Financial Inclusion Fund Vision, Mission, Structure Vientiane, 03 July 2014

1. Financial Inclusion Fund Vision, Mission, Structure Vientiane, 03 July 2014

2. Why the FIF in Laos? FIF target audience, instruments, internal structure Calls for proposals Application process Forms and documents Q&A Agenda

3. MAFIPP Objectives MAFIPP outcome Increased access to financial services by low – income households and micro-entrepreneurs on a sustainable basis to 408,000 additional active users by end 2017 • Outputs • Macro: Policy makers more able to improve the policy and regulatory environment in line with operational realities of Financial Service Providers (FSPs) nationally and accepted good practice internationally • Meso: Financial sector development infrastructure more capable to meet the needs of FSPs • Micro: FSPs more responsive to the financial service needs of poor households and micro-entrepreneurs • Means • Policy framework evidence-based Making Access Possible (MAP) • Diversification of productsPro-savings strategy. Diversify products as per client needs • Diversification of Financial Service ProvidersBranchless-Banking/Mobile Financial Services, Post Offices, linkages • Capacity-Building of the sector

4. What is “FIF” challenge fund? Financing mechanism to allocate funds to meso- & micro-levels. Instruments: grants and loans for now. FIF fund asks proposal from institutions and organizations working in targeted areas to meet certain objectives → thematic areas of investment Applicants assessed against transparent criteria by a Selection Committee grants/loans to projects that best meet FIF’s objectives Successful bidders must match a certain portion of the grant This mechanism creates a sense of competition among organizations involved

5. Why is FIF a tool needed in Laos? • Laos government prioritizes expansion of financial services, diversification of products, strong sector operating in prudent manner; • To complement the efforts of the sector High costs and risks make it difficult for institutions to expand • To help sector innovate and expand financial services • To prepare the pro-poor financial sector to commercial refinancing • Longer term considerations for Laos government • Interest of a versatile tool for development of the pro-poor financial sector • Leverage support from multiple donors • → will influence FIF institutionalization beyond MAFIPP

6. FIF Fund Vision • Catalyst to shape the financial sector:spur innovation and sustainable avenues for improving access for the poor especially in rural areas, with diversified financial products and services. • Pave the way for private sector: prepare FSPs to access commercial capital for their sustainable development • The fund will: • Respond to GOL development and country priorities • Focus on stimulating innovations in deepening access to financial services • Operate in open, transparent and competitive way, • Support sector partners to achieve growth and sustainability • Offer powerful, light touch, lean instruments to stimulate financial sector • Use the best international practices applied to Laos context • Be sustainable and attract other funders to participate in the fund • Apply step – by - step process to achieve the FIF Vision

7. Why the FIF in Laos? FIF target audience, instruments, internal structure Calls for proposals Application process Forms and documents Q&A Agenda

8. Eligible Institutions

9. Thematic Areas Support to BB/MFS through #3-Payment Systems Lending through #5-Expansion

10. Instruments of FIF Values in italic to be later confirmed • The FIF will fund no more than 75% of project cost, recipient institution must contribute • Performance Based: linked to performance targets /concrete achievements • All instruments in Lao Kip • The grant support may not exceed the duration of MAFIPP programme at start • Transparency requirement for Financial Institutions

11. Principles guiding loan policy Principles Prepare Financial Institutions to commercial refinancing Graduation path of pro-poor Financial Institutions Sustainability of FIF: preserve capital, recoup operational exps Proposed application: Graduated interest rate policy • NDTMFIs: reference to inflation • DTMFIs/SCUs: reference to savings mobilization costs Progressively charge FIF operational exps Finalization of rates for 2014 under consideration Governor →trigger for calendar of call for proposal for loans

12. FIF Governance & Management Overall Project/ Fund Oversight MAFIPP PMC Investment Committee Decision Making Body on Proposals with advice from TAC Technical Advisory Committee (TAC) Chief Technical Advisor Management of FIF FIF Manager FIF Analyst FIF Officer

13. Why the FIF in Laos? FIF target audience, instruments, internal structure Calls for proposals Application process Forms and documents Q&A Agenda

14. 3 calls today – lending imminent 3 Payment Systems for Mobile Financial Services only EoI Call proposals Loan EoI Call proposals

15. 1 Financial Product Innovations Target Licensed Financial Service Providers Microfinance Institutions: DTMFs /NDTMFIs /SCUs Commercial Banks with downscaling or rural outreach projects Object Testing or the roll-out of a financial product not yet offered on a large scale by the institution. Loan, savings, insurance or a money transfer product. In-house or underwritten by another organization, a regulated FSP or insurance company. Think about linkages! Instruments Direct TA• TA grant • Risk grant

16. 2 Delivery Methodologies Target Licensed Financial Service Providers Microfinance Institutions: DTMFs /NDTMFIs /SCUs Commercial Banks with downscaling or rural outreach projects Object Test/roll-out an additional delivery channel for financial services not yet used in-house: e.g. group lending thru centermeetings, client relationship thru branch office and field officer, roving field officers to distant places involve outside organizations or individuals: e.g. village correspondent or center leader performing some tasks on behalf of the FSP, village funds, retailers or mobile network operators, other FSPs Instruments Direct TA• TA grant • Risk grant Don’t overlap with EoI #1

17. 3 Payment Systems through use of technology Target Candidates pilot Branchless-banking/Mobile Financial ServicesLicensed FSP or non-financial e.g. telco, large retailer Assumption that candidates already introduced to MAFIPP Object Consideration and/or implementation of BB/MFS Pilot in Laos • use of a network of agents to process financial transactions with consumers on behalf of the operator under his responsibility Must comply with the principles set by BoL Instruments Direct TA• TA grant • Risk grant

18. 5 Expansion  Target Licensed Microfinance Institutions: DTMFs /NDTMFIs /SCUs Strict eligibility criteria: years operation, nb clients, PAR30 limited sample of qualifying MFIs  no EoI stage Object Growth of the number of borrowersMain criterion of evaluation apart from capacity to repay Instruments Loan Duration: up to 30 months Size and interest rates to be confirmed in July

19. Supporting/back-up slides

20. Achievements