MAP Lao PDR - MAFIPP Websitemafipp.org/.../161027-Laos-FI-Roadmap-2016-2020-presentation-Eng-1.pdfMAP Lao PDR Draft Financial Inclusion Roadmap, 2016 –2020 03 November 2016 Cedric

MAP Lao PDR Draft Financial Inclusion Roadmap, 2016 – 2020

03 November 2016Cedric Javary

Agenda

• Promoters of the Financial Inclusion Roadmap

• The formulation process of the Roadmap

• Proposed vision and congruence with NSEDP VIII 2016-2020

• Thematic areas and possible partners identified

• Proposed implementation setup and next steps

• The thematic areas in detail

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Financial Inclusion Roadmap: requested by BoL, implemented by MAFIPP (1/4)

• MAFIPP: joint BoL-UNCDF programme to foster Financial Inclusion• 2010-2017 with target of +400,000 active users of financial services. $9.8mn funding.

• Market-development approach with macro /meso /micro-level interventions• Evidence-based policy formulation → Financial Inclusion Roadmap• Digital Financial Services development from scratch

→ DFS piloting framework with 3 licenses released. Draft regulation in progress.→ 1 pilot live for 14 months (BCOME). 2 in preparation.

• Challenge fund to boost innovation and modernization of Financial Services Providers: Fund for Inclusive Finance (FIF)

• Sector capacity-building →Higher Diploma in Microfinance (Banking Institute)→Microfinance Master Certificate Course (MF Association)

• Generous support from Australian Government since 2013: AUD 6mn.

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• Established 1968

• Roles and attributions defined in Law on the Bank of Lao PDR 14Oct 1995and Decree on the Organization & Activities of BoL 06Apr 2000

•Mandate economic stability, key contribution to NSEDPs

• strong will to contribute to sustainable and large base economic development→strong commitment to Financial Inclusion, particularly towards rural areasMutually reinforcing interventions on monetary policy, financial sector deepening and financial inclusion

•2015-2030 Vision for Financial Sector Development and its 5-yearStrategy

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5-year strategy from BoL 2016-2020:→ Continue to monitor the stability of the foreign exchange to support the social and economic development for growth and sustainability• Continue to sustain the structure for financial institutions /monetary to ensure

ongoing improvement• Develop the financial market to offer effective liquidity management for financial

institutions /monetary • Develop commercial banks for them to have sustainable systems and to operate

effectively with a variety of products and services that meet the national economic needs, with quality levels on par with regional and international standards

• Develop the capacity for the microfinance institutions to expand financial access and services to reach out to the poor people

• Develop capital markets to provide an outlet to official investment fund at international standards

• Develop the national payment system to be innovative and secure with various payment products

• Develop a complete infrastructure and system for the management of financial institutions /monetary, conducive to innovation and on par with international standards

• Develop system and criteria for selection and develop human resources capacity for improved their work effectiveness 5


• UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries.

• UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, contributing to SDGs, especially

• UNCDF’s financing models work through two channels:

financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and

showing how localized investments — through fiscal decentralization, innovative municipal finance, and structured project finance — can drive public and private funding that underpins local economic expansion and sustainable development.

• UNCDF partnering in Laos with Ministry of Home Affairs and UNDP to strengthen the capacity and service delivery of Local Administrations (GPAR SCSD programme):

capacity-building of district & provincial administrations tested successfully the District Development Funds to build small-scale

infrastructure, now to be streamlined under the ‘Sam Sang’ policy framework

Citizen feed-back 6

Agenda







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Increased access to quality financial services in Laos

Building human capital

Building human capital

Social mobilitySocial mobilitySaving &

investmentSaving &

investment

RemittancesRemittancesIncome &

consumption ladder

Income & consumption

ladder

Economic corridorsEconomic corridors

Financial Inclusion catalyst to economic development benefiting the vast majority of population

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Roadmap formulation supported by strong evidence

Objective: Support expansion of access to financial services

• Program of action encapsulated in a Roadmap, which helps build a common

vision of the desired future for financial inclusion

Demand side study Supply side study Regulatory analysis

• FinScope 2014• Consumer Interviews

• Interviews• Annual reports• Product data

• Reviewed regulation and policy in FS and related areas

• Interviews

Discrete target markets Product and provider landscape (informal and formal)

Public policy objectives and Regulatory barriers

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Evidence is the foundation for a large stakeholders dialogue (1/2)

Time Fram

e 18

-24

mo

nth

s

1. Inception

2. Research & Analysis

3. Diagnostic & Recommendations

4. Road Map Development

5. Implementation

1. Analysisa. Contextb. Regulationc. Demand Side (FinScope & Qualitative Research)d. Supply Side

KEY OUTPUTS & OUTCOMES

2. Stakeholders & Ressources aligned

DIAGNOSTIC REPORT & SYNTHESIS

ROADMAP

5 years

MAIN EVENTS

FinScope Launch 3/7/2015FinScope Launch 3/7/2015

MAP thematic stakeholder consultations September 2015

MAP Plenary Stakeholder Workshop 17/9/2015

MAP thematic stakeholder consultations September 2015

MAP Plenary Stakeholder Workshop 17/9/2015

MAP Road Map consultationsNovember 2015

MAP Road Map consultationsNovember 2015

Stakeholder & Qualitative Interviews May – July 2015Stakeholder & Qualitative

Interviews May – July 2015

FinScope Survey November 2014 – January 2015

FinScope Survey November 2014 – January 2015

MAP Kick-off WorkshopMAP Kick-off WorkshopThe MAP Process in Lao PDR

MAP Presentation to Steering Committee 21/8/2015

MAP Presentation to Steering Committee 21/8/2015

MAP Road Map internal & provincial consultations – Q2 2016

MAP Road Map internal & provincial consultations – Q2 2016

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Evidence is the foundation for a large stakeholders dialogue (2/2)

• Building-up the evidence• FinScope Laos 2014: extensive use of formal and informal financial services by a

nationally representative sample of 2,000 adults →FinScope databook →FS database• Supply-side and regulatory assessment →Diagnostic report →Synthesis note

• Discussion of conclusions from diagnostic with stakeholders• 5 thematic discussions September 2015: subsidized credit /banking & leasing

/microfinance /village funds /donor partners• Plenary presentation 17September 2015

• Roadmap Discussions Week, 7-11 December 2015• Consultations with MAP Steering Committee, MoF, MoIC, MAF, MPI, NCRDPE• Discussion topics: National Vision for Financial Inclusion, Links to draft NSEDP8, Selected

Priority Areas, Proposed Action Items, Stakeholders and Champions

• National dialogue on draft Roadmap April-May 2016• Debate with all Dpts of BoL • 4 provincial consultations: Luang Prabang, Oudomxay, Savannakhet, Champasak

BOL branches, provincial government offices, Planning & Investment, Agriculture & forestry Dpt, Finance Dpt, Post & Telecom Dpt, Education Dpt, Rural Development and Poverty Eradication, Commercial bank branches, Microfinance Institutions 11

Agenda







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Proposed National Vision for Financial Inclusion

Over the period 2016-2020, improve household welfare, increase economic efficiency and support growth by:

• reducing the percentage of adults who are financially excluded from 25%* to 15%**;

• increasing those with access to formal financial products from 47%* to 60%; and

• increasing those with access to more than one formal financial product from 28%* to 42%*** by 2020 by:

• extending financial inclusion to lower income households and target groups that are currently less well served

• enhancing financial sector infrastructure, encouraging competition, modernising regulation and reducing risks

• facilitating well targeted credit to productive enterprises and for investment in assets

* Baseline from 2014 FinScope. ** Reduce the excluded 25% by 40%*** Reduce the 35% who are thinly served by 40%

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Possible indicators for tracking the National Vision for Financial Inclusion

Indicator Source Frequency

Financial access strand:- Financial exclusion- Use of formal/informal

products- Use of multiple products

FinScope surveys Every 3 years: 2017, 2020

Number of customers/account holders- Banks- MFIs- Mobile money

Financial institutions, BoL Annual

Number of branches/agents Financial institutions, BoL Annual

Others????

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NSEDP VIII MAP Roadmap Objectives

Access to finance (for agric.) on a rational basis (8.4.3 Implementation bullet 4)

1. Credit2. Consumer Empowerment (Financial Literacy, AML/CFT)3. Village Funds4. Payments5. Outreach

Access to finance for SMEs, provision of LT finance by banks, establishing a fund to mitigate risks of bank lending to SMEs (8.4.5 bullet 4)

Access to finance for rural enterprises through mobile and e-banking services, with appropriate regulation (8.4.5 bullet 5)

4. Payments

Financial Inclusion contribution to NSEDP VIII objectives

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Outcome 1 – Firm and Inclusive Growth

Output 1 – Sustained and inclusive economic growth

Promotion of competitive and sustainable SMEs (303) 1. Credit2. Consumer Empowerment (Financial Literacy)4. Payments

Small-holder farmer diversification (303)

Transparent enforcement of legislation, rules & regulations (303)

2. Consumer Empowerment (Transparency)

Business banks/institutions meeting regional/international standards of efficiency (8.4.2 Priority Activities bullet 4)

1. Credit2. Consumer Empowerment 4. Payments5. Outreach

Non-farm activities in small towns (8.4.2 Policies bullet 11)

1. Credit2. Consumer Empowerment 4. Payments


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Outcome 2: Development of human resources, poverty reduction, access to health & education

Outcome 1: Improved living standards & poverty reduction using Sam-Sung principles

Developed villages 3. Village Funds

Rural economic activity 1. Credit 3. Village Funds 4. Payments 5. Outreach

Output 2: Macro-economic Stability

Implementation of recommendations of FATF (Implementation bullet 9)

2. Consumer Empowerment (AML/CFT)

Output 2: Food security

Appropriate farmer credit 1. Credit


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Outcome 1, Output 1 – Sustained and inclusive economic growth

Enhance sustainability of agriculture through producer groups (8.4.3 Direction bullet 1)

1. Credit

Output 2: Macro-economic Stability

Macroeconomic co-ordination (MoF, BoL, MPI, MIC) (Implementation bullet 8)

All

Priority Cross-Cutting Outputs

Management and Application of ICT

Increase registered mobile phone usage rate to 100% 4. Payments5. Outreach

NSEDP VIII objectives supporting Financial Inclusion (Enablers)

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Agenda







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• Lack of sufficient income

• Rural nature of population

• Limited branch networks, especially in rural areas (proximity)

• Eligibility (not having a job / regular income, institutions not offering products suited to low and irregular income people)

• Lack of appropriate products e.g. reliance on collateral

• Reliance on savings to provide insurance

• Distorted credit market

• Slow rollout of mobile money

• Limited need for insurance given the collective functioning of the society

• Limited financial literacy and understanding of financial products

Key Barriers

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1. Payment eco-system development

2. Extending the outreach of banks and other financial service providers

3. Strengthening village funds to ensure sustainability

4. Improve the working of the credit market

5. Develop accessible risk mitigation products

6. Promoting linkages between financial institutions and sectors

7. Consumer protection and empowerment

• Co-ordination (BoL, GoL, party)

• Appropriate regulation

• Re-thinking balance between government & market provision

Priorities to achieve financial inclusion

Pre-conditionsProposed Priorities

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Priority initiatives to achieve the national vision – initial proposal

• Improved household welfare, increased economic efficiency, and support for national growth

• Increase broadly served from 28% (FinScope 2014) to 45%, and reduce the excluded from 25% to 12% by 2021

Consumer empower-

ment

Financial outreach

Payments ecosystem

Village Funds

Payments infrast-ructure

Mobile money

Regulatory and policy

Accessible risk

products

Outcome:

Impact:

Agents

Branch networks

Product develop-

ment

Regulation and policy

Micro-insurance products/

distribution

MSME support

Policy & regulation

Capacity building, support

networks

Fin. literacy initiatives

Financial reporting

AML-CFT regulations

Review interest rate

caps

Improve linkages

Improve credit

availability

Credit information

New credit products

MFI expansion


Institutional co-operation

Legal

Customer protection


Reform of subsidised

credit

Perceived interest GoL partners December 2015

High priority

Medium priority

Low priority

Consumer empower-

ment

Financial outreach

Payments ecosystem

Village Funds

Accessible risk

products

Improve linkages

Improve credit

availability

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MFI expansion

Priority initiatives to achieve the national vision – final version after consultations

• Improved household welfare, increased economic efficiency, and support for national growth

• Increase broadly served from 28% (FinScope 2014) to 42%, and reduce the excluded from 25% to 15% by 2020

Consumer empowerment

Financial outreach

Payments ecosystem

Village Funds

Payments infrastructure

Mobile money


Outcome:

Impact:

Branch networksRegulation and

policy

MSME support

Capacity building, support networks

Fin. literacy initiatives

Financial reporting

Review interest rate caps

Improve credit availability

Credit information

New credit products

Legal

Customer protection


Reform of subsidised credit

Political support

Agents

AML-CFT regulations

Insurance products

Product development

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• Financial Inclusion Priorities

Topic Actions Organisations Involved

1. Improve Credit Availability

Credit information collection/sharing

Integrate all formal credit providers, infrastructure, legislation

BoL, FIs, IFC

New credit products Develop new products, less reliance on collateral

BoL, FIs

Review interest rate caps (caps on bank interest rates)

Evaluate impact (macro-economy) and effectiveness prior to reform

MoF, BoL, NCRDPE, MAF, CCP, PM Office, NB, banks, WB, UNCDF

MSME credit Lines of credit, guarantee funds MoIC/DoSMEP, WB, ADB, IFC,banks

Financial Inclusion Priorities & Partners

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Topic Actions Organisations Involved

2. Consumer Empowerment / Protection

Legal Faster finalisation, full disclosure BoL, MoF, line ministries

Regulation & Transparency Improving quality of bank regulation & reporting

BoL, WB, bankers association

Promote financial literacy Integrate into education system MoES, BoL, GIZ-AFP, ADB

Consumer protection Complaint resolution procedures,deposit insurance, disclosure

Banks, MFIs, BoL

AML/CFT regulations Tiered KYC (calibrate to risk) and implement effectively

BoL, WB, embassies, bankersassociation, UNODC


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Topic Actions Organisations involved

3. Village Funds

Political support Senior government organizes agencies cooperation

PM Office, BoL, MoF, CCP, NCRDPE

Regulation and policy Formalisesupervision/regulation

BoL, MAF, NCRDPE, LWU, GIZ-AFP, other intl agencies

Strengthen village funds/banks Extend support networks BoL, MAF, NCRDPE, LWU, GIZ-AFP, SBFIC, ACCU, other intl agencies


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4. Payments Eco-System

Regulation and policy Legislation: electronic transaction law…

BoL, WB, IFC

Develop payments infrastructure

RTGS, ECH, switch, interoperability

BoL, IFC, banks

Develop mobile money for payments, remittances, savings

Pilots, agent networks, cross-border, regulations,

BoL, MTP, MAFIPP, banks, MNOs

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5. Improve outreach

Regulatory and policy Create incentives for FIs to proactively serve the low income and rural segments of the population

BoL, FIs, Bankers Assn, MFA

Rollout of branch networks by banks/MFIs/leasing

Remove restrictions BoL, FIs, Bankers Assn, MFA

Encourage expansion of MFIs leveraging technology and linkage with others FSPs

Clarify rules on use of agentsTechnology for low cost extensive distribution network

BoL, FIs, Bankers Assn, MFA

Appropriate products for low-income consumers

Product development Banks, FIs


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Agenda







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Coordination and resourcing

• Intergovernmental Steering Committee established in August 2014 to monitor the formulation of the Roadmap

• The SC under the chairmanship of BoL is proposed to extend its role to monitor the implementation of the Roadmap

– Key roles of the committee include the review and of diagnostic and roadmap; and Implementation and M&E

– Technical sub-groups to address various detailed areas

• BoL will be the programme champion and will coordinate activities

• Donor coordination to be organised and coordinated by BoL

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Approval of priorities and action items

Identification of stakeholders and champions

First draft of roadmap document

Further stakeholder engagement

Cross-reference to NSEDP formulation process

• Finalisation of roadmap and formal approval (by PM office)

• Establishment of institutional structures (or use of existing structures) to oversee implementation and monitoring

• Donor engagement for funding of roadmap initiatives/action items

• Implementation matrix showing actions and responsible implementer

• M&E indicators and framework to be developed to mobilise stakeholders and monitor outcomes

• Immediate implementation of areas where resources are available or resource requirements are low

Next steps

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Agenda







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• Action items• Review interest rate policy, notably the provision of subsidised credit by

government and the impact of interest rate caps • Reform to reduce fiscal costs and improve credit discipline and impact

effectiveness.• Seek to learn from relevant international best practice.• Develop new credit products; reduce dependence upon collateralised lending;

pay more attention to ability of borrowers to service debt• Develop MSME credit through lines of wholesale credit, guarantee funds • Introduce rules on product information disclosure (e.g. APRs on credit and

savings) and restrict credit institutions from using flat rate credit;• Improve the effectiveness of credit information collection and sharing, credit

information registry• Develop insurance products to support credit (e.g. credit life, whereby debt dies

with the borrower)

1. Improve the availability and sustainability of credit provision

• Objectives: Improve the availability of credit, particularly for productive activities (MSMEs, farming) on terms that are suitable for the borrowers and sustainable for the credit providers.

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• Action items• Integrate learning on financial literacy into the education system;• Financial institutions develop financial literacy amongst their customers • Establish compulsory procedures for dealing with customer complaints• Financial institutions to report publicly, consistently and in a timely manner • Regularly publish all relevant financial sector statistics.• Extend deposit insurance from banks to MFIs• Rules on product information disclosure (e.g. APRs on credit and savings)• Restrict credit institutions from using flat rate credit• Introduce tiered KYC regulations and ensure that AML/CFT regulation is more

effectively implemented• Consistent regulatory requirements across different but similar types of

institutions, and consistent interpretation of laws and regulations• Faster finalisation of draft laws and regulations relating to the financial sector • Ensure that all laws, regulations, guidelines and directives are publicly and

readily available

2. Consumer Empowerment

• Objectives: Improve consumers’ ability to understand financial services and make appropriate financial decisions; improve the protection of consumers; improve disclosure, transparency, and the consistency of regulation

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• Action items• BoL should take on regulatory and supervisory responsibility for the VF

sector. • Introduce establish regulations, covering operating procedures,

accounting and reporting requirements, cash management, risk management, provisioning etc., applicable to all VFs, perhaps graduated and related to size;

• Direct supervision of larger VFs by BoL; delegate supervisory responsibility for smaller VFs

• Build on successes of GIZ-AFP support & capacity building programme for VFs

• Develop regional support organisations• Mobilise political support for stabilisation of VFs to ensure sustainability

3. Strengthen village funds for sustainability and relevance to rural populations

• Objectives: Build on the successes of Village Funds and address weaknesses, to extend provision of stable, semi-formal financial services culturally suited to low income populations.

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4. Improve the Payments Eco-System

• Objectives: Reduce overall costs of payments, increase access. Improve payments infrastructure. Establish more contact points (mobile, agency). Penetrate rural areas. Utilise mobile money and DFS to provide financial products directly or as distribution channels.

• Action items• Ensure the rollout of mobile money and digital financial services• Develop propertly functioning agent networks• Introduce cross-border mobile money• Develop payments system infrastructure (RTGS, clearing, national

switch)• Finalise regulatory and legal framework for mobile money and other

payments mechanisms• Establish payments service providers association• Promote interoperability between platforms and service providers

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• Action items• Banks need to be more innovative in extending distribution networks

through branches and non-branch channels• More innovation in product design, moving beyond traditional

products. • Investigate the potential for branchless banking using independent

agents.• Regulatory barriers to the establishment of new branches by banks,

MFIs and leasing companies – such as additional capital requirements -should be removed.

• Consider strategic alliances between banks and MFIs.

5. Extend the outreach of banks and other financial service providers

• Objectives: Extend the availability of financial products and services through both improved physical outreach and enhanced product design. Move banks beyond their current focus on urban areas and serving higher income / formally employed consumers.

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THANK YOU

Contacts:Cedric Javary

([email protected])

mailto:[email protected]

Documents

MAP Lao PDR - MAFIPP Websitemafipp.org/.../161027-Laos-FI-Roadmap-2016-2020-presentation-Eng-1.pdfMAP Lao PDR Draft Financial Inclusion Roadmap, 2016 –2020 03 November 2016 Cedric