ABSTRACT
This chapter provides an overview of informal finance in Papua New Guinea with a view to learning from financial arrangements in informal subsector in order to throw more light on policies in the formal subsector. Financial markets in Papua New Guinea are characterized by duality. The informal financial market in Papua New Guinea consists mainly of relatively localized credit and savings transactions of money, real goods and labor services among members of extended families, clans and tribes, friends and relatives, and store owners. The existence of formal financial institutions that focus only on lending and do not mobilize deposits indicates that policymakers have failed to learn from the informal sector even the most basic lessons. Informal savings and credit arrangements in Papua New Guinea are influenced by a multitude of factors that include culture, the nature of the economy, educational level of the population, and lack of access to institutional sources.
