NBPOL in Kimbe • Wage deposits in Port Moresby 21

Bank Transactions per Week Region Cash Deposits Cash withdrawals Male Female Male Female Goroka 1 per 50 weeks 1 per 12.5 weeks Nil Nil Kimbe 1 per 12.5 weeks Nil 1 per 5 weeks 1 per 20 weeks Port Moresby 1 per 100 weeks Nil 1 per 9.1 weeks 1 per 3 weeks 22

Average Amount of Bank Transactions (PGK) Region Cash Deposits Cash withdrawals Male Female Male Female Goroka Nil Nil 123 400 Kimbe 165 Nil 278 232 Port Moresby 350 Nil 237 448 23

Direct Deposits & Cheques Cashed Region Frequency Avg. Amount (in PGK) Male Female Male Female Goroka 1 per 50 weeks 1 per 10 weeks 123 333 Kimbe 1 per 5 weeks 1 per 25 weeks 344 225 Port Moresby 1 per 25 weeks 1 per 3.3 weeks 441 455 Most direct deposits and cheque payments related to palm oil sales in Kimbe and wage and salary payments in Port Moresby and Goroka 24

Distance Travelled for Financial Transactions Goroka Kimbe Port Moresby With Individuals 3km 1.5km 0.2km Banks 14km 16km 4km Round-trip bus fare for the typical trips to withdraw cash are about PGK 10 each way 25

Goroka Bank and Respondent Locations Respondent locations Bank locations 26

Kimbe Bank and Respondent Locations Respondent locations Bank locations 27

PoM Bank and Respondent Locations Respondent locations Bank locations

OTHER TRANSACTIONS 29

Lump Sum Transactions There were 287 expenditures that exceeded PGK 100 • We call these lump sum transactions • There was a lump sum transaction every 3 weeks Most of the lump sums were financed out of cash flow But 54 of the 287 occurred in weeks where respondents withdrew as much or more than the lump sum amount from a bank • A total of 48 bank withdrawals were used to pay for 54 lump sums 30

Emergency Expenditures Number Avg. Amount (PGK) Funerals 8 81 Hospital Bills 10 23 Medicine 41 5.5 Animal Medicine 1 14 Total 60 20 About one emergency expenditure every four months One large transaction of PGK 250 for funeral clothes Half were fully covered by a cash transfer from a family member, friend or associate 31

Diaries enables segmentation based on behavior , with a focus on cash flow CASE STUDIES AND TENTATIVE SEGMENTATION 32

Market Segments (tentative) Respondents whose income is dominated by … • Lump sum agriculture sales proceeds, such as palm oil sales (18 respondents) • Salaries and wages (53 respondents) • (Informal) Business revenue (163 respondents) • No reported earned income (4 respondents) Segments overlap • 44 salaried and wage workers have a business • 5 salaried and wage workers have a business and sell palm oil • All but one palm oil seller reported other business income 33

Segment Analysis Example 18 respondents in Kimbe research site conducted 28 oil palm sales Average sale amount was PGK 375 NBPOL paid farmer through direct deposit into a bank In almost all cases full amount was immediately withdrawn in Kimbe 34

Case Study: Palm Oil Sales Nonti lives near Kimbe and earns her living selling betel nuts and mustard in town, and palm oil She sells her palm oil to an NBPOL truck driver and receives a receipt for payment in return She travels 11km to Kimbe to withdraw the cash from a BSP ATM 35

Case Study: Wage Worker Isa earns PGK 270 every two weeks She spends most of her income in the first week She uses loans to cover her expenses in the second week 36