New report on farmers & financial services in Laos
This blog post was co-authored by Erin Taylor, Isaac Lyne, Salika Onsy, Daovy Kongmanila and Khamtou Kanyavong.
The DiFF team is pleased to announce the release of a report, The Financial Ecosystem for Smallholder Farming Households in Lao PDR, by Erin B. Taylor, Isaac Lyne, Salika Onsy, Daovy Kongmanila and Khamtou Kanyavong (Western Sydney University and the National University of Laos).
The report maps the financial ecosystem for smallholder farmers in Laos, including:
The current state of the financial ecosystem in Laos (digital and non-digital)
The stakeholders present in this system (companies, not-for-profits, government, etc.)
The products, programs, and policies currently being offered to smallholder farmers
We explore how stakeholders in Laos work together to improve financial services for smallholder farmers, while mitigating the risks brought about by digital delivery of financial services. We also identify areas of opportunity for services and collaboration between ecosystem actors, together with ideas for further research.
Key findings
The ecosystem for financial inclusion in Laos has grown rapidly in recent years. While the country's economy is still predominantly cash-based, financial inclusion is increasing, though there is still a noticeable urban/rural gap.
The biggest area of digitization has been in general banking services, with all banks offering apps for personal banking, and some providing QR codes for payments at merchant stores. QR codes are increasingly available for payments in the retail sector, it is clear that they are increasingly available, including in rural areas, town markets, and so on.
Mobile money is not widely used despite a quite large number of people having downloaded relevant applications. This may be because the banking system is relatively functional, accessible and advanced and also because mobile money itself has not been available for very long.
With respect to credit, most lending is still informal or semi-formal. Public banks provide more than half of the total agricultural loans. Microfinance, up to now, has not made much headway as a form of farming finance and digitalization in the sector is largely contained to deposit taking institutions that predominantly operate in urban areas.
Leasing companies are becoming an important source of credit and a driver of financial inclusion, enabling farming households to access consumer goods from fridges to air conditioners and also mobile handsets. Some leasing companies provide digital delivery, either through their own apps or by partnering with mobile money services, and developing innovative forms of credit scoring.
Agricultural insurance is in development, but currently, the only insurance available direct to farmers is for flood and fire damage to rubber trees on large-scale plantations. Index insurance for other large-scale crops, such as oil palm, have also been approved by the insurance regulator.
International NGOs and Laotian associations offer programs that focus on access and usage of financial services or poverty reduction; these are often tied in with social and conditional cash transfer programs that sometimes encourage use of digital financial services.
Digital financial inclusion is not without issues related to trust. According to our qualitative research, farmers worry about potential threats caused by digital tools, especially vulnerability to fraud, scams, or having their phones hacked.
We would like to thank the Australian Centre for International Agricultural Research (ACIAR) for funding this project and the stakeholders who attended our ecosystem mapping workshop in Vientiane on 1 November 2023.
You can download the full report or the executive summary. We welcome your feedback at erin@finthropology.com or i.lyne@westernsydney.edu.au.
