Papua New Guinea’s National Development Bank has the “most-atypical business model of the four banks” studied in the Pacific, according to the Asian Development Bank, The National reports.
Four Pacific development bank state owned entities (SOEs) – Development Bank of Samoa (DBS), Marshall Islands Development Bank (MIDB), Tonga Development Bank (TDB) and NDB are studied in ADB’s Finding Balance: Benchmarking the Performance of State-Owned Entities in Papua New Guinea report released last Thursday,
“It (NDB) receives most of the money it lends through government grants that are designated for specific ‘loans’ rather than making and assessing loans based on a traditional development bank model,” the report says.
“It does not borrow to support its lending activities as these are financed by ‘client’s trust funds’ amounting to US$5.4 million, on which it appears to pay no interest.
“Its assets include 36% property and plant, 17% deferred tax benefit, and 31% in loans.
“The NDB’s lending activities have been consistently loss-making, with the bank carrying US$52.8 million of accumulated loan losses in FY (financial year) 2009, almost equal to its paid-up capital.
“From FY2002-FY2009, NDB also wrote off K34 million in bad debts and achieved the lowest return on equity (ROE) among the banks reviewed in this study.
“The NDB has incurred operating loss annually from FY2002-FY2009.
“This poor performance continued in FY2009 with a ratio of non-performing loans to total loans of 54%.”
“This compares with 7% for MIDB, 8% for TDB, and 11% for DBS.”
The report said TDB – by keeping close to its core mandate and following a robust commercial model – was in contrast able to pay to its shareholder a special dividend of US$5.8 million in 2009 on top of ordinary dividends of US$0.9 million and achieve a 9.42% ROE.”