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No More “Torn Trousers”: Public-Private Cooperation, an Approachable Way for Financial Inclusion in the Pacific

Vivid sunset at Ela Beach, Port Moresby, ©Christine_Gneh/Shutterstock

By Chen Jinyu

Jinyu, if we can source more funding from public and private financiers, we can facilitate more small loans to the local small and medium-sized enterprises (SMEs), which could expand their businesses, or even further improve their family life,” my supervisor at the United Nations Development Capital Fund (UNCDF) told me.

While designing loan guarantee programs for smallholder farmers and SMEs in Papua New Guinea, I sometimes find these stories relatable, to me, and my family. In the place where I am from, we share a plain and simple idiom in Cantonese – “Those who work hard never believe they will wear torn trousers their whole life, but that they will eventually climb up the social ladder and achieve triumphs”. My grandma is a firm believer in hard work. And because of her hard work, in the late 90s, she and other farmers in the village brought out the collaterals of the whole community to the table and negotiated with the local cooperative bank for a loan to build a primary school. That school later marked the starting point of my education journey, and later, I became the first college graduate and the first to study development financing in my family.

Hard work alone cannot guarantee a future of “no torn trousers”. As our financial sector develops, it is always easier for those who have already owned capital assets to invest and borrow money.[1] For those underprivileged, the challenge is and has always where to find sufficient collateral to meet the bank loan requirements so that they can pay for their business essentials (e.g., fertilizers, pesticides). If access to finance is blocked, it is harder to build a sustainable business, which leads to zero future investment in households or even to no education for the next generation. At the end of the day, the poor will stay poor and find themselves caught too deep in the poverty trap.[2]

Face the reality: imbalance of attention across the globe and public/private finance

Recently, more and more stakeholders have recognized the roles SMEs can play in development – job opportunity stimulus, poverty alleviation, inequality reduction-, and the investment starts to pour in, especially, in Africa. So far, Africa has attracted investment funding up to USD 502 billion per year.[3] Such investment has strongly empowered the growth of African startups in energy, microfinance, and financial services. [4]

Outside Africa, the small island developing states (SIDS) in the Pacific – countries less present in news-, also wait for more investment support. Over the past years, the amount of investment into Pacific countries mainly comes from Australia and has decreased by 33% in 2019.[5]

Let’s take the country of focus of my internship as an example. In Papua New Guinea, the development financing options are regrettably limited and rather homogeneous. The official development assistance (ODA) in Papua New Guinea is mainly from Australia and New Zealand.[6] The core international private finance source of Papua New Guinea is philanthropic organizations.[7] However, the world needs public finance from donor countries, but we also need private finance to come and participate in the exciting development journey, as the case of Papua New Guinea illustrates.

Capacity Building: empowerment of a whole-life-cycle development

Look for opportunities and make them visible. Illiquidity in the developing market often scares away private investors. Compared with African countries, Pacific Island countries tend to have more asset liquidity. For Papua New Guinea, it even faces excess liquidity.[8] To solve the problem, in the 2021 Budget Plan, the government aims at increasing investable projects within the country.[9] While pitching new proposals with potential funders, I find that a lot of investors are not yet aware of this point. Hence, in this case, international multilateral forums connecting public and private sectors would be extraordinarily helpful. Between these forums, UNCDF and other practitioners that have built partnerships with both governments and private investors could further extend their roles and thus facilitate future investments.

Teach them how to fish instead of giving them fish. In Papua New Guinea and other Pacific Island countries, there are challenge funds and enterprise grants set up by international public and private financiers. The purpose is to attract innovative proposals and support the startup business. But grants alone are not a once-for-all solution. We need customized financial products to unlock future financing for these SMEs. How to do that? Development organizations have already been expert at blending public and private finance into in-time support. Backed up with financial resources and credit of its own, a development organization can offer a guarantee program to the SMEs and cover the repayment risks for them at the bank’s request. In the meantime, SMEs receive technical assistance from these organizations, safeguarding the full-cycle growth of the business. Therefore, for investors that wish to have an impact, organizations of this kind are a great option as they teach the startups how to finance themselves.

With funding from donors and private investors, we already see a positive impact from UNCDF projects. Microfinance institutions such as Women’s Micro Bank Ltd. are installing new bio-metric bank access points in Papua New Guinea. It is now easier for the local SMEs to save money, establish a credit record, apply for loans, and expand their businesses. Fintech companies such as SkyEye Pacific, receive tailored financial products and assistance from the UNCDF. It has set up an address system for Solomons Islands, empowering the local logistics business.

The significance of connecting public and private sectors together is not only to help the SMEs, but also to unlock financial resources for many others. So that we will always be one day closer to make a difference to an individual family, and much closer to the SDGs 2030. And just as what the Cantonese love to say, hopefully, one day, no one ever wears torn trousers again.


[1] George R. G. Clarke, Lixin Colin Xu, and Heng-fu Zou, “Finance and Income Inequality: What Do the Data Tell Us?,” Southern Economic Journal 72, no. 3 (2006): 578–96, https://doi.org/10.2307/20111834.

[2] Banerjee, Abhijit, and Esther Duflo. 2012. Poor Economics. New York, NY: Public Affairs.

[3] “Impact Investment Favours Expats over African Entrepreneurs. Here’s How to Fix That,” World Economic Forum, accessed September 28, 2021, https://www.weforum.org/agenda/2019/07/impact-investors-favour-expats-over-african-entrepreneurs-here-s-how-to-fix-that/.

[4] “2020 Annual Impact Investor Survey,” The GIIN, accessed May 2, 2021, https://thegiin.org/research/publication/impinv-survey-2020.

[5] “Asia-Pacific Trade and Investment Report 2019: Navigating Non-Tariff Measures towards Sustainable Development | ESCAP,” accessed September 28, 2021, https://www.unescap.org/publications/APTIR2019.

[6] “The Curious Case of Aid Concentration in Papua New Guinea | The Interpreter,” accessed October 1, 2021, https://www.lowyinstitute.org/the-interpreter/curious-case-aid-concentration-papua-new-guinea.

[7] The author screened all the multilateral financing institutions (MFIs), private investors, philanthropic foundations that had/still have development assistance programs undergoing in Papua New Guinea. Findings show that there are two private investors, seven philanthropic organizations and four MFIs.

[8] “Papua New Guinea,” IMF, accessed September 28th, 2021

https://www.imf.org/-/media/Files/Publications/CR/2020/English/1PNGEA2020001.ashx.

[9] “2021 National Budget,” Department of Treasury, accessed October 2, 2021, https://www.treasury.gov.pg/html/national_budget/2021%20National%20Budget.html.

About the Author

Chen Jinyu is currently a financial inclusion intern with UNCDF PNG. Besides, she is a second-year master’s student in the dual degree program between Sciences Po and Peking University. Coming from Guangdong China, Jinyu is too young to remember the poor living condition but old/lucky enough to enjoy the development benefits. She is always curious about the world and how we can make it a better place.

*This Blog Entry was selected for publication under the call with the subject: What Future for Global Public-Private Cooperation?