The 22nd Conference of Asian Credit Supplementation Institution Confederation November 9 13, 2009 Taipei, Taiwan (R.O.C.

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1 Questionnaire on Credit Supplementation System & the 22nd ACSIC Conference s Theme Please send this form via by July 15, 2009 to: The Secretariat The 22nd ACSIC Conference Small & Medium Enterprise Credit Guarantee Fund of Taiwan 4F., No. 6, Sec. 1, Roosevelt Rd., Taipei City 10066, Taiwan (R.O.C.) Tel.: ext. 563 or 229 Fax: acsic22@smeg.org.tw Website: Name and Address of Institution Name of Institution: Address of Institution: Representative: Small Business Development Corporation P O Box 286, Waigani, NCD Mr. Diri Kobla Telephone No.: Fax No.: URL: dkobla@sbdc.gov.pg Contact Person Name: Nathan Timo Position: Manager Business Development Services Telephone No.: Fax No.: ntimo@sbdc.gov.pg 1. History of the system: a. Establishment Questionnaire on Credit Supplementation System p. 1/9 Institution: 12.SBDC

2 The Small Business Development Corporation (SBDC) of Papua New Guinea was established by an Act of the National Parliament of Papua New Guinea on the 25 th April, 1990 to address the serious lack of accessible credit facilities that was facing small indigenous businessmen and women faced in securing credit from established commercial banks who required an established credit rating, higher equity contribution and some form of security or collateral. b. Changes There has been no major changes to the organisation of SBDC in the last five (5) years. 2. Objective of the system The primary objective of the establishment and operation of the SBDC credit guarantee schemes was to assist Papua New Guinean small business men and women who required financial assistance to either establish their business or expand existing businesses but did not have sufficient equity or collateral to meet the normal commercial banks requirements. 3. Items of your business There is only one (1) Business Credit Guarantee system being provided by SBDC. This is known as the: (1) Small Business Credit Guarantee Scheme (SBCGS) (2) SBDC also provides a entrepreneurial business training program known as the SIYB. This stands for Start Your Business and Improve Your Business and is conducted with the administrative support of the International Labour Organisation (ILO) and with funding support from the Australian Government through its donor agency, AusAID. The training has now become a prerequisite to obtaining further financial support for interest applicants. (3) Through an extensive network partnership arrangement of Small Enterprise Development agencies (SED), Non Government Organisations (NGO) and Business Development Officers working for the Department of Commerce, we provide extension services to small businesses in terms of bank loan proposals, cash flow, book keeping etc. p. 2/9 Institution: 12.SBDC

3 4. Organisational overview a. Legal background, corporate status and law The Small Business Development Corporation was established by an Act of Parliament in The Government has also made SBDC the lead implementation Agency for the promotion and development of the Papua New Guineas SME Policy. b. Competent Authority The Managing Director of the SBDC is responsible for the day to day administration of the organisation. The MD report to a Board of Directors who set out the overall policy direction of the SBDC. The Board report annually to the Minister for Commerce and Industry as the Small Business Development Corporation comes under the Ministry of Commerce and Industry. Under this Ministry we have sister organisations such as the Investment Promotion Authority (IPA) and the Industrial Centres Development Corporation (ICDC) who compliments and enhance the work that SBDC does. p. 3/9 Institution: 12.SBDC

4 c. Organisation Chart Number of Staff: 35 SMALL BUSINESS DEVELOPMENT CORPORATION ORGANISATIONAL STRUCTURE MINISTER FOR Commerce & INDUSTRY SBDC BOARD Managing Director Manager Corporate Services Manager Business Development Services Manager Small Industry Centre Chief Technical Advisor- Manager Informtion Training Services Chief Technica l Advisor Accountant FIS SED Network Res. & Infor. Micro Ent. SIYB Training Correspond. Course Co- Network Partners throughout Papua New Guinea p. 4/9 Institution: 12.SBDC

5 d. Affiliated companies There are no affiliated companies to our organisation. SBDC is a government Statutory organisation tasked with the responsibility of developing and promoting the small to medium enterprise sector and reports directly to the government through the Minister for Commerce and Industry. 5. Capital a. Source of paid-in capital Nil, SBDC is a government institution funded through an annual budgetary allocation. Some donor funds are received for specific projects for example, business skills development training. b. The amount of capital (as of December 31, 2004) Nil c. Recent increased capital 6. Outline of the system, Refer to 7 (a) p. 5/9 Institution: 12.SBDC

6 7. Operational of the System a. Schematic flow Chart of SBDC Guarantee Operations diagram SMALL BUSINESS DEVELOPMENT CORPORATION GUARANTEE SCHEMES OPERATION GOVERNMENT OF PNG SBDC (Guarantee) PFI (Commercial Banks) Small Business Loans Clients b. Brief explanation The Government of PNG provides the funds that SBDC uses as guarantee with the participating Financial Institution (PFI s) who lend to clients who have received some business training from SBDC. Repayments go back to the bank. A fee is collected by SBDC initially. p. 6/9 Institution: 12.SBDC

7 8. Eligible conditions for guarantee/insurance service a. Enterprises New start up businesses or existing businesses that want expansion but lack adequate collateral to meet normal Bank requirements. Must have minimum 20% equity of total project cost. b. Financial facilities SBDC only provides guarantees. The actual funding facility is provided by the participating financial institution on their terms. This covers both long term fully drawn loans or short term overdrafts. c. Eligible financial institutions There are four commercial banks and one (1) National Development Bank that participate under the guarantee scheme. The main criteria is that SBDC provides 80% guarantee with 20% equity from the proponents. d. Maximum amount In local currency, between K5, to K60, e. Insurance premium SBDC charges a 1% guarantee service fee to the finance institution client. The PFI change an establishment fee of K100 per approved loan application. f. Collateral and Guarantor SBDC provides the collateral for new start businesses on the ration of 4:1 between SBDC and the proponents. g. Credit investigation Both SBDC and the PFI carry out a thorough credit check on borrowers using the following process. 1. Company profile analysis 2. Business strategy analysis 3. Application of Funds Analysis 4. Loan Collateral Analysis 5. Cash Flow Analysis p. 7/9 Institution: 12.SBDC

8 6. Other Matters h. Leverage ratio SBDC guarantees up to four times the loan amount. i. Guarantee coverage SBDC provides 80% guarantee of finance projects. j. Sources of income The main source of funding for SBDC is through the governments budgetary allocation. 9. Payment under insurance a. Conditions for payment All funded projects are managed by the participating financial institutions on their terms. This includes confirmation of insolvency and disposal of security. b. Coverage payment Same as above. 10. Recovery of payment The recovery of payment is entrusted to the participating financial institutions because they fund and manage projects on their terms. 11. System problems 1. Lack of continued and sustained funding from the Government of PNG. 2. Lack of markets and infrastructure for small businessmen and women 3. Lack of information on markets, products etc., 4. Lack of business knowledge and technique 12. Latest operational results: Unable to Update p. 8/9 Institution: 12.SBDC

9 Questionnaire on the 22nd ACSIC Conference s Theme The theme of the 22nd ACSIC Conference: The Measures Taken by Credit Guarantee/Insurance Systems to Exert the SME- Assistance Functions during the Global Financial Crisis. Please describe SBDC s efforts towards the current global financial crisis (1) Have SMEs in Papua New Guinea faced difficulties under the current global financial crisis? YES NO (2) Has SBDC implemented (or plan to implement) programs to support those SMEs? YES NO (3) What kind of measures has SBDC taken to support those SMEs? Enhancement of existing programs Establishment of a new program (4) Please describe the details of the measures of (3) and indicate whether they are conducted under SBDC s efforts or as a part of government s policies. Enhancement of existing programs By SBDC s own effort As a part of the government s policy Establishment of a new program By SBDC s own effort As a part of the government s policy p. 9/9 Institution: 12.SBDC