Payday Lenders in Papua New Guinea

The search for money by urban Papua New Guineans has been accompanied by the ongoing laments in popular discussion and the media about payday lenders — the money lenders described by Goddard (2005), not the informal and rather benign loans among friends and relatives documented by Strathern (1975). Tens of thousands of public servants have found themselves indebted to these lenders:

… Chief Secretary Isaac Lupari … told parliamentarians … that 80 per cent of the 76,000 public servants survived on borrowed money. … He said many of them had borrowed money from three to five different finance companies which charged interest rates ranging from 25 to 50 per cent. Mr Lupari said as a result of high loan repayments, ‘the net pay some of them take home each fortnight on average is K50 or none’.

It is common for payday lenders to charge 10 per cent per fortnight and to add a further 10 per cent for each fortnight that the loan continues to be outstanding. Others charge a flat 30–40 per cent premium on the entire sum of the loan. Repayment of such loans is difficult and can trap borrowers in cycles of recurring debts. For both commercial banks and payday lenders, high interest rates reflect high risks of default, particularly with larger sums of money that cannot simply be collected from fortnight to fortnight.

Leave a Reply

Your email address will not be published. Required fields are marked *