PNG's MAMA BANK, NKW Fresh, and PSDI help boost agriculture through tailored finance product
WAU, PAPUA NEW GUINEA (10 November 2022)—Vegetable growers in Papua New Guinea’s (PNG) Morobe province can boost production, grow their incomes, and expand their businesses after gaining access to new tractors through a tailored agriculture finance product developed by Women’s Micro Bank Limited (MAMA BANK), produce distributor NKW Fresh, and the Pacific Private Sector Development Initiative (PSDI).
Five small-scale women growers in Wau on 10 November 2022 received their new walk-behind tractors through an Agriculture Value Chain Finance (AVCF) pilot product, with 10 additional machines scheduled for delivery next week.
The new walk-behind tractors provided to women produce growers in PNG's Morobe province.
The AVCF pilot product, established by MAMA BANK and NKW Fresh and facilitated by PSDI, provides a solution to finance access issues for NKW Fresh’s small-scale vegetable growers.
It can also serve as a model for other PNG and Pacific banks seeking to expand credit access for small-scale growers and businesses.
“Local farmers play a major role in providing food for PNG, and it is evident that women agriculture producers play a key role in their family’s economic welfare,” MAMA BANK chief executive officer Gunanidhi Das said. “MAMA BANK is happy to work with NKW Fresh and PSDI on this AVCF partnership, which is helping women’s enterprises flourish.”
A produce grower in Wau tries out her new walk-behind tractor.
Most small-scale farmers struggle to raise financing to invest in machinery or new planting because they have no formal property rights and can’t provide land as collateral.
AVCF products instead use the grower’s contractual supply arrangement with a larger company or distributor as collateral for a business loan, enabling the grower to obtain capital, invest, and boost agriculture production.
In turn, banks and other lenders can work directly with the distributor—which often has a better understanding of the grower’s long-term output—and take advantage of PSDI-supported secured transactions frameworks to register their security interests over the grower’s contract.
Upon the sale of crops, individual loan repayments can be channeled from the distributor directly to the bank or lender, reducing lending risk.
The AVCF model can help expand credit access for small-scale growers and businesses.
“Under this model, farmers who were previously ‘unbankable’ can raise finance to expand their businesses,” PSDI Financing Growth Specialist Jeremy Cleaver said. “PSDI is pleased to support such an important initiative and innovative financial solution.”
NKW Fresh estimates that a farmer using the new machinery can cultivate more than four times more land in the same amount of time, resulting in more produce to sell.
“Using machinery on our half-hectare farmer incubation blocks can generate somewhere between 45,000 kina and 75,000 kina in annual income for the farmer—a significant boost,” NKW Fresh General Manager David Stewart said.
Mr. Cleaver said PSDI was also working with other lenders throughout the Pacific to develop similar AVCF products which provide financing to established value chains.
PSDI is an Asian Development Bank (ADB) technical assistance program undertaken in partnership with the Governments of Australia and New Zealand. PSDI supports ADB's 14 Pacific developing member countries to improve the enabling environment for business and to achieve inclusive, private sector-led economic growth.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.