In May, US-based blockchain firm, Ledger Atlas, inked a memorandum of understanding (MoU) with the Port Moresby government for the company to design the operational guidelines for PNG’s planned blockchain-focused special economic zone (SEZ).
As the country’s first SEZ of this kind, it is intended to serve as a global financial centre for blockchain activity, enabling tech solutions to be developed in an incubator-like environment. The Finschhafen district on the north-east coast of the Morobe Province has been proposed as a suitable location.
US venture capitalist Tim Draper has also committed to providing financial support for the project, with further backing expected to come from other offshore investors.
“Technology is the future of any country,” Rainbo Paita, the member of Parliament for Finschhafen, told press following the signing of the MoU. “We are a small country, but that does not mean we shouldn’t take bold and calculated risks.”
Blockchain solutions to improve financial inclusion
New blockchain solutions and devices are already being trialled in PNG as part of the government and central bank’s efforts to foster financial inclusion.
One such project is IDBox, which is currently being tested in the remote village of Lalaura, six-hours east of Port Moresby in Central Province. The solar-powered unit formulates a unique ID – created with a map of their phone and fingerprints – that allows users to access financial services such as micro-finance, micro-insurance and remittances services.
Initiatives such as these could take advantage of the fact that mobile coverage is available to 90 percent of the population, according to data released by the Ministry of Communications and Information Technology in mid-May.
By contrast around 85 percent of the population remains unbanked, as per Bank of PNG data, with one of the contributing factors being distance from formal banking facilities: less than 20 percent of PNG’s 8m-strong population live in urban centres with easy access to bricks-and-mortar financial services.
Given its potential to bridge the existing shortfalls in financial inclusion, the central bank is supportive of the use of blockchain technology in tools such as IDBox.
“We are undertaking research to carefully consider blockchain as a technology to achieve our objectives of financial inclusion,” Loi Martin Bakani, governor of the Bank of PNG, told an APEC dialogue on digital trade in Port Moresby in June.
However, to fulfil these ambitions and fully realise the potential of broader technological developments, infrastructure constraints must also be overcome. Electrical outages are not uncommon, and high internet fees tend to discourage fixed-line broadband penetration, which stands at less than 5 percent, and limit access to online services.
PNG looks to lead region in fintech development
PNG’s adoption of blockchain technology in financial technology (fintech) solutions could serve as an example for the wider region, as many APEC member counties also experience low financial inclusion rates.
One of the main outcomes of the APEC senior officials meeting in 2018, which was held in Port Moresby at the end of May, was a joint commitment to promote cooperation in bridging the digital divide. By working together, it is hoped that the member states will be able to harness the opportunities of the digital economy.
If successful, the fintech solutions currently being tested in village communities in PNG could be implemented elsewhere, potentially helping boost financial inclusion in other countries.
This Papua New Guinea economic update was produced by Oxford Business Group.