Post on 22-Dec-2021
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
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 3
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)
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 4
• 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…
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 5
• National ID cardscovering ¼ of adults
Family book: example from a rural family
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• Listing family members→• Cover page↓
Limited and shallow access to formal financial services in Laos and Thailand (Lao workers)
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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
Opportunities & Challenges
Policy recommendations
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 8
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
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 9
Goal: transactional account /For all / Ubiquitous / 0 maintenance fee / Pay-as-you-go
E-Money
Cardless?
Agents
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 10
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
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 11
% 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
Opportunities & Challenges
Policy recommendations
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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
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
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Thank youAlberto Isgut isgut@un.org
Economic Affairs Officer,
Macroeconomic Polity and Financing for Development Division, UN-ESCAP
Cedric Javary cedric.javary@gmail.com
Independent consultant +856 20 7721 7318
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Backup
Laos G2P/G2B - UN-ESCAP PNH 09Dec20 18
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?
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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
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