It was a pretty big deal when UNCDF partnered with five banks in Uganda to design and roll out agency banking throughout the country of some 43 million people. With mobile money services active since 2009, the banks were eager to engage in branchless banking activities, pending the issuing of regulation from Bank of Uganda in 2017.

As a result, agency banking is now becoming business-as-usual in many areas there – thanks to the success of this UNCDF project.  PHB has been honored to contribute its consulting expertise to the strategy and design, the development and implementation of the pilot project, and then to the publication of the final report on this large undertaking.

The release of the report in February 2019, “Introducing Agency Banking in Uganda: A New Channel to Increase Financial Inclusion,” details expertise applied and learned in supporting the roll-out of agency banking from September 2016 to July 2018. “There are now hundreds of thousands of clients able to access the five partnering banks’ services remotely, through thousands of agents spread across the country,” said Ciprian Panturu, a partner of PHB Development who was embedded in the UNCDF project to manage the pilot and supervise technical assistance to participating banks. “PHB has worked with UNCDF in projects around the world, either by providing technical assistance to its partners or by managing projects. I’m glad they trusted our expertise once again – especially here in fast-paced Uganda – to help achieve the intended results.”

And, it should be mentioned that Ciprian is also lead author of the UNCDF report!

Results of the pilot were largely successful compared to similar initiatives in other countries. Factors in the success include application of previous experience in designing such a multi-stakeholder pilot, national conducive context, and there was a clearly identified need for such an alternative delivery channel from the financial institutions.

“We applied a combination of internal and external learning within the project: what we assumed during the design had been thoroughly tested and proven throughout the implementation of the pilots, and then adjusted to maintain a cohesive logic of the channel within the banks’ ecosystems” said Ciprian, “It was crucial to ensure that the banks had a head start with expertise accumulated through similar implementations, and hands-on support that they needed for this to be a success – and I believe this was delivered.”

Some of the key findings and confirmations from the Uganda Agency Banking report include:

Banks

• Agency banking is a complex channel to build, and banks should approach such transitions as aClients can now access banks’ services through agents around the country.

reshaping of their general strategies – with a human-centric design.

• Rolling out agency banking requires a sustained, flexible and proactive approach – along with regular operations. Banks needed to provide sound systems carrying relevant services, to monitor agents and their operators, as well as acquire, educate and retain customers. It is also important to understand that change takes time, and real proof of value comes only through verifiable results.

Agents

• Banks identified rural schools and savings and credit cooperatives (SACCOs) as ideal agents to start with, ensuring transaction volumes in addition to sufficient liquidity to handle them.
• Waiting times in agent onboarding may decrease motivation, and agency banking regulations requiring Bank of Uganda approval for each agent, as well as proof of having a regulated account for a minimum of 6 months, can make agent selection difficult in rural areas.

Customers

• Payments for goods, services, utilities and school fees attract early adopters – who also seek to avoid transportation costs and travel time. Established value chains should also be explored to increase adoption by new customer segments.
• Fewer women initially adopt the channel, but when they do, they make regular transactions. For example, female customers represented only about 20 percent of all customers at one bank, but 94 percent were active. In contrast, only about 56 per cent of its male customers were active.

The complete report “Introducing Agency Banking in Uganda: A New Channel to Increase Financial Inclusion” can be downloaded at the following URL (PDF). https://www.uncdf.org/article/4381/agency-banking-in-uganda-a-new-channel-to-increase-financial-inclusion

PHB’s track record of providing expert consultation for UNCDF includes the launch of digital financial services in Lao PDR over a four year period from 2014-2018. In Laos, PHB worked with a wide network of stakeholders for an extended period to help build the DFS ecosystem from the ground up. PHB also helped support a digital payment system with UNCDF from 2016 – 2018 in Benin for the Zem moto-taxi drivers and their passengers, thus increasing financial inclusion for essential service providers in the cities.

Lao PDR is taking steps to digitize its economy, as are all other ASEAN countries. PHB Development has worked in close consort over the past four years with UNCDF* to develop a Digital Financial Services (DFS) ecosystem in what was previously a greenfield environment for digital payments. Today there are tens of thousands of new DFS users, representing nearly 1% of the adult population who are regular users of DFS. Though the numbers are relatively modest, they are significant tailwinds in this growing success story.

The Digital Finance  Working Group was convened each quarter under the chairmanship of BOL as a forum for the DFS  industry to address opportunities and challenges related to DFS.

When PHB first engaged in Lao PDR in September 2014, nearby Cambodia already had providers like WING with 1.5 million mobile money subscribers. Meanwhile, in Lao PDR, there were no institutions offering DFS or branchless banking – and therefore no customers. This was partly because the Bank of the Lao PDR (BoL) had no regulatory framework for this burgeoning industry.

Digital Financial Services Ecosystem

Through PHB’s work within UNCDF and with BoL – across a wide network of stakeholders for an extended period – PHB was able to help catalyze the development of the DFS ecosystem from the ground up. As of October 2018, there were multiple bank-led DFS initiatives underway, and the largest mobile operator had launched the first-ever pilot of a mobile wallet under the authority of the Bank of the Lao PDR.

The four-year journey was led locally in Lao PDR by UNCDF under the directorship of the central bank, BoL “Businesses have increased confidence to make investments in the Fintech market here, and that is a big change. The work of all of these partners has created the opportunity for services like mobile money wallets, branchless banking, digital microfinance and QR code-enabled merchant payments to begin to flourish,” said David Kleiman, a PHB Senior Consultant, and UNCDF DFS Consultant in Lao PDR from 2014-2018.

This ecosystem development grew across multiple dimensions including financial institutions, and new payment service providers, with BoL as the regulator. PHB supported early market entrants including BCEL** and Unitel to develop business plans while advising BoL on establishing suitable and enabling digital policies. This approach ultimately supported the introduction of the first-ever DFS services in Lao PDR, including:

• BCEL’s Community Money Express (BCOME): now in their second phase initiative for branchless banking which includes account opening with an instant issue ATM card and the ability to make P2G payments for road tax – as well as other standard branchless banking services. These innovations were supported through PHB Development’s team over a period of more than 18 months through all phases of preparation, testing, training, pilot and launch. See the multi-media case study “The Dawn of Digital Finance in Lao PDR.” 
• Unitel, the largest Mobile Network Operator (MNO) in Laos, and part of the Viettel Group was supported by PHB to establish Star FinTech Co Ltd (SFT) to meet compliance obligations of BoL and develop the most suitable DFS service for the Lao PDR population. PHB conducted research applying the principles of Human Centered Design to support the creation of branding and the development of the U-money mobile wallet. SFT received approval to launch a commercial pilot of U-Money in September 2018.

David Kleiman (standing, right) facilitating a session at the ADB Financial Regulatory Training for Mobile Financial Services, attended by BoL and 15 other regional central banks – hosted by the Bank of Thailand.

The establishment of the BoL Payment Systems Department in early 2018 presented another opportunity for PHB to support UNCDF in developing training on the principles of DFS for the new department. This training helped department staff get up to speed on DFS topics and supervisory approaches to e-money, agents, and customer protection – resulting in better understanding and interpretation of the recently enacted National Payment Systems Law.

“The actors all needed an on-site resource person, someone who could be called upon by any stakeholder – UNCDF and its partners, the Bank of the Lao PDR and wider stakeholders such as other banks, MFIs, MNOs or Fintechs – as a neutral advisor to address specific questions associated with the rapidly changing DFS climate. As the UNCDF DFS Expert, my role was to bring together stakeholders on digital implementation and strategy issues,” said David, “The results really speak to the ambition of BoL and tenacity of the UNCDF. Although there was no clear concept of regulation for DFS when PHB arrived, now there is a national payment system law; a department within BoL to implement it; providers offering appropriate services and most importantly…customers.”

“A lot of learning took place through workshops and training that can lead to further positive development. We are seeing a growing set of use cases beyond simply remittances, and that points to further adoption of DFS in the country,” said David.

*PHB worked  directly with UNCDF’s  global initiative known as MM4P, and the Lao PDR national implementation program MAFIPP (Making Access to Finance Inclusive for Poor People)

**Banque Pour Le Commerce Extérieur Lao Public, the largest bank in Lao PDR

(More on PHB training)

Featured PHB-facilitated workshops during this period:

• Building Effective Agent Networks: Training and exposure workshop for banks and non-banks to understand how to scout, select, recruit and manage agents for DFS.
• Digital Finance and Interventions Models for MFIs: Support to MFIs interested in the digitalization of their business and introduction of DFS. Based partially upon the models discussed in the 6-part Toolkit Series “How to Succeed in Your Digital Journey,” a series of practical guides for financial service providers from PHB Academy, UNCDF MicroLead and the MasterCard Foundation on DFS.
• Asian Development Bank Financial Regulatory Training Initiative (co-facilitated by PHB in Bangkok): Supported three representatives from BoL to attend this ADB training program with regulators from 16 other countries on Electronic Banking and Mobile Financial Services.
• National Payment Systems Act as applied to Digital Financial Services and Financial Inclusion: Training for 13 technical staff of the newly formed Payment Systems Department (PSD), and focused on understanding aspects of the National Payment Systems Law (NPS) as as related to DFS and the department’s role in inspection, strategy, audit, policy and IT policy.
• AML/CFT Principles for Digital Finance Providers: Training workshop – followed by individual coaching with two providers – about the compliance requirements under the AML law and risk mitigation strategies.

A previous PHB blog on DFS development in Lao PDR was published in June 2017

They buzz past in Benin’s largest city of Cotonou, bypassing congested traffic and going off-road when needed to deliver customers to their destinations. The “Zemidjan”, or better known as the “Zem”, is the motorbike taxi drivers hustling daily to make a living and facing challenges in building their status as business people in Benin society.

Along with UNCDF MM4P, PHB Development is supporting MTN Benin to develop a digital payment ecosystem for the Zem and their passengers. The project is seen as a way to increase financial inclusion for those providing some essential services in the cities.

Building the digital ecosystem around the Zems has been a sustained project encompassing several phases, as reported in a May 2018 article from UNCDF.   Actions began with human-centric research by PHB and Innate Motion in 2016 to better understand the Zem’s aspirations and challenges, and investigate how they can become MTN Mobile Money (MoMo) ambassadors. “Our research helped us uncover that Zem is full of aspirations and projects for their future, but are impeded by societal and financial hassles. Involving MTN all along in this journey, we tried to understand how their lives could be impacted with digital payments – with consideration of their current challenges and longer-term ambitions. This is essential in designing a good value proposition for them,” said Victorin Salifou, DFS Expert at PHB Development

Following the research phase, PHB Development and Innate Motion worked with MTN and MM4P in developing and piloting digital payment solutions and tailored incentive mechanisms to make digital payments attractive to the Zemidjans and their customers. Digital payments are also intended to grow with the Zem being able to use their mobile money to conduct transactions for themselves, such as purchasing fuel and meals while working. With a pilot running until the end of 2018, MTN Benin intends to position the initial 200 Zem pilot participants – out of an estimated 100,000 in the city – as MoMo ambassadors to spur the growth of the digital payment ecosystem throughout the country.

Immediate benefits of digital payments include increased security, because drivers carry large amounts of cash that can be lost or stolen, especially near the end of their working day. There are also physical security and image perceptions of the Zem that could be improved: The Zem have received training on driving codes and encouragement to adhere to a dress code. “We designed a t-shirt for them that is more visible to other motorists and conveys a better image to customers. We also provided helmets they can use. We’re increasing their safety on different levels and helping to boost their image. It’s a positive step that we can build on within the project,” said Hermann Ahouandjinou, Manager – FS Sales & Ecosystem with MTN Benin.

The Zem participants needed to have a mobile money account to participate and were recruited through an association that previously worked with them. So far, 163 of the initial 200 participants have fully completed their profile to accept payment from a client via mobile money. Technologies such as Near-field communication (NFC), Unstructured Supplementary Service Data (USSD) and QR codes are helping build the digital payment ecosystem from the ground up. An MTN field team visits the Zems at points where they meet during the day, in order to gain practical information on what needs to be improved in the process to drive to the adoption. It’s a modest start with much room to grow as momentum builds.

After the pilot and the learnings gained from it, there will be the project roll-out and possible expansion to other cities. “We know that digital payments have been difficult to crack in other markets, so we want to learn from this pilot which incentives are working and which are not, to perfect our value proposition,” said Victorin Salifou with PHB.

Author: Matt Luna, PHB Development

Contribution by Lisa Chassin, Head of PHB Studies and Strategies & HCD Expert for Financial Inclusion

31 July 2018

The European Microfinance Week 2018 brought together nearly 500 microfinance professionals from more than 60 countries to share expertise on human issues that can be improved through further cooperation in the evolving financial inclusion sector. PHB representatives Lisa Chassin and Ronald Everts contributed their expertise on developing topics in various sessions of one of the world’s top microfinance events in Luxembourg from 29 November to 1 December.

Lisa Chassin (second from left in photo) joined the Digital Innovation for Financial Empowerment (DIFE) working group that explored varied conceptions around human-centric design (HCD) to improve the impact of digital financial services. “This was an interesting first-time topic for the group,” said Lisa, “many tend to focus mainly on technology, and by putting the client back at the centre of our discussion we aim to better connect with the people we want to serve.”

A session on the final day featured Lisa on an expert panel, along with Karima Wardak with UNCDF MM4P, and Richard Kennedy and Glida Zarate Chabluk from Innate Motion. The panellists presented two projects they are conducting together in Benin and Senegal: the focus in Benin is to develop the digital ecosystem around the Zemidjans (merchant payments and digital tontines). In Senegal, they have been studying how to digitalise pension payments for former civil servants. The panel experts presented a step-by-step approach to an HCD project, including 1) stakeholder engagement on aligning objectives 2) ethnographic research and immersions for a more complete understanding of the people being served 3) co-creation sessions with partners and clients for an increased sense of ownership 4) implementing prototyping/action plans.

PHB’s Ronald Everts (in photo at above) pointed out developments in housing finance that are boosted by the United Nations’ focus on housing as a human right.  “This, in combination with a feverish urbanization, creates opportunities for microfinance. Housing finance regulation varies widely per country, and making an investment in this sector can be cumbersome and knowledge-intensive,” shared Ronald about microfinance and housing. Additional EMW sessions attended by PHB included a training on the Social Performance Management tool SPI4, using the Cerise methodology.

An increasingly prominent focus with microfinance and at the EMW is the empowerment of women. It was pointed out that financers and investors should consider some central factors in making a positive impact:

• Women may often work part-time in their small enterprises, combining entrepreneurship with family tasks.
• Families of the women, including the men, should be incorporated in the approach to a sustainable empowerment of women.

The closing plenary of the EMW 2018 followed the theme of “Microfinance: positioning ourselves for the next decade” with “financial inclusion through technology” as an upcoming microfinance award focus. PHB Development continues to work toward its core mission of financial inclusion for all — often implementing mobile technology and innovative methods.

For more information on these PHB Development initiatives, contact:

Lisa Chassin

Ronald Everts

Click this link to see more about the European Microfinance Week.

PHB Development values the diversity and innovation that its consultants can bring to developing financial inclusion systems nearly anywhere on the planet. PHB Associate, Pall Kvaran, recently shared views from his current work in Uganda.

What are the areas of need you currently working on?

I am working on two different projects, one in tea and one in coffee, both focused on helping farmers gain access to digital financial services. We move towards achieving this goal by digitizing the payments farmer receive for their major cash crops. By doing this, we help them get access to services such as savings accounts and loans through mobile money.

What are the challenges you are facing and what are you doing to solve them?

The coffee project I am working on is all about problem-solving. This project is funded by CGAP and UNCDF, and we are working with one of the largest coffee companies in Uganda. UNCDF has been working on digitizing payments to farmers for a couple of years and PHB was tasked with doing a deep dive and figuring out what the most important problems are and how to solve them in order to make the digitization effort work as effectively as possible.

We used a new method we call Value Proposition Mapping, where we essentially mapped all income and expenses farmers and traders in the coffee value chain engage in on a month to month basis over the course of a year. We then calculated the costs of cash and digital payments for each transaction type and figured out which ones are ready for digitization, depending on the value propositions farmers and traders face.

What is the most interesting or surprising thing that you have encountered in the field?

 The extreme level of interest farmers has in spending management. Almost every farmer I have spoken to in my work in a range of different agriculture value chains sees mobile money as helping them manage their own spending to save up for investments. This can be even more true for women because they are usually not the head of the household and thus have a hard time controlling how the money they make is spent. Mobile money can really help them keep a part of their income for themselves and save up for future investment.

Where are you seeing as the current and potential impacts?

 In the short term, I see the digitization of payments in agriculture value chains having a positive impact on spending management as well as the risks farmers face. Being paid with mobile money allows people to store their money safely as well as reducing the risk they face while travelling with cash. In the medium and long term, as more affordable financial services will be offered through mobile money platforms I see these farmers gaining access to interest-bearing savings accounts, loans for investments and important risk mitigation services such as crop insurance.

The current agricultural productivity in Uganda is multiple times lower than what it can and will be in the near future. I believe these services are of vital importance when it comes to helping farmers in developing countries increase their production and income.

 How do local traditions and ways of doing business affect your work?

I believe my work as a PHB consultant is actually centered around this very question. My job is gain a deep understanding of local contexts and use that understanding to figure out how we can best help people. I think our coffee value proposition mapping methodology does this exceptionally well, especially when we get a chance to combine it with more qualitative human-centred design methodologies.

Why did you choose to work in the field of financial inclusion, and what do you like best about working for PHB?

 I strongly support development policies focused on helping people help themselves and I feel financial inclusion is exactly this. I believe the people we are trying to help are best qualified to decide what they need in order to help them better their lives.

I think providing access to financial services is one of the most important pieces in this puzzle. If we are able to give people access to interest-bearing savings accounts and loans for investment, they have been given a set of tools they can use to decide themselves what goals they want to work towards

When it comes to PHB Development, I really like the cooperative nature of the company. Most of the success of the company is channelled into reinvesting for growth and increasing possibilities. Rather than being typical employees, we function more like a group of independent consultants who work closely together towards our common goals.

Republished from the UNCDF MM4P website:  https://www.uncdf.org/article/2507/agents-revolution-on-the-ground-lao-pdr

Vientiane, LAO PDR – The mixed emotions of excitement and nervousness would be the best way to describe how new branchless banking agents feel in the Lao People’s Democratic Republic (Lao PDR). For many prospective agents, who humbly regard themselves as rural, less-educated people, having the opportunity to work with the country’s largest bank is an unusual, unexpected opportunity.

In June 2015, one of the country’s leading banks—Banque pour le Commerce Extérieur Lao Public (BCEL)—launched a new concept in banking for the country: branchless banking through agents, a service the bank branded as BCEL Community Money Express (BCOME). The project was supported by United Nations Capital Development Fund (UNCDF), its national implementation programme Making Access to Finance More Inclusive for Poor People (MAFIPP) and PHB Development, from concept through pilot and on to commercial launch. Today, BCOME has more than doubled the size of the BCEL branch and service unit network, and with more than 125 agents, it is represented in every province of the country.

One of the most outstanding agents in the country, Nouteng Sybounheueang of Souvannaphoun Village in Paklai District, briefly shared her story:

First, I was worried [that] I did not make the decision right away when the staff of BCEL approached me about being an agent. I just replied to them that I needed time to think about it. And in my thoughts, I started to wonder how can one walk into my shop and offer me such a big job? Being a bank’s agent, how much money would I have to have? What kind of tasks would I be dealing with? I am only a low-educated rural woman, running a small shop selling miscellaneous goods, and I had never touched a computer or iPad.

After taking a night to think it over, Mrs. Sybounheueang called bank staff the next day to confirm her interest. She then spent two weeks preparing the agent documents, to apply and to be approved. After that, she transformed a storage room for her goods into her new office. She purchased a laptop and a printer as required by the bank, though as she completed primary school only, she did not know how to use them. However, the BCOME team arranged a one-day training at her place on how to use the computer, how to access the BCOME system and how to conduct transactions for her customers.

Mrs. Sybounheueang was among the first few BCOME agents registered in July 2015 when the project was still in its pilot phase. Since that time, BCEL has expanded the BCOME agent network across the country, with over 128 agents in every province and a target of 410 agents by the end of 2019. Yet, the quantity of agents is less important to BCOME than the consistent, high-quality service that agents must deliver. As the agents are the face of the service and there is a reputation risk to the bank for non-compliance, the quality of the service should be its first priority.

BCEL supports its agents in several ways, such as the service system, technical and operational training, marketing and publicity material, and encouragement of the agents to do conscientious self-promotion, carefully focusing on three components of performance: trust, high visibility, and location.

A successful agent like Mrs. Sybounheueang attributes her success to these three attributes but primarily to the trust she has from her customers and the bank. She knows how to use the promotional material (brochures and posters) that the bank provides, and she speaks to her community about the value of the BCOME service and the convenience it can offer them. Situated on the main road, her location is premium and highly visible. Her converted storage room serves as a dedicated BCOME service office, providing her customers a comfortable environment to conduct their transactions. She is now involved in supporting the construction of a new market for the region that is only 100 metres away from her agent location. When completed, the market will attract more customers to transact at her location.

Agents in different parts of the country serve communities with different standards of living and different circumstances. Khaek Phanthalath, an agent in Ban Tha Kok Hai, Pak Ngum District (a village about 50 kilometres from a city), explained that the transaction type that she deals with the most is receipt of remittances. People from other provinces send money to their parents or relatives who live in the village or nearby, and they come to get the money at her shop. In contrast, Mrs. Sybounheueang, the agent from Paklai District, mostly serves customers who send money to their children who are studying in the capital or other large towns. Another agent, who represents BCOME in the busy and crowded capital of Vientiane, handles more business-related transactions.

These various use cases and requirements from different communities are carefully considered by the BCOME development team, as Nanthalath Keopaseuth, Deputy Director at BCEL, explained, “Sometimes our development team even thinks that we should modify the specific product to meet the particular need of each province and locality. This is a subject that we are thinking about for the possible development of our service—we keep thinking how we can create the best product to fit the rural community.”

It is noticeable that most BCOME agents are women—women who have a business to manage, who hold a lot of responsibility in their family and who are eager to support their community. All are happy to bring the service to their village and provide more convenience for their relatives and fellow villagers, to save them the time and money of traveling a long way to a city to complete their transactions. For farmers in their village, the agent’s extended service hours, from early morning until late in the evening, help them so that they are able to focus on production and not lose valuable time conducting transactions; they can stop by and do the transaction whenever is convenient. Suddenly banking is easier and less stressful.

The commission is not the only benefit of being a BCOME agent. Agents also build friendships and share convivial moments during their workday. They also benefit from the prestige conferred on them by the brand of the first commercial bank in the country, giving them considerable standing in their local community. And, the new, efficient service of BCOME draws in more customers to agents’ existing business location; it helps their existing business grow.

BCEL has brought the new age of banking—branchless banking—to Lao PDR with a service that relies on local people becoming engaged as agents to serve their own community at their community members’ doorstep. BCOME is designed to help a new group of customers, who have until now been unfamiliar or even unaware of financial and banking services, experience these services and benefit from them. In fact, BCEL has discovered just how much money flows from people in remote, rural areas to the capital city of Vientiane and other main cities, for their children’s education, for their families and for their commercial needs.

With their enthusiastic approach to providing accessibility and to helping support growth of their communities, agents are raising the awareness of villagers (e.g., through careful self-promotion at their agent location) and educating them about the low risk, inexpensive cost and speed of the new system. BCEL supports agents with periodic awareness-raising campaigns to promote overall services of the bank, while focusing attention on the agents as the primary source of the service in the community.

As Mrs. Sybounheueang summarized, “I can give them friendly advice to use this new service—it is convenient and safe. Before they sent money to their children by a bus driver. Their children would come to pick up the money at the bus station, but they had difficulties with timing and missing the bus. It was high risk. Now more and more come to use my service. They like it here because some of them feel uncomfortable to go to the bank branch.”

June 2017. Copyright © UN Capital Development Fund. All rights reserved.      

The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNCDF, or their Member States.

For more information, please contact

Aliska Bajracharya

KM Consultant, Lao PDR

http://mm4p.uncdf.org

Republished from the UNCDF MM4P website:  https://www.uncdf.org/article/2940/the-roaming-agents-of-lao-pdr

On October 16^th 2017, Yong Duangphachanh did not make the 2-hour journey to a banking agent point in the district town to deposit money for her children’s educational fees. Instead, she attended a Xainiyom Micro Finance (XMI) center meeting in her village in northern Lao PDR and was the first in her area to experience the latest evolution in branchless banking.

XMI has partnered with BCEL’s Community Money Express (BCOME) and since February 2017, has been providing BCOME transactions to its customers via their 7 branch offices; including Beng where Yong Duangphachanh has her XMI account. But what delighted her was that now she did not have to travel to the agent - now the agent could travel to her.

This pilot initiative is supported by the UNCDF Making Access to Finance More Inclusive for Poor People (MAFIPP) programme jointly operated with the Bank of Lao PDR, with support from the Australian Government and technical assistance from UNCDF MM4P. The programme aims to integrate microfinance institutions (MFIs) into the digital finance ecosystem in appropriate ways. As a follow up to MAFIPPs “Training on Digital Finance and Interventions Models for MFIs” in and building upon the UNCDF MFI strategy toolkits to enter the digital financial service (DFS) arena, XMI was ready to take the next step.

To provide convenience and continuous service to its remote customers XMI conducts weekly center meetings in all villages accessible by motorbike. Meetings only occur in the mornings and take about one hour typically for clients to make loan repayments, to deposit or withdraw on their savings accounts. Now, as part of the center meetings, the XMI field staff travels to the community with a laptop, printer and, most importantly, a 3G Pocket Wi-fi router to allow the loan officers to connect to the BCOME platform. There are already plans to replace the equipment with a more portable tablet and a pocket-sized Bluetooth printer. Although now customers can avail opportunities like BCOME transactions including depositing and remitting funds. Currently, XMI conducts center meetings in 3 provinces (Oudomxay, Luang Namtha, Bokeo) and 14 districts covering 415 villages.

And with all that travelling, XMI staff are well known in the communities that they serve, and they look for innovative ways to bring valuable services and raise awareness about them. As part of their mission, they conduct promotional activities at schools. Such as the outreach to high school seniors conducted by XMI at Meuang Beng High School where students were introduced to the benefits of savings and educational loans. Although XMI accounts cannot be opened by minors, it is presumed that parents will be able to avail of these services on their behalf. Additionally, XMI explained how BCOME transfers can help students who study away from home and need to receive financial support from their relatives.

XMI continues to make further inroads for financial inclusion and values its relationship with BCOME as it is a positive way to associate with BCEL (the largest bank in Lao PDR with 41% market share in retail savings and 4% in lending). The association makes people more confident in conducting banking and financial services with XMI.

This pilot activity of offering remote transactions has been well received by customers but it is not without its challenges. BCEL is cautious about allowing agents to conduct transactions away from the designated and approved premises. BCEL understands the importance of trust in agent banking transactions. And they ensure it by having an authorized signboard and customer pricing clearly displayed. XMI and their well-trained staff could offer significant assurance to BCEL. XMI has been authorized by BCEL to conduct only on-line BCOME transactions so that the BCOME remittance occurs in real-time. The customer either gives cash or the amount is debited from her/his savings passbook – the transaction will be recorded in the XMI monitoring information system only when the credit officer returns to the Service Unit. The XMI savings passbook (containing the client’s picture) can be used for formal client identification in lieu of the common ID card of the family book – a procedure mandated by BCEL to fulfill the anti-money laundering obligations applicable to commercial banks.

XMI is hampered by the lack of suitable mobile data connectivity in many communities, which would require offering off-line transactions. For example, when a customer wants to deposit or remit funds, that transaction would be executed once the officer returns to the branch office where there is a stable internet connection. BCEL is considering authorizing off-line transactions based on the success of this initial pilot with a roaming BCOME agent.

“A service such as this makes banking more accessible and can also increase business for us,” said Khanthaly Saenvilayvong, Managing Director of XMI. He accompanied the team on this first experiment and is pleased and proud that XMI is the first to bring a real-time DFS solution to a remote community in northern Lao PDR. “These DFS services will continue to develop and provide opportunities to offer more and more services - once people become aware of the service they will try it and then become regular users due to the security and convenience.”

XMI key figures (as of Q3 2017 unless stated otherwise, source: mixmarket.org)

By David Kleiman

DFS Expert, Lao PDR

For more information, visit

http://mm4p.uncdf.org/

Republished from the UNCDF MM4P website:  https://www.uncdf.org/article/2528/creating-new-world-banking-lao-pdr

On 12 May 2015, the first branchless banking transaction was completed in a rural village in the Lao People's Democratic Republic (Lao PDR). This ground-breaking transaction took place with a service launched by Banque pour le Commerce Exterieur Lao Public (BCEL), one of the country’s leading banks. The service, BCEL Community Money Express (BCOME), was the first of its kind in this largely agrarian and rural nation.

Digital financial services (DFS) in Lao PDR can have significant impact by providing access to services that the dispersed population is sorely missing. The first branchless transaction opened a new world of banking that is fast, safe, inexpensive, convenient and reliable, though the story behind the project was neither swift nor simple. The journey to launch digital finance and branchless banking took investment and planning that began years ago, in 2012, with the engagement of the Bank of the Lao PDR (BoL) and the United Nations Capital Development Fund (UNCDF).

Bringing digital finance to Lao PDR required a serious commitment by BoL, which had not yet established a regulatory framework for DFS at the time. But BoL had a vision for digital finance, that it would be an important service to broaden financial inclusion and to accelerate local development. The 2014 FinScope survey of the country revealed that access to banking services was twice as high in urban areas than in rural, with the areas without year-round road access severely affected. The two main reasons for the finding were the following:

• Distance: It takes more than one hour of travel time for at least 40% of rural people to travel from the often remote mountainous areas where they live to a bank branch or an ATM.
• Income: Most rural dwellers have unpredictable income.

In sum, banking was an awkward, time-consuming and expensive proposition for many people (see the figures for greater understanding of the financial context at the time).

In 2013, BoL hosted a two-day stakeholder conference with the support of UNCDF and International Finance Corporation to explore the benefits of digital finance for financial inclusion and to develop a strategy to implement DFS for the benefit of rural Lao people. BoL also requested a scoping mission to assess the potential for DFS in the country be conducted by the UNCDF programme Mobile Money for the Poor (MM4P), through the national implementation programme called Making Access to Finance More Inclusive for Poor People (MAFIPP). The project received generous financial support from the Australian Government.

In parallel, with the support of UNCDF, BoL went to work on creating an enabling regulatory framework for DFS to permit banks and non-banks to offer services. As Akhom Praseuth, Director General of the Financial Institution Supervision Department at BoL, explained, “The Bank of the Lao PDR has a vision for digital finance and we work on its promotion. We are focused on building a strategy for expanding access to financial services, and set the laws and regulations for mobile banking as a tool to control digital finance.” UNCDF supported BoL in its regulatory efforts by assisting BoL staff to attend different workshops and go on exposure visits to Cambodia as well as providing international regulatory experts to advise on the development of appropriate regulations. In 2014, two members of the BoL regulatory committee also travelled to the United Republic of Tanzania to meet with staff of the country’s central bank, Bank of Tanzania, to understand its role and the framework that had helped that country develop its own successful DFS ecosystem.

In the intervening period, BCEL became attracted to DFS and started developing its own vision to promote a suitable service for the Lao context. BCEL worked concurrently with a UNCDF-supported consultancy to develop a five-year business case that established a target of serving 150,000 customers annually through a network of 410 agents. “The inspiration to create this project began when we received the statistics on Lao people’s access to financial resources and the banking system in the country,” said Nanthalath Keopaseuth, Deputy Director at BCEL (the service provider for BCOME). “We like to bring the technology into the system to reduce costs and at the same time to offer the communities accessibility to funding resources. That is how it made BCEL to be interested, to carry out studies and have a hands-on approach to the project,” stressed of Mr. Keopaseuth.

BCEL is one of the oldest and largest banks in Lao PDR in terms of retail customers, branches and ATMs. In the last few years, BCEL has successfully rolled out i-Banking—a corporate Internet-banking platform—within its organization as well as a popular, highly functional mobile banking application for individual clients called BCEL One. Introducing branchless banking was a wholly new concept for BCEL and for the country that required the bank to think outside the box and to be ready to manage a range of complex challenges like merging traditional retail banking with branchless banking and digital finance. Addressing these challenges meant considering not only the technology required but the manpower and knowledge needed—as well as the capital required. Most significantly, BCEL had to change its views of the customer.

Typically, a bank builds branches and customers go to the branches. In the new world of branchless banking, the bank is in the position of going to the customer, bringing them much needed services. The concept of banking at the customer’s doorstep is highly appealing to customers, but at the same time, it can represent some level of risk for the bank.

The BCOME service relies on agents, so BCEL needed to build a relationship of trust with them and in turn inculcate trust in the agent within the community and by individual customers. To create a meaningful value proposition for BCOME agents, BCEL invested significantly in training its agents, conducting substantial marketing campaigns with agents, and teaching agents how to proactively promote the service and serve customers.

To create a clearer picture of the service, UNCDF and MAFIPP brought the BCOME development team to visit countries that have similar market situations. The team exchanged lessons learned and brought back know-how to develop a system that was well-suited to the bank, its customers and the Lao context.

After operating for over a year, the BCEL branchless banking service has seen positive signs of development. By the end of 2016, there were 128 agents working in all provinces nationwide.

“What surprised me is the result of the products that BCEL has developed, and it has been introduced to communities. The service has been well accepted in society and the product has been widely used by customers, and the number of the agents has increased,” reported Sengchanh Manivanh, BCOME Coordinator.

The success of the BCOME project is a result of the hard work of the BCEL team—and that team clearly includes the agents. As trusted leaders in their communities, they have become the face of banking for many people and are educating them about financial services. People are understanding the services and realizing that banking is not something incompatible with them. With the creativeness of BCEL to build its business model around the circumstances of the country and with the help of external organizations, BCOME is now a reality.

This is the third blog post of a series about the dawn of digital financial services in Lao PDR. Read also "Community development through digital finance in Lao PDR" and "Agents—The revolution on the ground in Lao PDR" .

June 2017. Copyright © UN Capital Development Fund. All rights reserved.

The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNCDF, or their Member States.

For more information, please contact:
Aliska Bajracharya
KM Consultant, Lao PDR
http://mm4p.uncdf.org/mm4p%40uncdf.org

David Kleiman
DFS Expert

Republished from the UNCDF MM4P website:  https://www.uncdf.org/article/3302/10th-digital-finance-working-group-in-lao-pdr-is-a-clarion-call-for-digital-finance

On 13 December 2017, the 10^th Digital Finance Working Group (DFWG) was convened by UNCDF¹ and the Bank of the Lao PDR² (BoL) with the generous support from the Australian Government. Under the chairmanship of BoL, this event marked a milestone for digital financial services (DFS) in Lao PDR. Not only it is the 10th meeting a milestone, showing the commitment of BoL and the engagement of the industry, but it also highlighted a new era of digital payments in Lao PDR.

More than 60 representatives from banks, mobile network operators (MNOs), microfinance institutions and government stakeholders were acquainted with the recently ratified National Payment System (NPS) Law.

The NPS law has secured passage in the National Assembly on November 7^th and is expected to be signed into law in Q1 2018. The emergence of this new policy instrument will:

• Give clarity to the industry about the roles they could play within the digital finance ecosystem.
• Mandate the creation of a payments department within BoL to issue licensing to both payment service providers and payment system operators.
• Pave the way to bring innovative, accessible and affordable payment solutions to Lao PDR.

“With emerging demand for quick access to financial services and success stories of existing products in South East Asia, Lao’s digital finance sector has also been witnessing progressive changes. For digital payments or mobile money to work in any market- collaboration is the key! There needs to be a strong dialogue and a sturdy partnership between MNOs, banks and third parties to work towards developing digital solutions that can reach the broadest portion of the population. “- Nopphorn Danchainam, Managing Director of Digio, a pioneering payment systems provider in Thailand.

Towards the end of the programme, BCEL spoke of new updates to their BCELOne mobile banking application, which has a current client base of 70,000 registered users. In November 2017, BCEL introduced the third release of its BCELOne application with an added feature of QR Payments known as OnePay. It allows account holders to make instant mobile payments to vendors simply by scanning the merchants QR code. This domestic payment service is first of its kind in Lao PDR, with a standards-based solution that will integrate into the NPS infrastructure and allow interoperability with other providers over time. BCELOne previously integrated into the UNCDF-supported BCEL Community Money Express (BCOME) service, which allows banked customers to send payments to anyone in the country using the application. Funds can then be collected from the banks’ branches or more than 200 agents nationwide. You can read the detailed case study of BCOME here and watch the video about BCOME’s pioneering role in DFS in Lao PDR.

The DFWG has served as an excellent industry forum for discussion, knowledge sharing and promotion of a new suite of services in the Lao financial services market. Looking ahead to the 11^th DFWG, BoL with the support of UNCDF aspires to promote the creation of action-oriented sub committees or taskforces that can address the challenges of delivering more innovative services in Lao PDR.

^{1.Through the in-country joint programme with BoL Making Access to Finance More Inclusive for Poor People (MAFIPP) and the global thematic initiative MM4P↩}

^{2.Lao People’s Democratic Republic↩}

For more information, please contact:

Aliska Bajracharya

KM Consultant

David Kleiman

DFS Expert, Lao PDR

Or visit mm4p.uncdf.org

Republished from the UNCDF MM4P website:  This article was first published on 21 June 2017 at https://www.uncdf.org/article/2512/community-development-through-digital-finance-lao

Using branchless banking to support education, agribusiness and more

There is an old Lao saying, ‘If you don’t go out of the village, you will not see the land far away; if you don’t go study, you will not have any knowledge.’ It is still commonly used in the Lao People's Democratic Republic (Lao PDR)—a country with a surge in demand for education, with 78% of youth enrolled in lower secondary education[1] while 56% of adults have primary education or less[2] (see the figure for more detail). Sending children away from home for higher education is considered a requirement for parents to build their children’s future. So, there is little surprise that sending money to support children’s education has become a primary use case for the first branchless banking service in Lao PDR.

Banque pour le Commerce Extérieur Lao Public (BCEL), one of the country’s leading banks, developed the branchless banking service, which is called BCEL Community Money Express (BCOME). It is entirely new; no other bank offers this kind of service in Lao PDR. Supported by United Nations Capital Development Fund (UNCDF) and its national implementation programme Making Access to Finance More Inclusive for Poor People (MAFIPP) and PHB Development, BCEL launched BCOME

in June 2015 with a small pilot of only 11 agents. Today, with more than 125 agents in every province of the country, BCOME has more than doubled the size of the BCEL branch and service unit network. Villagers perceive BCOME as convenient, quick, safe and friendly, the latter because it is offered by someone they know in their community—a neighbour, relative or acquaintance in town whom they can trust and with whom they can comfortably share their needs.

Figure from FinMark Trust and UNCDF-Making Access Possible, FinScope Survey Highlights: Laos 2014, p.9 (n.p., November 2015).
© UNCDF MM4P

Agriculture is the backbone of the Lao economy, but farmers are dispersed, living in remote, rural areas throughout the country. Travelling to a district town can be an undue burden for them, and accessing formal financial and banking services is even more difficult both because of the distance to a bank branch and because of insufficient income and low financial literacy. These challenges have understandably led farmers to depend on cash. For them, sending money to family members in other provinces by a bus driver is a method often used, but it is time consuming and sometimes risky.

Sompong Veosy, a farmer from Souvannaphoum Village in Paklai District, grows rice and raises buffalo and cows for his income. He normally spends all day looking after the rice paddy and livestock, only leaving his farm after sunset. Taking time from his work to travel to town to complete a transaction is exhausting. But, since a BCOME agency in his village opened, his outlook has changed. “In the past, I had to travel a long way to send money to my children for their education, but now it is easy, fast and convenient. I am very, very happy now. It is perfect,“ he explained with a happy smile.

Sompong Veosy, a farmer from Souvannaphoum Village in Paklai District.
© UNCDF MM4P

The BCOME service has drawn this new customer segment to BCEL, which has been surprised to learn just how much money from rural farming communities flows throughout the country. Through the service, BCEL can stay close to these new customers and learn about their requirements.

Thong Khoun, a villager from Thakokhai in Pakngum District, regularly sends money through BCOME to her son who is studying in the southern part of the country. Sometimes, though, it is the opposite: she has an urgent expense of her own, and her son sends money back to her. “My son asked me to open a bank account so that he can send money to me in the future. So, I wish that BCOME can open the account here. It is convenient because it is close to our house,” Ms. Khoun explained. “I used to ask the agent if I can open my account with her. I want to save money, and I also want to have an ATM card. I feel that I don’t want to carry cash anymore. If I have a card, wherever I go I can withdraw money from the machine—that is what I want now. If we can open the account with BCOME, it would be wonderful,” she added.

BCOME is not only a solution for farmers to support their children’s education, it also allows them to have more opportunities to trade their products more broadly—helping them to break free of poverty. It helps farmers increase their income by providing a quick and easy payment system. BCOME responds directly to the needs of communities with a service that old-fashioned banking cannot provide. Siavone Phomavong, an agent in the capital city of Vientiane, shared an example: “I have a customer who sells organic vegetables. He sends money to buy them from farmers in Pakse, Champasak Province.” The BCOME service assists the growth of agribusinesses, as the money from buyers in the main cities flows out to farmers in the provinces, where the farmers can save and re-invest for better techniques and more productivity.

The access afforded by branchless banking does not only support education of farmers’ children and their agribusiness, it is also suited to many different types of business requirements, such as paying for insurance and making monthly payments for the purchase a car. Early adopters who have experienced the efficiency of the first branchless banking service in Lao PDR have greater understanding of the new system and value the system more. It benefits them in many ways, relieving stress in their lives and reducing the time and the cost of transactions, which in turn gives them a chance to save and thereby prepares them to take a first step out of the poverty trap.

In the future, BCOME will continue to grow with new product and service offerings and to play an important role in accelerating the growth of all kinds of businesses. The convenience and accessibility can be applied to any customer segment, from low-income populations who deal in small transaction amounts to large organizations that can network with people in any isolated region. These advancements will contribute to a greater number of people improving their livelihood by using a low-cost, easy and friendly system, which will drive the economy of the household and in turn the communities that form the core of the country’s wealth.

This is the second blog post of a series about the dawn of digital financial services in Lao PDR. Read also "Agents—The revolution on the ground in Lao PDR" for an agent's perspective.

June 2017. Copyright © UN Capital Development Fund. All rights reserved.

The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNCDF, or their Member States.

[1] Lao People’s Democratic Republic, Ministry of Education and Sports, Education and Sports Sector Development Plan (2016–2020) (Vientiane, December 2015).

[2] FinMark Trust and UNCDF-Making Access Possible, FinScope Survey Highlights: Laos 2014 (n.p., November 2015).

For more information, please contact:
Aliska Bajracharya
KM Consultant, Lao PDR
http://mm4p.uncdf.org

David Kleiman
DFS Expert in Lao PDR

Digital finance expert David Kleiman shares insights from programmes with UNCDF

David Kleiman came to Lao PDR as a Digital Finance Expert from PHB Development for the United Nations Capital Development Fund (UNCDF) programme MMP4 in 2014. Since that time, David has focused on building multiple and varied relationships within this developing environment for digital financial services (DFS). He shared views on the objectives and impact of his work.

Can you briefly describe your core objectives to enable DFS?

In 2013, when UNCDF MM4P started, there was no regulatory framework or guidelines – and therefore no service providers either. In order to jump-start engagement, UNCDF MM4P applied a market-development approach to creating an ecosystem for DFS to take root and flourish in the country. Much of our success to date has come from a focus on three pillars of engagement:

David Kleiman, left, in Lao PDR

• A strong and growing relationship with the central bank, Bank of the Lao PDR (BoL), to develop guidelines and regulations for providers who aim to offer DFS and to promote a positive exchange between industry, BoL and the government in general.
• A direct strategic relationship with UNCDF partners – to promote, support and manage various project activities and to align their business objectives with UNCDF and BoL’s goals for financial inclusion.
• Broader stakeholder engagement with banks, microfinance institutions, Mobile Network Operators, and even startups to promote activity in the field of DFS.

When UNCDF provides support to enable implementation, partners also commit through their leadership and resource mobilization. It’s through these relationships with stakeholders that UNCDF can generate impactful projects and therefore catalyze the introduction of meaningful services for rural customers.

What can you say about the design and implementation process?

Any effective strategy must take into account the needs of people and the capacities of organizations in the country. Lao PDR currently has one implementation of DFS through agency banking; BCEL’s Community Money Express (BCOME), which allows people to do basic banking close to home. Before BCOME, customers had to travel to a bank branch – of which there are only 700 in the country. Today BCOME has more than 140 agents, so it represents both a turning point for the country and a significant improvement in the points of access for financial services. The upcoming launch by Unitel of their mobile wallet will add another significant dimension to the ecosystem.

What are some unique aspects of working with UNCDF on this?

Within Lao, UNCDF works jointly with BoL in a national implementation program called MAFIPP (Making Access to Finance more Inclusive for Poor People). This joint structure strengthens our communication with stakeholders and solidifies their commitment. Goals are aligned because of joint project nature, which can also help extend the use of DFS services to achieve aims such as enrolling in education, accessing better healthcare and more.

What are the changes you have seen, especially considering a human-centered design approach (HCD)?

In a new market like this, ambitions should be aligned before selling a financial service. It’s important to take demographics into account and to consider what really matters for the people – and why.

UNCDF has worked in numerous countries and has lots of talented people who understand best practices – particularly in engagement and impact. PHB Development has been working internationally with UNCDF on multiple DFS projects in Africa and Asia. The relationship between PHB and UNCDF is significant, and we can gain action-based insights from it. We listen to customers and providers who have aspirations – then work together to develop an implementation path based on best practices while developing services and solutions which are highly contextualized for each country.

MM4P AT A GLANCE

MM4P is a programme launched by UNCDF in partnership with the Swedish International Development Agency (Sida), the Australian Department of Foreign Affairs and Trade (DFAT), the Bill & Melinda Gates Foundation and The MasterCard Foundation. MM4P provides support to digital financial services (DFS) in a selected group of least developed countries (LDCs) to demonstrate how the correct mix of financial, technical and policy support can build a robust DFS ecosystem that reaches low-income people in LDCs.

For more information, visit mm4p.uncdf.org or follow @UNCDFMM4P and UNCDF MM4P on LInkedIn.

 2 June 2017