Lao PDR: Promoting Reforms for Payment Systems

Lao PDR: Promoting Reforms for Payment Systems

FIRST provided TA to the Bank of Lao to develop the national payment system strategy and create the legal and regulatory framework for the national payment system.


Modernizing payment systems was identified as a key driver for developing the financial sector for the Lao People's Democratic Republic (PDR) in the context of the country's 10-year vision and strategy, which was developed with the support of the World Bank in 2009. Payment flows to Lao PDR are diverse and largely facilitated by the physical transfer of cash in person or by other similar means. In 2011, there were 2.5 bank branches per 100,000 adults in Lao PDR, compared with 6 branches in the rest of its peers in the East Asia and Pacific Region and 8 ATMs compared with 14 in the Region.* Regarding usage, 3 percent of adults used accounts to receive wages compared with 17 percent in the Region, and 6 percent used debit cards compared with 35 percent in the Region.


The inefficient state of the payment systems and the resultant limited access and usage were exacerbated by the absence of a conducive legal and regulatory environment. Responding to a request from the Bank of Lao, FIRST provided TA worth $240,000 in 2011-2013 to (i) conduct the payment flows study; (ii) draft legal measures for establishing the oversight framework and regulations for electronic funds transfers; (iii) produce a technical note on establishing the oversight system; and (iv) develop a high-level national payment systems (NPS) strategy. An internal committee was formed to work on the National Payment Strategy Decree, with support from the World Bank Group project team, which comprised World Bank and IFC staff and consultants. The draft is expected to be approved by the governor of the Bank of Lao in November 2014 and thereafter will be submitted to the Ministry of Justice for review.

In May 2013, a large event on innovative payments and inclusive finance was organized by the World Bank, IFC, and the United Nations Capital Development Fund. Participants in the event included important stakeholders such as representatives from the Lao government, banks, and mobile network operators. Participants were informed about the potential for innovative payment instruments such as public and private sector payrolls to be made through mobile accounts. Participants also shared experiences from Papua New Guinea and Cambodia.


The project has made a significant contribution to modernizing payment systems and catalyzed support from the World Bank Group and donors for follow-up TA. The World Bank is putting together a TA program to support the implementation of the national payment systems strategy in general and in particular to develop the oversight framework; developing interoperability arrangements for retail payments; and bringing about a greater shift of government payments to electronic means. IFC is designing a TA program in evolving pilot programs to support the development of innovative payment mechanisms for utility bill payments and supply chain payments at a beverage company. In the payment flows study, these were identified as being among the payment transactions where cash is very intensively used. The work is funded by SECO for about $500,000 for three years, an amount that may need to be increased in light of the numerous activities that need to be carried out in order to build a stronger and more efficient national payment systems ecosystem. The United Nations Capital Development Fund is assisting in the development of alternative payment channels and e-money/ mobile money with a program envelope of $5 million.

Khaikeo Luangsivilay, deputy director of the IT Department at the Central Bank of Lao PDR, who is the head of the working committee of the payments system project, said:

The national payment system is a very important road map document for the Central Bank. It was the first time that such a document was presented to us. It has provided clarity, helped us strategize on how to organize ourselves and align our resources to the recommendations set forth in the NPS such as having a National Payments committee and department. The WBG support has been essential in building our capacity and in helping the Central Bank move forward steadily to an international best practice legal framework. We appreciate very much the high caliber of WBG experts. We hope to count on this continued unique and essential support to help set forth an efficient payments ecosystem in Lao PDR.

* Source: G-20 Financial Inclusion indicators ( regional average excludes developed countries.