stimulus can lead to an exhilarating temporary burst of economic activity. but it will almost certainly also lead to inflation - related distortions that undermine both the expansion and the economy ’ s efficiency over the longer term. the end result, as we know only too well from past experience, is high interest rates, punishing debt loads, recession, and higher unemployment. a further complication is that it takes between a year to a year and a half for the economy to fully respond to changes in the degree of monetary stimulus. in this sense, the economy is like a car that doesn ’ t respond immediately when you ease off on the accelerator but only a mile or so further down the road. with such a car, you want to be able to look a long way ahead to see what is coming, and you want to take action early to ensure that your speed is appropriate. this is why monetary policy must focus on the future, rather than the present, and why the bank must act in a forward - looking, pre - emptive manner. in other words, if we want our economy to reach full capacity relatively smoothly, without the risk of repeating the painful, inflation - related boom and bust cycles of the past, we must be ready to take timely action. if we wait to act until the economy is going flat out and pressing hard on the limits of its capacity to produce, we will have waited too long. thus, some combination of a further rise in short - term interest rates and an increase in the value of the canadian dollar will likely be necessary in coming months. i hasten to add that such a rise in short - term rates is the best way to preserve medium - and long - term rates at low levels. and it is these longer - term rates that are so important for the investments in new technology and other initiatives to increase productivity that canadian businesses need to stay competitive. let me reassure you that we are not talking about anything like the short - term interest rate increases that we saw in the 1970s and 1980s, or even in 1995. in an environment of low inflation and improved fiscal health, interest rates should not have to get that high again. you will not be surprised that i cannot give you in advance precise information about any further action the bank may take to reduce the amount of monetary stimulus in the economy. what i can tell you is that it is the strength of the momentum of demand, and thus how quickly the economy approaches the limits of its capacity to meet that

is research and documentation that suggests a link between financial development ( or accessibility to finance ) and reduction of poverty and indeed financial access does facilitate growth. 3. 0 providers of financial services financial accessibility and access to financial products in papua new guinea is provided through 4 commercial banks, 11 finance companies, 7 superannuation funds, 6 life insurance companies, 2 licensed microfinance institutions and 20 savings and loan societies. each of these entities complement each other in the different services and target specific market segments. of interest to the bank is the growth of these financial service providers side by side yet find enough competitive opportunities to service a virtually large unbanked population of png. for example, in a number of centres, banks, finance companies, savings and loan societies and microfinance institutions are operating quite successfully next to each other. in kokopo and kimbe this is most obvious. 4. 0 legislation there is no separate legislation for the microfinance industry and only two deposit taking microfinance institutions are licensed by the bank of papua new guinea under the banks and financial institutions act 2000 in the same fashion as commercial banks and financial companies. savings and loan societies are administered under the savings and loan societies act which is in its financial stages of a review to “ modernize ” the legislation. 2 licenced micro - banks in papua new guinea are : ( i ) png microbank limited is owned by the png sustainable development ltd ( 49 % ), bank of south pacific limited ( 32 % ) and international finance corporation ( 19 % ). ( ii ) wau microbank limited was licenced as a pilot project. ( more on this later ) 5. 0 challenges for the microfinance industry a major challenge for the microfinance industry and particularly for the two ( 2 ) licensed microbanks is to ensure that in their quest to expand the branch network ( outreach ) to rural and other areas where banking services are not available, they must ensure sustainability. i have already mentioned the pitfalls of reliance on subsidies and other market distortions. financial literacy. i believe it is also our duty to educate the public in financial matters to enable them to make informed decisions about their financies. dangers of fast money schemes. the public / your stakeholders should be continuously advised to place their money with licensed financial institutions and beware of fast money schemes or scams that often make false promises of paying high returns in a very short time. to educate the public on the dangers of investing