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2ND ANNUAL ASIA PACIFIC MICROFINANCE FORUM
Asia Pacific Microfinance Forum – Uniglobal is a leading knowledge sharing institution
The concept of microfinance is not new. The form of microfinance services we see today is largely derived from the community-based mutual credit transactions that existed centuries ago and that were based purely on trust and non-collateral borrowings and repayments. Today, microfinance services in PNG are supplied through the state-owned National Development Bank , five licensed microbanks, 21 savings and loans societies SLS and around 70 small community-based non-government organisations. While these financial institutions have successfully reached out to more than 43, microcredit borrowers and , depositors in PNG over the years, the microfinance industry has been facing the problem of disproportionately low demand for borrowings in comparison to savings deposits since inception. This implies that for every kina deposited in a microfinance institution MFI in PNG, only 55 toea are lent out as a loan to the public. The LTD ratio is usually used as a measure to evaluate the liquidity and financing structure of a financial institution, and to determine whether it is capable of self-funding or requires external financing.
Asia Pacific Microfinance Forum
Some of the biggest challenges MFIs struggle to overcome today are high operating costs, scalability and low earnings. And it is widely believed today that the provision of financial technology fintech innovations is expected to help MFIs reduce their costs, increase operational efficiency and remain competitive in the rapidly changing financial landscape. Additionally, new players like fintech-based lenders and mobile network operators are entering the microfinance industry and targeting the unbanked and the financially excluded segments.
Today Microfinance sector has undoubtedly become more dynamic so that the financing requirements are more complex. MFIs are undergoing various transformations in their structure; adapting their business models into different types of financial institutions such as small banks. The need for a well-functioning regulatory framework is evident. Transparent management of funding and a better functioning client protection mechanisms are increasingly in demand. Moreover, innovations in the financial sector help Microfinance clients have greater outreach and wider product offerings.