Enhancing capacities on digital G2P/G2B transfers and ...

UN-ESCAPPhnom Penh09 December 2020Session 2

Enhancing capacities on

digital G2P/G2B transfers

and digital international remittances in Lao PDR

Agenda

Diagnosis

Opportunities & Challenges

Policy recommendations

Laos G2P/G2B - UN-ESCAP PNH 09Dec20 2

Traditional GoL poverty reduction strategies rely on a geographic zoning of poverty


Graduation ladder out of poverty:PM decree No. 348/GOL, 2017

Households

Villages

Districts70%

70%

GoL not equipped to provide cash relief handouts to groups most affected by covid-19

• National Social Security Fund far from universal

• Coverage ~11% Lao population• 5% working age population

participating *2.3 covered• Mostly salaried workers

(still ½ not contributing)


• Poverty eradication strategies focused on provision of means of production• Loans from State-Owned Banks

Lao Statistical Bureau & ILO, Lao PDR Labour Force Survey, 2017

Savings & Credit market share of banks by outreachFinscope Laos 2014

Banque pour le Commerce Exterieur

Lao 41%

Lao Development

Bank 26%

Agriculture Promotion Bank 20%

Nayobay Bank 2%

Phongsavanh Bank 3%

ACLEDA Bank Laos 3%

Lao Viet Bank2%

Indochina Bank 1%

Others 4% Banque pour le Commerce Exterieur Lao 4%

Lao Developmen…

Agriculture Promotion Bank 44%

Nayobay Bank 26%

Phongsava…

ACLEDA Bank Laos 6%

Lao Viet Bank 2%

Indochina Bank 1%

Other…

Savings Credit

Lack of a digitized official ID system of individuals with a unique identifier • Family book universal

but…


• National ID cardscovering ¼ of adults

Family book: example from a rural family


• Listing family members→• Cover page↓

Limited and shallow access to formal financial services in Laos and Thailand (Lao workers)


Country 2019e share (%)

GDP 2019Cambodia 1,575 5.9

Lao PDR 285 1.5

Myanmar 2,840 4.3

Vietnam 17,000 6.5

Personal remittances receivedcurrent US$ million, WB

0%

20%

40%

60%

80%

Transactions

Savings

CreditInsurance

Remittances

Cambodia 2015

Laos 2014

Myanmar 2013

Thailand 2013

East Indonesia 2016*

Dimensions of financial inclusion, Finscope Laos 2014

• 36% banked in 2014, but…

Agenda

Diagnosis




Make digital finance work for the poor (1/2)

• Progresses on regulation• National Payments Systems Law November 2017• Standardization QR code January 2020• Payments Services Providers March 2020

licensing framework• Guidelines e-money upcoming• Guidelines agent-banking upcoming

• Active licensing• 7 e-money licenses / 4 MTOs• Non-banks welcome: 2 MNOs

• Consortiums for payments infrastructure• LAPNET: BoL 25% /UnionPay 15% /7 domestic banks April 2019• LAPASS: wholesale payments


Goal: transactional account /For all / Ubiquitous / 0 maintenance fee / Pay-as-you-go

E-Money

Cardless?

Agents


Make digital finance work for the poor(2/2)

Will DFS rocket outreach bridge the financial inclusion gap? Will usage follow?August 2020 All operators Unitel (Star Fintech)

• Number of digital wallets opened: 1,904,144 accounts 1,500,000

• Number of active users: 479,140 accounts 125,000

• Number of agents: 14,640 10,000


% unbanked?% poor?

% rural?

Who?

or?

3 million bank

accounts

Thailand>Laos remittances at the crossroad of Thai KYC and Lao control movements of capital

• Large volume corridor, critical lifeline for many poor householdsBefore covid During covid

• Official flow $285mn*⅔ ~1% GDP Parallel >>official? • Halving (WB)

• 281,000 Lao migrant workers under MoU + xxx illegal • 130,000 repatriated

• Parallel market better access & cheaperOfficial sector Parallel market

• Thai residency card to open bank account in Thailand • No KYC cash depositKYC by WU/Moneygram??? on Thai bank account

• Double whammy on FX rates: BoL rate +hefty margin • FX parallel market Laos

• SWIFT 2-3 days, WU/Moneygram 10mn but at agent • Near real timeLaos G2P/G2B - UN-ESCAP PNH 09Dec20 12

Fee 5,000 kip for 1,000 baht ≈1.7%

Agenda

Diagnosis




Policy recommendations for a conducive environment for G2P/G2B • No-frill accounts for all, with diverse offering

• Encourage cost-effective transactional accounts enabled by technology• Self-service account (young) /agent-assisted account (older, tech-adverse)• Pay-as-you-go, strive for 0 maintenance fee

• Tiered KYC to accommodate the population without [digital] IDs• Allow minimal account operations for undocumented customers• Leverage SIM card KYC currently underway /e-KYC https://simreg.gov.la/LaoKYC

• Ubiquitous coverage of physical touch points for e-money• Agent networks reaching out to the last mile• Trade-off liquidity – customer protection – agents’ formalism

• Financial and digital literacy Funding?Laos G2P/G2B - UN-ESCAP PNH 09Dec20 14

https://simreg.gov.la/LaoKYC

Use cases for modern payments with large business potential

• Large and developing need of domestic cash transfers• Premium price accepted over transaction at bank branch

• GoL payments/receipts actively digitized by MoF• Increase corporate tax collection → e-taxes

• TIN (Tax Identification Number) issued to all businesses registered with MoIC• SmartVAT /National Single Window /

• Broaden tax collection →leverage banks for road tax & land tax• Road tax killer product of BCEL BCOME in 2018 →APB, LDB

• PFM & centralization of GoL payments →opportunities for digital payments• Unitel awarded MoF contract payroll civil servants in 11 unbanked districts April 2020

Payroll of heads of villages in further 27 unbanked districts tbd

• Kick-off of social cash transfers under donors funding• Opportunity for digital financial services??? WB RRPM & IFAD AFN

UN JP ECGLaos G2P/G2B - UN-ESCAP PNH 09Dec20 15

Coordinated policy to shift TH>LA remittances to the formal system• GoL advocate towards GoT for Financial Inclusion of Lao

migrant workers

• Support partnerships Thai↔Lao financial institutions to create a simple cross-border transfer product

• Financial Inclusion module to migrant workers under MOU• Arrange before departure modalities for account-to-account

transfers


Thank youAlberto Isgut [email protected]

Economic Affairs Officer,

Macroeconomic Polity and Financing for Development Division, UN-ESCAP

Cedric Javary [email protected]

Independent consultant +856 20 7721 7318


mailto:[email protected]

mailto:[email protected]

Backup


GoL policies for digital society, but without a unifying grand vision• Digital economy and e-Commerce progressively shaping-up

• Division labour worked out MoIC MPT / MoST / BoL & MoF• PM Decree e-Commerce (MoIC) / e-Commerce websites certificates (MPT)

• MPT leading ‘Laos Digital Economy Masterplan’

• Test is level substance loaded onto 9th NSEDP

• Digital payments actively underway with National Payments Strategy• NPS 2021-2025 presented to Prime Minister 03 November 2020

• Digital identities system: a long way to go• Dichotomy MPS (Family book) /MoHA (national ID card)

• CRVS being upgraded with WB support (lifetime ID number, open architecture)

• Overhaul of existing official ID registries when?


Opportunity to piggy-back payments of Thai imports to Laos• Commercial banks vying to capture a lucrative large volumes market

• FX THB-LAK exception

• MSMEs inputs sourced from TH /middle-class Laotians in TH purchasing habits→large market for payments instruments

• Car leasing with structural currency mismatch

• Real-time cross-border transfer solutions…• Krung Sri – LDB API

• Kasikorn Bank real time transfer

• QR code interoperability BCEL-Thanachart

• … yet to be turned into end-to-end products• Banking partners managing their own market end

• Creativity needed to tackle roadblocksLaos G2P/G2B - UN-ESCAP PNH 09Dec20 20

Include remittances in interventions towards Lao cross-border migrant workers?• Regulatory approval for formal service that can compete with parallel

market• Infrastructure in place for account-to-account cross-border transfer

Krung Sri-LDB API + LAPNET interbank transfers• LDB e-KYC partnership

• Motivated private sector• See LDB and Unitel U-Money• Net-out outgoing payment flows from Lao importers

Lao stakeholders request• Request from LDB for advocacy support for end-to-end remittance solution

• Interest for IOM support for the Thai side

• Investigate MLSW/DSD and BoL Deputy Governor


Enhancing capacities on digital G2P/G2B transfers and ...

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